Financial Watch : Jefferies 1999 Billing Index Outperforms Nasdaq and SandP 500

Readers this month will see a change in the billing index. Jefferies & Co., the L.A.-based investment bank that develops the index with the assistance of Billing World staff, added five new companies, two of which are non-billing OSS vendors. Four companies are no longer in the index.

Non-billing OSS additions include CrossKeys Systems and DSET. Other additions are Architel, which is now trading on the Nasdaq and Corsair Communications, which purchased billing vendor Subscriber Computing. “So many billing vendors are offering fraud management products now that Corsair seemed to make a good fit [in itself],” says Douglas Ashton, senior vice president of Equity Research at Jefferies & Co.

Axiom, with market capitalization of $17.5 million as of Dec. 1, and Cellular Technical Services, with market capitalization of $12.8 million, were deemed too small to include this year, Ashton says. DSET acquired USCS late last year, so takes its place on the index. Versatility, which was bought by Oracle, is no longer on the list.

Prepaid Wireless: One Way to Play a Risky Asian Marketplace

Investing in companies that provide prepaid wireless billing services in Asia may be a safe way to play an otherwise risky Asian market. Billing industry financial analysts are taking a closer look at target market fundamentals this year, Ashton says. Asia is the biggest market for prepaid wireless billing and therefore the biggest target market for vendors who offer prepaid wireless billing services.

“Asia is a big growth market, despite all the problems they’ve had,” says Michael Gulledge, vice president of marketing and engineering, Glenayre. “The monetary problems it has had make it more of a cash-based society, which in turn drives demand for prepaid.” Intasys, which has an office in Melbourne, Australia, is also making a push into the Asian marketplace with a new prepaid billing system it is developing. The first installation of the system in Asia will be operational in June, a company official says.

In Asia, prepaid services were first introduced in Malaysia and the Philippines. These offerings helped wireless carriers in the area to survive, according to Paradigm Research. The number of wireless subscribers in the region grew annually by almost 60 percent between 1994 and 1997, the firm’s research shows.

In Malaysia, the carrier Mutiara began offering prepaid wireless services to its end-users; wireless carrier Celcom followed suit last September. Presently, 50 percent of all new Mutiara subscribers prepay, according to the firm. Mutiara's net subscriber additions grew from more than 7,000 new subscribers a month in 1997 to more than 11,400 new subscribers a month between January and July 1998. Other Malaysian carriers saw declines in their net monthly subscriber additions, from an average of 12,500 subscribers in 1997 to just below 7,000 subscribers between January and July 1998, the report shows. All mobile operators in the Philippines now offer prepaid service.

But, as more subscribers opt for prepaid services, the composition of carriers’ subscriber base changes. For instance, Smart Communication’s new prepaid customer base grew from 9 percent in mid-1997 to 34 percent by the end of 1997. Piltel, the second-largest carrier in the Philippines, anticipates that much of its subscriber base will migrate to the prepay system, according to Paradigm.

Carriers want to embrace the prepaid market without losing sight of high-end customers when growing their subscriber bases, which underscores the need for carriers to create a single view of their customers, to identify each customer’s usage patterns and the value of that customer to the carrier. Each carrier must be able to tie together its billing, provisioning and other systems so that they can communicate with each other, or at least communicate with a central database within the organization. This will create opportunities for billing vendors, OSS vendors and systems integrators.

Low-income families and people with no credit are no longer the only users drawn to the prepaid market demand for prepaid wireless services is increasing among middle-income families, who want more control of the money they spend on telecom services, industry experts say. In turn, carriers get cash up front, which reduces their exposure to bad debt and minimizes account management and collections.

Editor’s Note: The information in this article should not be used as the primary basis for investment decisions. The information is based on sources Billing World believes to be reliable. However, Billing World cannot guarantee the accuracy of this information.