VoIP provider Freshtel bleeds cash in an "extremely difficult year"

Stuart Corner
Monday, 31 August 2009 10:39

IT Industry - Strategy

In their commentary on the results the directors listed "Milestones for the period under review" as being: network rationalisation and centralisation to improve quality, reliability and scalability; ongoing development of mobile applications, particularly for iPhone, Blackberry and Android handsets; commencement of Pakistan Telecommunications calling card solution offering expatriates in the UK cheap calling rates to Pakistan; signing and roll-out of Yippii (Australian Christian Church) white label offering.

Freshtel came to prominence in 2006 when it struck a deal with UK retail Giant Tesco under which Tesco resoled the Freshtel VoIP service under the Tesco brand in the UK, and became a shareholder pumping in $13.2m. However after producing an initial surge in Freshtel revenues in FY07 (Freshtel predicted that the service "will revolutionise the market and make Internet phone calls the norm in Britain")  the Tesco relationship has failed to deliver on its promise, something for which there has never been any explanation from Freshtel.

In September 2008 Tesco launched a mobile VoIP service developed by Freshtel that allows customers to use their own wireless Internet connection or a public WiFi hotspot with their existing mobile phone and mobile number to make calls. The company still seems to have hopes for the Tesco relationship. It said in its results announcement that "Tesco has indicated it is ready to proceed to have the Voicedot backed Tesco calling card in place by the end of October 2009."

Throughout the company's history, founder Michael Carew has consistently promised much and delivered little. He told the company's AGM in November 2006: "A major investment will be in our UK rollout, including network infrastructure development...The final area of investment will be in the ongoing development of our business in the US, to fund initial infrastructure and operating costs... 2006 will see us launch a number of wholesale business models in different countries, all using our core network technology."

A year later he announced his plans to restructure his role "to allow me to take advantage of our position in the market and the strong relationships we have forged over the last 12 months." Carew said he would "be focusing on strategy and working with our partners who are keen to contribute to our success by working closely with us to engage other prospective white label partners to join them on the Voicedot network."

However five months later he announced his retirement from the board and in March 2009 started selling his shares in the company reducing his stake from 11.54 to 10.3 percent.