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Companies looking to offer Voice over IP (VoIP) service to their
consumers do not need to invest the big bucks in order to create a network and build the needed backbone; they can actually buy the
entire VoIP solution from deltathree
Internet Software & Services
75 Broad Street
New York, NY 10004
President and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
July 7, 2006
President and Chief Executive Officer
Mr. Zimels is the President and Chief Executive Officer of deltathree - appointed in
2002. Mr. Zimels began with deltathree in 1997 as the Vice President of Operations and
Chief Operating Officer. Prior to joining deltathree, Mr. Zimels was the Controller
and Vice President of Finance at Net Media Ltd., a leading Israel-based Internet Service
Provider, from June 1995 to June 1997. Mr. Zimels graduated with
distinction from Hebrew University with a degree in Economics and Accounting and holds a
Masters in Economics from Hebrew University.
Founded in 1996, deltathree is a leading provider of integrated Voice over Internet
Protocol (VoIP) telephony services, products, hosted solutions, and infrastructure.
deltathree offers customers high quality Internet telephony solutions that are viable and
cost-effective alternatives to traditional telephone services. Supporting hundreds of
thousands of active users around the world, deltathree serves customers through its two
primary distribution channels: the Service Provider / Reseller channel and the
iConnectHere direct-to-consumer channel.
deltathree solutions offer service providers and
resellers a full spectrum of private label VoIP products and services, as well as a
back-office suite of services. Its customizable VoIP solutions enable service providers to
offer private label telecommunications to their own customer base, under either their own
brand name, a white-label brand or the deltathree/iConnectHere brand name.
deltathrees VoIP solutions utilize advanced Session Initiation Protocol (SIP)
technology and provide all the components to support a complete VoIP service deployment
including; project planning and implementation, network management, softswitch
applications, a variety of VoIP hardware devices, service management tools and a full
suite of back office services. The back office suite includes billing, e-commerce and
fraud management, provisioning and configuration, web applications, Customer Premise
Equipment (CPE) and more.
iConnectHere, deltathree's direct-to-consumer
offering, provides award-winning VoIP products directly to consumers and small businesses
online using the same primary platform.
CEOCFO: Mr. Zimels, what was your vision when you became CEO
in 2002 and where are you today?
Mr. Zimels: As one of the founders of deltathree, I
have seen the company mature from a start-up to a global leader in VoIP communications
solutions. My vision on becoming CEO was that the company needed to focus on
specific Voice over IP target areas such as service providers and to do it profitability.
Our goal was not to sell products and services across too wide of a range of customers,
but to focus on the right range of customers for deltathree and that is what we did. I
think we are succeeding nicely.
CEOCFO: Will you tell us
about your core offerings?
Mr. Zimels: We provide outsourced Voice over IP
(VoIP) solutions for service providers worldwide. Service providers looking to offer VoIP
service to their consumers, do not need to invest the big bucks in order to create a VoIP
network and build the needed backbone infrastructure, they can actually buy the entire
VoIP solution from deltathree. Implementing an in house VoIP platform (meaning building it
on their own versus buying a solution) can be both extremely time consuming and very
expensive; often involving heavy investment in capital expenditures, research and
development resources as well incurring large operating expenses. Therefore, the
ideal solution is to buy an outsourced Voice over IP solution from deltathree, which will
cut time to market, reduce overall expenses and allow companies to focus more on sales and
marketing efforts rather then on implementing a VoIP platform. Customers of deltathree are
getting a decade of VoIP experience and expertise, an award winning VoIP service and an
absolute proven VoIP solution.
CEOCFO: Do you provide
customer service to the end-user?
Mr. Zimels: We provide a full solution, meaning you
could come to us and say that you want to outsource everything from start to end. Consumer
VoIP solutions requires a symphony of cross-discipline elements often involving many
partners. We have the relationships in place. You can take the full spectrum of
deltathrees outsourced capabilities or look to us and say which component you want
to do on your own. The beauty about our solutions is that they are flexible and modular.
Companies can choose the components of the solution they want to outsource to
CEOCFO: Is that
typically the way it is done today?
Mr. Zimels: I think the market is mixed. There are
companies in the market that are doing it on their own. Among them, you will find some
cable companies, some tier-one players and others, but you can find just as well,
companies that outsource their services and buy from someone else, like buying from
deltathree. The advantage of Voice over IP, or all IP products, is that it is not location
based. I could have my facility in one region and my client or my customer could be in a
different region and still get the same services as opposed to a traditional telephony
service where you needed to have a whole infrastructure in the same area where the
CEOCFO: How do you reach
your potential customer?
Mr. Zimels: We have been providing Voice over IP
services for about a decade, so we are known in the market place. I think most service
providers that are proactive in the space are considering offering Voice over IP to their
own customers. A typical provider does not wake up one day and decide to offer Voice
over IP, it is usually companies that are in a related space like a phone company, a cable
company, an ISP, a web portal or an entrepreneur who are looking to offer more products
and services to their consumers. Voice over IP is one of the products they wish to offer.
We are working with some of the worlds largest telecommunications companies, from
Verizon Communications all the way to the other end of the spectrum to serve local service
providers and resellers. These customers have already concluded that they need Voice over
IP and rather then building it themselves, they prefer to buy it from us. Basically, we
are known in the market as one of the leading Voice over IP service providers and as such
potential service providers mostly approach us.
CEOCFO: Would you tell
us about your arrangement with Verizon?
Mr. Zimels: Verizon Communications Inc. (NYSE: VZ) has
a product called VoiceWing, which is their Voice over IP offering to the Verizon
subscribers. Verizon, as one of the worlds leading providers of communications
services, has many great capabilities, but they were looking for expertise and experience
in the area of Voice over IP. We got together and two years ago, they started offering the
VoiceWing product to their own consumers. Consumers are buying the VoIP service from
Verizon and perceive that they are getting the full service from Verizon; they sign up on
the Verizon website, receive the products directly to their house, use the service and are
billed by Verizon. Behind the scenes on the back end, deltathree runs part of the
VoiceWing service. Verizon has just extended the contract with deltathree for one more
year. I believe our extension of the relationship reflects Verizon satisfaction with the
service and what they are getting from deltathree.
CEOCFO: You have a
consumer offering as well; where does that fit into your strategy?
Mr. Zimels: We have a consumer offering that dates back
to 1998. Our consumer offering is branded under the iConnectHere brand name and we have
loyal customers that have been with us for more then seven years. We do not market that
product aggressively; you will not see banners or advertisements for iConnectHere because
we focus on a more financially efficiently customer acquisition strategy. In the early
days of deltathree focusing on the direct-to-consumer channel was our core business, today
our service provider and reseller customers make up the majority of our business. We
leverage the information that we derive from running a consumer based offering, to improve
our service to our partners so that when Verizon is getting a solution from deltathree it
relies a lot on knowledge and data that we acquired over time from our own consumer base.
Last quarter a little less than 15% of our business came directly from our consumer
offering, and all the rest came from a broad range of partners like Verizon and other
companies worldwide that use our products. You do not have to reside in the U.S. to use
the iConnectHere service, the service is available and supported worldwide.
CEOCFO: You had a good
first quarter; what accounts for the revenue and how do you sustain the growth?
Mr. Zimels: Getting new partners to work with us is the
key driver of our growth. Each one of the partners has their own customer base, when you
add one more partner; you automatically add their existing user base. Our customers market
deltathrees Voice over IP services to their end users under their own brand, they
handle the end user acquisition, they know their customer base the best and therefore they
are able to push the product better than anyone else. It is the strong demand for our core
service provider and reseller offerings as well as solid demand fundamentals that are
driving our success. We are very pleased with our recent financial performance.
CEOCFO: What is ahead
for the next two or three years?
Mr. Zimels: We believe growth will be driven by the
further adoption of Voice over IP worldwide. Consumers are more familiar with the Voice
over IP product and in addition to demanding it, they are also seeking a more advanced
VoIP product; that would be one driver. There is more broadband connectivity worldwide and
more end-users that are using broadband so for them the natural extension would be using
Voice over IP as the phone service. We believe that the market is going to continue
growing rapidly. We will see new companies come and go, but we believe that we have the
fundamentals to empower our partners to deliver very good solutions to the market place.
That is one development that we believe will continue over the next two or three years.
The next market we believe will be a complementary horizontal market, which is going to be
more focused on the SoHo market, which is the Small Office/Home Office market. Here you
would have three, four, maybe ten subscribers that are looking for a key system, which is
a PBX (private branch exchange) or a private telephone network used within an enterprise,
where they can use all the traditional features that are currently available in an office
system. For example, transferring a call to another party, dial a short extension
regardless of whether they are in the same office or in different locations worldwide. The
final market I will discuss today would be a new vertical market and that entails moving
into the wireless space where consumers will be able to use their wireless device as a
Voice IP terminal as well. Therefore, when they are at home and have a cell phone in hand,
when trying to originate or receive a call, the call will go through the Voice over IP
network and not the cell network. This doesnt mean that there is not going to be a
competition to the cell network; it might be that the cell providers themselves are going
to encourage the use of these kinds of products because of the congestion today on the
CEOCFO: You win either
Mr. Zimels: It is definitely a competitive environment
for service providers and we are bringing the tools and solutions to our customers and
partners to help them compete in this marketplace and succeed. With more service providers
having the drive and desire to succeed in the Voice over IP market, the better for
deltathree and we have the innovative and flexible solutions to help them succeed.
CEOCFO: Will you tell us
about the financial picture of the company?
Mr. Zimels: deltathree is a profitable company, showing
twenty two consecutive quarters of bottom line improvement. It is important to us that our
business model continues to be focused on financial efficiency while expanding our
profitability. We were in the space starting in 1996 going through the bubble years where
revenue growth or having more eyeballs or subscribers was worth, or perceived to be, more
important in the market than having real substantial numbers and numbers that have
longevity and viability. For us today, it is important to continue being a profitable
company in the Voice over IP space, improving our bottom line while simultaneously
continuing to drive market penetration and top line growth. Achieving profitability was a
very important milestone and we plan to continue to build on this.
CEOCFO: In closing, why
should potential investors be interested and what should they know that is often missed?
Mr. Zimels: Investors should know that we are not a
newcomer to the marketplace, we have been in the market for more then a decade, so we have
the experience and the expertise that is required to run this kind of a business. We
proved ourselves quarter over quarter for the last four years that we are seeing strong
growth. We achieved our bottom line objectives quite consistently over the past twenty-two
quarters; the same goes for the top-line growth. We believe that we have a good sense of
where the market is going and believe that the company will continue to progress. There is
a good story here, a stable company with solid financials, growing over time based on
experience and selling the most advanced and robust VoIP solution in the market place.
Overall, I think investors should know that deltathree represents a successful, global and
most importantly profitable Voice over IP player.
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