IDT: balancing act
15 September 2010 | Guy Matthews
Known primarily as a high-volume voice minutes company, IDT is now changing its mix with a move to higher-margin services, as Guy Matthews reports.
It’s not every international carrier these days that would welcome the tag of “the cheap voice minutes company”. This is not a worry for IDT, headquartered in Newark in New Jersey, which has made a name for itself over the last 15 years in a number of high-volume low-margin sectors of the telecoms market, from low-cost international prepaid calling cards to local and long-distance services for small and mid-sized businesses.
But its flagship division remains carrier services, specialising in the wholesaling of traditional voice, VoIP, enterprise, networking and mobile services to other carriers. It is here that IDT is trying the difficult balancing act of seeking to refocus around high-margin business while not alienating a loyal customer base, much of it in emerging markets, that has come to value a commitment to no-nonsense low pricing.
The result is a reshuffled wholesale voice termination offer that now starts with Bronze routing, for service providers looking primarily for the best available rates, then moves on to Silver for “stable quality of service (QoS) with aggressive market-based pricing”, Gold for those expecting “high QoS at competitive market rates” and lastly and most importantly, Platinum routing, designed for operators whose subscribers want the highest quality combined with enhanced features like calling line identity (CLI).
“At the beginning of 2009, we set out to ask our customers what they thought of our voice products, and what they were looking for in those products,” explains Nick Ford, IDT’s president of carrier services. “In particular we’ve redefined the high end of our range – the Platinum level – so that it now features more direct routes. It’s been a big success already, with a lot more traffic on our Platinum routing than before. We’re planning to add still more value, for example in the form of QoS reporting as we look to maximise transparency for customers.”
Ford says that an important subset of the IDT wholesale customer base, and a particular target for the Platinum grading, is mobile operators, in both developed and emerging markets: “For mobile network operators (MNOs), we send large volumes of traffic to a range of destinations in places like Asia, Africa and Latin America,” he says. “We’ve got strong relations with operators in those countries. We terminate traffic with them and they use our network too.”
“IDT’s Platinum customers, which I take to be mainly the biggest carriers, represent its best opportunity, for a number of reasons,” says Paris Burstyn, senior analyst for wholesale with consulting firm Ovum. “The cost of sale is small relative to the revenue they generate, compared with smaller customers. These don’t produce as much revenue, but do require a lot of sales and support. Additionally, Platinum customers can use IDT’s services to support their customers’ TDM voice without having to maintain or invest in their own legacy networks while they transition the customers to IP services.”
A move to high-end services, says Burstyn, not only provides IDT with potentially higher margins, but also creates the opportunity to build better customer loyalty, making the renewing of contracts easier than with the sale of commodity services.
IDT’s move upstream has coincided with a recovery in the company’s financial fortunes. The wider IDT Corporation, the activities of which span the energy sector as well as telecoms, at one point faced delisting from the New York Stock Exchange. It posted a net loss of $155.4 million in fiscal 2009, but went on to generate $12.8 million in profit in the first nine months of its 2010 fiscal year.
“We’ve had positive cash flow for the last three quarters,” says Ford. “Last month we were invited to ring the bell for the opening of the New York Stock Exchange as one of the fastest growing companies quoted on it.”
He claims that much good has been done to the company’s cost base with a migration from legacy TDM to an IP softswitched network: “Massive cost savings have been the result,” he says. “We can now size our network in line with peak times, and have the stability to handle any traffic. The market can see we’ve cut our costs and can scale – and that we’ve repositioned our product set.”
He says there are further innovations in the pipeline over the next year or so – for example getting further into the market for mobile money: “That would be a natural progression for us, to move on from top-ups to remittance services,” says Ford. “We haven’t as yet got any dates for such a move, but we’re looking into it, and other new areas as well.”
18 January 2018 |
31 March 2014 | Guy Matthews