SigValue Technologies: Making prepaid more profitable

A year after it was founded, SigValue Technologies, which develops billing products for the prepaid market, has had its first sale, is completing its second financing round, and developing its third product.

Please pay attention to the following numbers, which were scrupulously calculated for a presentation by Israeli start-up SigValue Technologies. Prepaid services for the cellular telephony market constitute 30% of the entire global market, and it is predicted that within a few years the number of subscribers using prepaid services will surpass the number of post-paid subscribers.

If that is not enough, research company Pro-Data has thrown another bomb, informing us that 56% of European cellular subscribers pay for their telephone calls before they are made, and that 80% of new subscribers in some European countries prefer prepaid services.

If this is the case, then subscribers like having the ability to have full control over their cellular expenditures. Until now, the target audience for prepaid services were parents buying cellular telephones for their children, who budgeted them a fixed sum per month that could not be exceeded. Other users were adults and the elderly who made few calls, but wished to be available for incoming calls.

Another fascinating target audience is the netherworld of escort service girls who prefer that there be no connection between the phone number and the subscriber behind it. With prepaid services, the buyer of the cellular device pays for a calling card at a kiosk or automatic teller, and starts talking. As a matter of fact, in Japan, where cellular phones are quite prevalent, the government is trying to limit prepaid cellular devices as part of its anti-crime efforts.

Other new, prepaid services markets are in the developing world, where there are few banking services enabling people to pay monthly bills. In this case, it is simple to allow subscribers to pay in advance for their calls.

The attractiveness of prepaid services and the rapidly expanding cellular market has led to a flowering of technology companies developing products in the field, including advanced billing technologies. One such company is Israeli start-up SigValue Technologies, one of whose new shareholders is billing giant Amdocs (NYSE: DOX).

SigValue Technologies's ambition is to prevent discrimination against prepaid customers, so they can receive the same services as post-paid customers. The company was founded in April 2000 by Eli Yardeni and Yuval Maron, who had worked together at Pele-Phone, where Yardeni was chief of the new technologies division and Maron worked at the department for finding and testing new technologies.

Yardeni was also head of the engineering systems department, responsible for switches and RF. In this capacity, he examined start-up Schema, which asked Pele-Phone to test whether its systems were economically feasible. During this period, the two men decided to found a start up, and after rejecting several possibilities, decided to focus on prepaid technologies.

They decided to work in the area of prepaid rather than RF technology – Pele-Phone's area of specialization – because communications operators thought the RF field would devour investment instead of generating additional revenue. On the other hand, added value services, such as advanced prepaid services, are considered to be income yielding products for operators, and therefore easier to sell.

"At the time, there was a great deal of hype surrounding third generation cellular," says Yardeni. "We decided to go into a solid and real business that was already needed. The motivation was to help operators save money on infrastructures and communications equipment already purchased. At the same time, the operator is opening a whole world of new sources of revenue."

Ordinarily billing systems send bills listing customer calls according to time and destination. Prepaid billing operates differently, because the bills must be based on real time technology, as it is essential to know immediately whether a customer still has credit in his account, whether the desired service is available, and for how long. SigValue's founders say there are only a few technologies currently capable of real time billing, most of which were developed in-house by operators.

SigValue Technologies launched its first product early this year. It is a standard prepaid system, whose advantage is that it can handle an environment of multiple switches from different manufacturers, while enabling the provision of new services at lower cost. The system is also suitable for next generation communications infrastructure.

SigValue Technologies enables communications operators to reduce their costs for investments in infrastructures. Prepaid systems deliver additional traffic on the cellular infrastructure, but SigValue Technologies's system eliminates transmission costs altogether, saving several million dollars a year, and sharply reducing the need for further investment in infrastructure. The result is a lower infrastructure cost per subscriber compared with competing technologies.

SigValue Technologies has also developed a system allowing operators to bill in real time for SMS messages, based on content, time, and destination. For example, the downloading of an icon, dial tone, or stock quote would each be billed differently.

A few days ago, SigValue Technologies received its first cash order from an East Asian customer, which is also a beta site for the combined prepaid and SMS system. SigValue Technologies  hopes that the system's scalability will lead to follow-up orders from the customer.

The company is currently working on a future product that will provide solutions for Europe's GPRS and the US's CDMA services. The system will allow billing based on the type of application and the traffic volume needed by the customer. The product will be launched at the end of the year.

Maron says, "With our voice products, we entered a market with alternative technologies. We only had a technological edge. We consider ourselves industry pioneers with our third product."

The current consensus is that ordinary billing for the third generation will include prepaid services. In this way, customers will continue to pay for phone calls in the usual manner, while paying fixed sums n advance for more expensive services, such as pay-per-view video and other multimedia services.

The combination of prepaid and post-paid billing systems could be particularly attractive for subscribers who received cellular telephones from their jobs, and whose employers might be unwilling to pay for their downloaded movies. In this way, an employee could pay in advance for the services he wants, and the business will get a monthly bill for the phone calls only.

SigValue Technologies has already signed agreements with two large billing companies to integrate the combined billing systems. The company will sell its system both through OEMs and direct sales.

The company is already running three beta sites, and, as mentioned above, has had one cash sale to an East Asia customer. The system 's price starts at several hundred thousand dollars, depending on subscriber capacity.

Maron and Yardeni say the company's technology can also provide added value to Internet wireless access companies, and they are considering developing supplementary product for LMDS networks in the future. For now, the company is negotiating to provide supplementary products to Internet wireless access companies that want additional applications in order to improve their tender bids.

Name: SigValue Technologies

Founded: April 2000

Founders: Eli Yardeni and Yuval Maron

Product: Prepaid billing system

Financing rounds total: $2 million seed stage and $7 million first financing round to date, which is expected to grow.

Ownership: Founders, AIG Orion Fund LP, Amdocs, Holland Ventures. New investors will be added.

Employees: 20

Competitors: Logica Mobile Networks of the UK; Comverse and cellular communications equipment manufacturers


Published by Israel's Business Arena on 28 August 2001

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