eServGlobal to sell Telco business to Oracle for US$93.75m and Focus on Mobile Payments

26th May 2010 Telecommunications-based transaction management specialist, eServGlobal (ASX: ESV; AIM: ESG) has entered into a conditional agreement to sell its USP Business and USP Products to Oracle (NASDAQ:ORCL) for up to US$93.75m (£65m, A$113.4m). Upon completion, the company intends to focus on its non-USP Business – which contributed 58% eServGlobal’s total revenue in the FY ended 30th June 2009.

“Having built, implemented and developed a world leading pre-paid charging platform, the Company recognises that Telecom Operators (TOs) are progressively looking for suppliers to provide ‘convergent billing’ solutions . Without a post-paid solution, eServGlobal could not independently provide convergent billing”, eServGlobal stated.

“The board and management consider the purchase price to incorporate a sufficient premium to reflect the strategic value of our USP assets and business”. Furthermore, the company highlighted that the deal, worth A$113.4m, compares favourably with the total market capitalisation of eServGlobal, on 24th May, of A$88.6 million (£51.2 million).

USP products provide real-time charging, voucher management, messaging and network service applications for the communications industry, with over 25 tier one customers such as Orange, KPN, Excelcom, Nextel and Telecom New Zealand. Over 35 million subscribers and 500 billion transactions per year are managed by USP products.

The company’s USP Business provides software services to telecommunications customers through the licence and support of eServGlobal’s USP Products – such as the USP Platform, ChargingMax, MessageMax, NumberMax, uVOMS, UMS and Social Relationship Manager. The USP Business had attributable revenue, in the FY ended 30 June 2009, of A$61.6m (£35.6m)

Simultaneously, Oracle announced that it has entered into an agreement to purchase certain pre-paid assets of eServGlobal. This includes eServGlobal’s Universal Services Platform (USP) products, which include proven and scalable pre-paid charging products for the communications industry. USP provides a single platform to deliver pre-paid charging including online charging and rating, real-time session control, reporting and promotions. The products also include a network services platform, including support for number portability, VPN, least-cost routing and a messaging gateway. The proposed transaction is subject to customary closing conditions and approvals. eServGlobal USP business-related employees joining Oracle will become a part of the Communications Global Business Unit.

Moving forwards, eServGlobal has chosen to focus on the segments of Mobile Money and Value Added Services, leveraging traditional and SAAS (software As A Service) business models. This focus is expected to provide eServGlobal significant growth opportunities and is supported by its strong portfolio of products and solutions:

– In Remittance – HomeSend, the global hubbing service offering cross border person-to-person transfers of Money, Air Time and Roaming Recharge

– In Mobile Money- PayMobile: The unified solution for mobile payment, m-wallet, m- Commerce and peer to peer mobile money transfer

– In Value Added Services – – PromoMax: The carrier grade solution for telecom operators to build targeted, personalized, diversified and timely promotions and loyalty programs

– Value Added Services Platform:

– The carrier grade messaging and value added services platform with specific features for specific customers.
– MSP, the carrier grade, open standard Messaging Services Platform
– Mailis, the flexible, modular and scalable solution enabling service providers to deliver Voice Mail, Unified Mail and Video Mail to both retail and business customers
– UIP, eServGlobal’s highly scalable and multi-lingual IVR solution

eServGlobal believes that its overall business will benefit from the separation of the USP Business, and upon completion, the company’s focus will be on the development, support and customisation of the high growth areas of mobile-money services and value add services.

“The board is excited by the prospects of its remaining business which comprises of over 60+ customers in 40+ countries”. The remaining businesses are the company’s HomeSend Platform and its Value Added Services (VAS) Platform.

According to eServGlobal, the HomeSend Platform provides a global ‘hubbing’ service, which offers mobile-based cross border person-to-person transfers of money, air time and roaming re-charge. Whereas, the VAS Platform provides TOs with services which ‘enables them to engage with their customers in a personalised and dynamic manner’.

The company will convene a meeting of shareholders, in respect of the proposed transaction and the subsequent changes to the business, on 30 June 2010. eServGlobal noted that certain major shareholders, together holding 39% of the company’s issued share capital, are currently supporting the deal. This includes Guinness Peat Group on 19% and ex Mincom executives, Richard Mathews and Craig Halliday (now eServeGlobal’s CEO and COO) who through various interests, hold 20%.

eServGlobal’s new strategy is driven by studies show that by 2012, 1.7 billion people in emerging markets will have a mobile phone but no access to banking services and 360 million people without
traditional bank accounts will use mobile money. This opportunity could generate $5 billion annually in direct revenue, and an additional $3 billion annually in indirect revenue to the market players.

In addition, communications service providers are facing voice ARPU decline and fierce competition on customer ownership from non telco players (Apple, Google, Microsoft and the others). Straight price competition is declining and operators need to find new ways to serve their subscribers.

eServGlobal plans to commit significant new resources, gained from this transaction, to enhancing our value-added services, mobile payment and retention solutions. This transaction will allow us to undertake a number of key projects, leading to our customers’:

– access to the lucrative mobile money market
– increased competitiveness with telco and non-telco players
– reduced OPEX through lower subscriber acquisition costs and reduced churn

What are eServGlobal’s plans for Mobile Money?
We will continue to develop, deliver and support Mobile Money through our PayMobile suite of products which allow operators to enter the lucrative financial services market.
This product enables mobile phone users (with or without banking faculties) to firstly recharge their electronic wallets via multiple payment methods and secondly to make secure purchase of goods, bill payment and/or money/airtime transfer.

What are eServGlobals plans for HomeSend?
We will continue to invest in the HomeSend platform in partnership with Belgacom ICS. We remain very excited about the opportunity this platform provides for the world’s 175 million migrants to send funds abroad conveniently and economically. HomeSend is the only mobile-centric international remittance hub endorsed by the GSMA. The Belgium-Philippines corridor was officially launched this year with the
second largest Filipino operator Globe.

What are eServGlobal’s plans for Retention?
eServGlobal plans to extend the reach of its innovative, carrier-grade retention solution, PromoMax. PromoMax allows operators to increase ARPU, challenge competitors’ offerings and reduce churn with targeted, personalized, diversified and real-time promotions and loyalty programs cheaply, effectively and quickly. PromoMax will also be integrated into PayMobile to extend the mobile money and loyalty services functionality thereby enabling a combination of loyalty program and account management.

What are eServGlobal’s plans for Messaging?
eServGlobal has a fully supported release of the Messaging Services Platform (MSP) currently available. Recent benchmark tests prove that MSP reaches 2000 SMS or 100 MMS per second on the X and T series SUN platforms. These figures confirm the carrier grade performance levels that MSP is capable of providing to customer businesses.

What are eServGlobal’s plans for voice and video mail?
eServGlobal will continue developing and commercializing its Voice Mail, Unified Mail and Video Mail solution, Mailis. Service providers can boost their revenue by increasing call completion and call-back ratios, while improving customer satisfaction and experience. The services are proposed over a flexible, modular and scalable solution enabling service providers to deliver user options and enhance both personal
and business communication experiences.

What are eServGlobal’s plans for Interactive Voice Response (IVR)?
eServGlobal’s IVR solution, UIP, has been recently enhanced to allow it to be deployed on both legacy and NGN networks. UIP is highly scalable, supports multiple languages and is able to be controlled by any INAP enabled system. UIP will continue to be supported and proposed as a stand alone product by eServGlobal. The Mobile Money and Value Added Services solutions will rely on its capabilities for customer voice interactions.

In which areas will eServGlobal continue/commence research and development?
eServGlobal believes in continual improvement. In a fast moving, high-tech industry eServGlobal takes pride in helping our customers stay ahead of the game with innovative products. eServGlobal will be investing in innovative, scalable and industry pioneering solutions, with continued R&D in Mobile Payment and Value Added Services including Messaging and Retention and will focus on generalizing our next
generation PRIME architecture to the rest of the portfolio.

What are eServGlobal’s plans for SaaS?
eServGlobal’s most popular SaaS, was successfully launched earlier this year at the 2010 African Cup of Nations and provided games and infotainment services to subscribers of 12 regional Orange Group affiliates. Currently operators are seeking to lower risk and Capex investments, increase their flexibility and time to market. The SaaS model provides these benefits as it requires no upfront investments from operators and enables quick configuration with the addition of new services.

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