Freshtel hoping to revolutionise UK phone market

Stuart Corner
Thursday, 13 September 2007 18:22

Your IT - Home IT

If you want to get an idea of how the VoIP market in Australia could take off, you might do well to follow the progress of the VoIP service in the UK provided by retail giant Tesco using the 'white label' service of Australian VoIP service provider, Freshtel (ASX: FRE).

Freshtel has just announced that Tesco has launched new landline-style plans for its Internet phone service that, according to Freshtel "will revolutionise the market and make Internet phone calls the norm in Britain."

Freshtel goes on to say: " The plans have been designed to allow UK customers to use and pay for an internet phone in the same way they would a traditional landline service and are expected to massively drive uptake of Internet telephony (VoIP) technology in the UK. The launch will be supported by a new marketing campaign in the UK."

The plans are quite similar to those announced last week by Australian VoIP provider gotalk ($14.95 per month for unlimited calls to Australian fixed and mobile numbers and, for an extra $9.95 per month unlimited calls to 20 countries and 20 cent untimed calls to 20 more). The new Tesco plans offer unlimited calls within the UK for £5 per month ($A12.40) and unlimited international calls for £8.50 per month ($A21.00). With these prices and with the backing of such a massive and high profile organisation as Tesco - one in every six retail dollars spent in the UK ends up in Tesco's tills - there seems to be real potential for a quantum leap in uptake.

According to GFK Research, at the end of 2006, Tesco Internet Phone accounted for 80 percent of all Internet phone products sold in the UK. At mid year they were already available in over 400Tesco stores and through the Tesco Connect scheme, Tesco Internet phones had been provided free to all UK secondary comprehensive schools–allowing pupils work on interactive lesson plans and communicate for free with schools across the UK.

Freshtel has not disclosed subscriber numbers but, certainly, revenue is not exactly stellar, so far. For the year to 30 June 2007, Freshtel reported sales revenue from call time, hardware royalties and license fees of $3.4 million, which it said was largely due to the Tesco white label contract completing its first full year of operations.

In comparison, Australian VoIP provider Engin has just reported full year revenues of $17.4 million, from (at year end) 77,000 subscribers. MyNetFone managed to match Freshtel's revenues from a year end subscriber base of 35,000.

Both these, of course are retailers so, Unlike Freshtel enjoy the full benefit of receipts from users. nevertheless it's a safe bet that the market penetration of the Tesco VoIP service is still relatively low. The conditions seem to be in place for that situation to change rapidly.