Flexiroam aims to be leading provider in 5 years

By Isabelle Francis May 15, 2015

To list on ASX soon, market cap expected at A$40.3mil
Post-IPO will focus on acquiring market share across Asia

Flexiroam aims to be leading provider in 5 years

FLEXIROAM, a niche player in the Malaysian telecommunication industry, is aiming to become the leading roaming provider in Asia by 2020, says its founder and chief executive officer Jef Ong Kenn Tat.

It will take a big step towards this target with its initial public offering (IPO) on the Australian Securities Exchange (ASX). The closing of the IPO exercise is next Tuesday (May 19).

Being a popular destination for tech companies to tap equity, and offering a pool of ready investors as well as peers for benchmarking, ASX is a natural platform for Flexiroam.

Given the appetite of investors at ASX for tech companies, investors in Flexiroam cannot be blamed for expecting it to replicate the success of Ziptel, whose stock now is trading at a 200% premium above its IPO price.

Ziptel is an Australian-owned telecommunications business focused on providing international roaming and calling solutions to consumers.

Furthermore, when compared with Ziptel, its closest peer, Flexiroam's revenue is stronger, giving the Malaysian startup an edge post its IPO.

For instance, where Ziptel earned A$600,000 (US$485,000) in the first six months of 2014. Flexiroam recorded A$3.2 million (US$2.6 million) in just the nine months of its fiscal 2014.

In a recent interview with Digital News Asia (DNA), Ong says Flexiroam has been growing its business organically over the past four years and that the listing exercise now suits its business aspirations.

Flexiroam will be issuing 60 million shares to the public at A$0.20 (US$0.16) each, with a minimum subscription of A$8 million (US$6.2 million). If all goes well and its IPO bid is fully subscribed, Flexiroam will have an estimated market capitalisation of A$40.3 million (US$31.5 million).

Patersons Securities Limited is the lead manager of the IPO, while Trident Capital is the corporate adviser.

Flexiroam's edge

Flexiroam aims to be leading provider in 5 years Ong (pic) says the existing structural challenges across countries in the region will keep Flexiroam's affordable roaming products and services relevant to the industry.

He says his team will also continue to innovate as the company grows, meeting consumer needs in the ever fast-changing technological landscape.

“Going forward, we will focus our resources on acquiring market share by replicating our business model across Asia.

“By our estimation, Flexiroam should become the leading roaming provider in Asia by 2020,” he predicts.

To achieve this goal, Flexiroam will innovate to make the roaming experience more convenient and user-friendly, he says. Flexiroam currently has a subscriber base of over 300,000.

Presently, its services are available to travellers from eight countries: Malaysia, Singapore, Indonesia, Australia, Canada, Hong Kong, the United Kingdom and the United States.

The IPO will catapult its expansion into Singapore, Thailand and Indonesia, as well as open up operations in China, Hong Kong, and India.

Flexiroam, which Ong established in 2011, did not take off without hurdles.

“It is never easy to bootstrap a startup. Having a strong software engineering background myself, sales and marketing was my biggest challenge.

“The team started off with three engineers developing products without knowing how to sell them,” Ong says.

The second major challenge it faced was scarce pecuniary resources, according to Ong.

“Back then, I wasn’t well versed with fund-raising, it was always about getting customers who were willing to pay for what I developed in the early years of Flexiroam, so that I could grow my business.

“There was simply no budget for marketing,” he adds.

After developing the prototype of Flexiroam, Ong and his team began to divert their attention to marketing. They spent countless hours at airports talking to customers and meeting potential resellers to forge strategic partnerships.

After office hours, the team would stay back late to brainstorm on ideas and strategies to market Flexiroam.

“After a year of trial and error, we finally established our niche market,” says Ong.

“Today, we have close to 100 travel agencies, airlines and travel industry players partnering with us to bring affordable roaming solutions to travellers who need both call and data services,” he adds.

Over the years, Flexiroam has developed a range of products such as digital roaming passes and global SIM cards. It has also applied for one patent so far.

Its core products currently include the Flexiroam Roaming Pass and Flexiroam SIM cards, which allow outbound travellers to enjoy international roaming services at pre-determined fixed fees that are significantly lower than regular international roaming charges.

Its products and services are supported by the Flexiroam Tracking System (FTS), a cloud-based tracking system that allows global access to its product.

How it all started

Having been in the telco industry for more than a decade, Ong noticed that roaming charges remain expensive despite the rapid evolution of mobile telecommunication technology from 2G to the current 4G (Fourth Generation).

“By right, roaming charges should be on par with local charges.

“Clearly the telcos do not transfer the economies of scale that they are now enjoying from past investments to end-users,” he says.

Ong explains that different mobile operators or telcos in other countries have different cost structures due to different operational and capital expenditures. This prevents them from offering reciprocal network services to their roaming partners.

Secondly, there are regulatory challenges in certain countries that make it difficult to reduce roaming charges.

“First and foremost, there must be a politico-economic union among the countries involved, such as the European Union where the EU Parliament provides a platform for member countries to operate a system of supranational institutions and intergovernmental negotiated decisions.

“Such a politico-economic union does not exist in Asia,” says Ong, adding that as a result, consumers get hit in their wallets when they travel and turn on their roaming service.

However, he believes that even if such a union exists in Asia, certain member countries will still be inclined to break ranks and charge higher roaming charges, which is quite similar to what is happening currently in the EU countries.

Asked on the impact to Flexiroam if there are some initiatives to implement an Asean roaming agreement, Ong is surprisingly mellow.

“Look, the market is huge. There are more than 200 countries and territories in the world. Asean is just a grouping 10 countries. What if a Malaysian travelled out of those 10 countries?” he says.

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