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Time to diversify, says VoIP pioneer

Internet telephony player|Via Communication Network Sdn Bhd|is quickly diversifying in a move away from impending "cut-throat" competition.
Written by Anita Devasahayam, Contributor
Internet telephony player plans to grow its non-VoIP revenue streams from 25 percent presently to 75 per cent of total revenues.

KUALA LUMPUR, 21 July 2000 - Internet telephony player, Via Communication Network Sdn Bhd (VCN), is quickly diversifying in a move away from impending "cut-throat" competition.

"The rates in the Voice-over-IP (VoIP) market will get very competitive very soon, turning it into a cut-throat business as the market becomes quickly commoditized. We cannot depend on calls alone, and are looking for other ways to create new revenue streams," said VCN CEO, Alvin Foo.

Foo told ZDNet Asia that the company is already moving into higher-margin activities such as e-business, network services and Linux.

"Our goal is to grow our non-VoIP revenue streams from 25 percent presently to 75 per cent of total revenues," he said.

VCN introduced the first commercial VoIP service in Malaysia in February 1998. The service enabled regular phone users or PBX subscribers to place trunk and long-distance calls over Internet gateways at discounts averaging 30-40 percent.

Foo said the business grew rapidly from zero to 1,000 customers in its first year earning RM600,000 (US$158,000) in sales. In 1999, sales rose fifteen-fold, and Foo projects similar exponential growth this year.

"The economic crisis worked in our favor as companies were looking for ways to cut cost. Cheaper phone calls using Internet telephony technology was a huge savings factor to join up," said Foo, a London University-trained lawyer.

Foo said in mid-1999, however, just as VCN was scaling up, the company was forced to take a hard look at its business model. "We had to reinvent our strategy to cushion ourselves from what we saw as a shrinking of the Internet telephony pie in Malaysia and the region."

Although VCN had first-mover advantage, Foo said it was losing ground on account of deregulation, lack of funding support to expand and the entry of new players.

Last month, local fixed-line player Telekom Malaysia and fiber-optic operator Time Telekom introduced their VoIP services, while mobile player Celcom is expected to enter the fray by year-end.

The new services up Foo's sleeves are targeted at its current customer base, the first of which is the launch of a B2B trading portal in August. "It will serve as a conduit to help small and medium-sized businesses participate in the new economy from the front-end right up to the back-office, and also offer co-location services," he said.

Foo skimped on details but plugged the new portal as "the first of its kind" available here, which is likely to be subscription-based. "We will leverage on the Net as an extension to improve current business practices and that would be the role of the portal."

On the Linux front, the company is betting on Woolfie's Den, a dedicated Linux community site that actively pursues and develops the Open Source market.

The diversification exercise will also pave the way for VCN to seek a listing either on Hong Kong's GEM or Singapore's SESDAQ by January 2001.

"We hope to raise US$20 to US$30 million to fund future ventures," he said, adding that the local technology bourse MESDAQ, which has attracted only a single company in over a year, was unable to provide access to "big money".

"Malaysia is not a place to become an Amazon.com. Our venture capitalists are essentially bankers, and no one expected our business to take off the way it did. This is why many potential emerging-technology companies here are reduced to becoming box-pushers because they cannot get access to cash," said Foo.

About Via Communication Network Sdn Bhd
Set up in 1997, with an initial startup capital of RM1 million (US$264,000), VCN is headquartered in Kuala Lumpur and currently has branches in Penang, Johore, Malacca, Ipoh and Kuantan and has opened associated offices region-wide. The company has pumped in US$5.3 million to strengthen its infrastructure.

To date VCN has an estimated 30,000 customers of which 50 per cent are in Malaysia and the rest in Thailand, Hong Kong, Philippines and Taiwan.

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