MyNetFone charts course in app-dominated world

MyNetFone is not a telco; it's a "software company that does voice communications" its CEO says

The future of voice communications may be in 'over the top' applications, but there's life yet in the humble phone number according to the CEO of VoIP provider MyNetFone. Phone numbers "are this invisible glue that everyone takes for granted," Rene Sugo says.

"Even though there's a lot of change happening in technology, in the way we communicate, phone numbers still have a very important role for the next 10 to 20 years until we figure out something better. At the moment, no-one's come up with something better."

MyNetFone earlier this year marked its 10-year anniversary, and while phone numbers are not quite pining for the fjords, most things in the industry have changed dramatically over the last decade.

Since it was founded in 2004, the ASX-listed company has witnessed significant shifts in the voice communications landscape, with the rise of over the top applications such as Skype and the increasing number of people who ditch their home landlines in favour of mobile handsets.

In 2004, when MyNetFone was founded, "Skype didn't exist," Sugo says. "The whole concept of really mass market Internet communications just didn't exist. The other thing about calls back then was a domestic call from say Sydney to Perth was over a dollar a minute — can you imagine paying a dollar a minute for a domestic phone call today? It's just unheard of.

"It was a totally different market, dominated by a couple of big telcos and resellers of the big telcos and they were making incredible margins. And then you had this new movement starting which was voice over IP."

VoIP was seen as a way of saving money by slashing phone bills. Now the cost of voice calling has been slashed, and much of it is conducted either via mobile handsets or via software applications.

"Residential telephony has really changed a lot," Sugo says. "There's now mobile substitution – a lot of people are getting rid of their landlines at home. That's something you wouldn't have dreamt of 10 years ago; it's a very dramatic change."

"Now mobiles are really cheap, and they're smartphones that do more than just call and they're pretty cheap on a plan," he adds. "And those plans include unlimited calls to everywhere in Australia and other mobiles — so the whole thing about cost just changed totally in 10 years."

In the residential market the future is "100 per cent" OTT, the CEO says. But for businesses and government agencies, "it's more important to have a geographic number so we're moving into that space with our cloud based PBX," Sugo says.

In 2012 MyNetFone made a splash when the company announced it had won a $20 million contract to provide VoIP services to the Tasmanian government. It's something Sugo says he would obviously not object to seeing replicated by other governments, and the Tasmanian experience is being closely watched.

"I thought Tassie was being very ambitious being the first one to take that leap into the VoIP world and I think there are a lot of other governments that are now looking at it, especially the other state governments and local governments like councils," the CEO says.

MyNetFone is "actively targeting" other governments and has made an effort to be certified as an eligible telco supplier for as many governments as possible.

"I think governments are getting to a point where they don't have a choice – they're going to have to move to voice over IP because they want to make things simpler."

In the case of Tasmania, it was productivity, not cost, that was a primary driver for the transition.

"It was mainly for the benefits of productivity increases, flexibility, and getting rid of obsolete technology – and those reasons are relevant to all large government s and enterprises around Australia so it's only a matter of time," Sugo says.

Market consolidation

During the decade the company has existed, the number of market players has shrunk significantly. "If you go back then there were probably 12, 13 providers that had a carrier access code, which means that they were interconnected with all the other carriers within Australia for voice communications," Sugo says.

"Now there are only six independent players that have a carrier access code – so that's basically halved in 10 years."

"We were lucky enough to make the right move to ensure our future," Sugo says.

One of those moves was building its own network, the CEO says: "If we hadn't built our own network, we'd be at the whim of the other telcos, and because there has been consolidation in the market, it's actually harder to get a good deal in wholesale telco land.

"We're lucky that we have own capabilities and we stand on our own two feet now, and we don't rely on the big telcos."

MyNetFone has also played its own part in market consolidation, acquiring a string of smaller players in recent years.

The company picked up CallStream for $600,000 and Connexus for $4.75 million in November 2012, followed by GoTalk in December 2012 for $1.4 million. It acquired the assets of PennyTel in October last year after the company went into liquidation.

Read more: TIO reveals jump in complaints about mobile data charges

GoTalk and CallStream have been fully integrated, while Connexus should be finished shortly. PenntyTel is around 50 per cent integrated.

"The goal is really between six to 12 months to finish an integration, and we can have maybe two or three integration projects going at once – that's our capabilities at the moment."

The company is still actively looking for acquisitions, Sugo says.

"What we're looking for is communications businesses that fit our capabilities so that we can bring them onto our network. So we're looking for people that are either offering over-the-top services or services that can be ported into our network because they are some of our key assets – our network and our software capabilities."

"We've constantly got a bit of a funnel of opportunities we're looking at, but if they don't fit then we'll walk away," Sugo says.

"We're not just going to buy anything that has telco written on it; we don't have DSLAMS, we don't have data infrastructure, and we're not a big reseller of Telstra and Optus. So we're looking for people that have over-the-top applications, or lots of voice traffic or lots of stuff that fits into our network."

The company is also "very much focussed" on organic growth, the CEO adds.

"We're growing organically, especially in the small to medium business and in the wholesale space where we offer open access to our network for other carriage service providers and other IT service providers.

Read more: Is Skype finally ready for call centres?

"That's very important because a lot of the smaller service providers have to buy from people like Optus and Telstra, but we are a real, genuine alternative to that."

"We offer open standards, open protocols for people to plug into our network and deliver their value-add, if you like, using our capabilities," Sugo says.

Sugo says he thinks of MyNetFone as a "software company that does voice communications", not as a telco. MyNetFone is "about over-the-top; it's about applications; it's about services in the cloud".

"A big part of our business is enabling some of the cloud application providers that are very popular in residential land," Sugo says.

"We're still enabling that real-time, person-to-person voice communication — that's the value, that's the thing that people need. People always need to be able to speak to someone else remotely in real time. And that's not going to go away. But now there's many more ways of doing that. And we try to facilitate that through our software capabilities and our network capabilities."

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