Telecommunications Sample Business Plan

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Telecommunications Business Plan

Executive Summary

The telecommunications revolution has arrived: Personal communications and unified messaging systems are at the vanguard of this technological phenomenon. Dating from the 1984 deregulation of local and long distance telephone service, competition has accelerated and sought out every nook and cranny of telecom products and services for both consumers and businesses. From that day only 15 years ago, when consumers were tied to a fixed phone with its fixed phone number, mobile and cellular phones have proliferated to meet the demand for communication anytime, anywhere in the world. Companies that have not foreseen change–or kept up–are quickly consigned to the technological and financial graveyard, Iridium being just the latest example. Financial muscle has been displaced by quality and depth of management and speed of execution as the final arbiter in the marketplace. AT&T finally realized this and brought in a technology-savvy CEO who could pull the trigger on needed change; Iridium did not and paid the price.

TeleSpace is well positioned to become the market leader in personal communications and unified messaging. Now that business and the consumer have telecommunications mobility with numerous phone and fax numbers, pagers, and email, they are demanding simplicity and speed: One identifier for their complex business and personal lives that will find them anytime, anywhere, and deliver their communications. They want and need MyLine.

MyLine has been an operating system for over five years and has a loyal, though small, core of customers. The technology is clean, elegant and maintainable. The system has a complex array of features, some critical, most not. MyLine has had limited success because it was engineered and marketed like the pocket knife of the early TV ads: Rather than the sleek cutting tool the consumer wanted, the early knife had a corkscrew, screwdrivers, awl, key chain, etc. It weighed twice as much as it had to, and came with instructions, instructions for a pocket knife! Consumers knew they were in trouble before they even used the product.

Internal market research has shown what the consumer wants, and MyLine has it! There are five primary target markets, three of which will be discussed below, starting with the businessman and consumer who just wants to get phone calls no matter where: In the office, in a car, in a plane, playing golf, wherever. If the customer is on earth, MyLine will find him/her. Then there’s the Soccer/Sports Mom, totally mobile and often just as totally unreachable-except with our toll-free, 800 MyLine. And the military market, for both professional and personal use, is inviting. They demand mobile, reliable, and confidential communications–MyLine is ready and able to enlist.

The overall telecommunications market is huge, well over $200 billion. The personal communications and unified messaging sub-industry, with its hundreds of millions of actual/potential users, is difficult to quantify at this stage. Management estimates that projected sales of about $40 million in the third year, with sales running at the rate of $5 million per month by the end of that year, would still be only approximately a one percent market share. To become the market leader, a five to ten percent market share would probably be needed. Management plans to achieve this within five years.

1.1 Objectives

TeleSpace’s primary corporate objectives are:

• To become the market leader in personal communications and unified messaging products and services within five years.
• To become the lowest cost provider and drive an aggressive pricing model through the industry.
• To have the best and most responsive customer service by year-end Year 1.

1.2 Mission

MyLine is already the most technologically-superior personal communications system in the world. TeleSpace management will build on MyLine’s brand and technical reputation to become the market leader in personal and business communications, and unified messaging systems within five years.

1.3 Keys to Success

There are three keys to success for TeleSpace:

• Marketing must generate sufficient sales volume to drive an aggressive pricing model while still achieving planned profitability projections.
• Strategic partners must be found to private label MyLine and promote it through their distribution channels.
• Equity capital must be secured at a reasonable valuation.

Company Summary

TeleSpace, Inc. develops and markets programmable personal communications and unified messaging services for individuals and businesses. The company was incorporated in early Year 1, and operates as a wholly-owned subsidiary of AmericomUSA, Inc., a public reporting company. In response to overtures from AmericomUSA senior management, TeleSpace management has proposed a leveraged buyout of the company from Americom and has incorporated this proposal in a Letter of Intent (LOI) sent to Americom. A copy of this LOI is included in the plan appendix. Briefly, the proposal calls for TeleSpace management to purchase 81% of TeleSpace common stock from Americom, with an option to acquire an additional 10% within two years. Americom will deliver all rights and ownership of the MyLine technology and customer base and cease active association with the company. They will not be represented on the Board of Directors. Management expects this negotiation to be completed by the end of October, Year 1, when management will actively pursue equity capital to finalize the acquisition and fund corporate operations.

*Attachments are not included in this sample plan.

2.1 Company Ownership

TeleSpace, Inc. is a wholly-owned subsidiary of AmericomUSA, Inc., a public reporting company. Mr. Robert Cezar, Chief Executive Officer of AmericomUSA, Inc., owns approximately 58% of the common stock of AmericomUSA.

2.2 Start-up Summary

Start-up costs, shown below (exclusive of salaries), are comprised mostly of legal fees, marketing collateral, advertising, and consulting fees. Start-up costs are being financed by the parent company, AmericomUSA.

2.3 Company Locations and Facilities

TeleSpace corporate offices are located in Arroyo Grande, CA. Existing space of 900 square feet is adequate for existing staff, but new facilities have to be leased when sales representatives are hired.

Products and Services

TeleSpace, Inc. develops and markets programmable personal communications and unified messaging services for individuals and businesses. The MyLine system can best be described as a personal communications platform, a remotely programmable “telocation” service which allows the user to access MyLine services from any telephone device or personal computer anywhere in the world.

3.1 Product and Service Description

The MyLine system can best be described as a personal communications platform, a remotely programmable “telocation” service which allows the user to access MyLine services from any telephone device or personal computer anywhere in the world. MyLine is a virtual telephone number which allows the user to control inbound telephone, fax, and data calls and receive them anywhere, but only on demand. MyLine is the only telephone number users will ever need. They receive every telephone call, fax, or email sent to their MyLine number in real time or stored for later use. Or they can screen and elect not to receive any particular communication, delete or divert for later handling. MyLine includes a proprietary security system to prevent unauthorized access and has real-time billing and accounting capabilities. The latter can generate, using a telephone or personal computer, comprehensive billing records by project and/or general ledger account.

3.2 Sales Literature

Initial radio and Internet ads and sales collateral will be developed by the company’s marketing, advertising, and public relations agency in Silicon Valley. This is a well-known firm specializing in high-tech clients.

3.3 Competitive Comparison

In 1992, AT&T launched their Easy Reach service which, although simplistic in design and use, signified the need for a universal telocation virtual number and thus found immediate acceptance. MCI reacted by introducing its Personal 800 Follow Me Service. These services today require users to subscribe to their networks, lack a broad range of integrated services, and offer limited remote control capability.

There is one striking difference between MyLine and competing technologies: The competition has not integrated all means of communication. Some offer voice mail and follow me technology, others offer this, and other features, on a piece meal basis, not totally integrated. MyLine is the only totally integrated voice, fax, data, and email system on the market.

3.4 Fulfillment

The company now maintains its servers locally for supporting MyLine. As volume grows, management plans to co-locate at Above.Net’s facilities in San Jose, CA. A strategic marketing partner will also be sought, especially for the toll-free, 800 number.

3.5 Technology

The MyLine hardware platform is a state-of-the-art digital industry standard, and its design provides unique redundancy and flexibility. The MyLine system places the user on an electronic highway of digital call processing, operating on a Novell Local Area Network (LAN), integrating computer and telephone information into computer telephony technology. The LAN is connected to the Public Switch Network with the capability of using the ISDN/DSL features provided by the long distance carriers.

MyLine users have a personal communications exchange as a zero-blocking private global network providing voice, fax, and data transfer between themselves and any other MyLine or non-MyLine user. MyLine overlays and utilizes the Public Switched Telephone Network (PSTN) or the Public Switched Data Network, providing access to anyone with a MyLine number. The network routes all incoming and outgoing requests and data to a central hub for distribution to external routers, the Internet if needed, or delivers the request directly to local destinations.

The MyLine switching center provides the telephonic connection to the PSTN, which the network utilizes as its gateway. The MyLine system utilizes a Novell Netware Global Messaging Service which operates on Novell Netware file servers, providing a standardized platform and format for global message distribution to other Novell Netware servers, compatible applications and Internet addresses. Thus, access to the MyLine system is virtually unlimited. All communications within the network are encrypted, either with public/private key algorithms or with the proprietary MyLine rotational encryption algorithms.

3.6 Future Products and Services

MyLine features can be summarized in the following categories. A comprehensive feature set is available upon request by potential investors.

• Call forwarding.
• Selective call screening.
• Automatic callback.
• Wake-up services.
• Conference calling.
• Call waiting.
• Call wonferencing (integrating call waiting and conferencing).
• Voice messaging.
• Paging.
• Real time billing/accounting.
• Information on demand.
• Number referral.
• Fax store and forward.
• Email.

Market Analysis Summary

Dun and Bradstreet estimates that 1999 sales of the U.S. telecommunications market will be over $150 billion, of which the personal communications and unified messaging market is three percent, or $4 billion. If the company can achieve a one percent market share within three years, its sales would be $40 million in a market growing eight percent per year. These estimates are conservative, given the accelerating growth rate of telecommunications and unified messaging in particular. There is ample space for the company, and many competitors, in this huge and fast-growing marketplace.

4.1 Market Segmentation

TeleSpace has targeted five primary market segments:

• General consumer and business market.
• Sports Mom toll-free.
• Domestic Traveler/Calling Card.
• International Traveler.
• Military.

4.2 Target Market Segment Strategy

The company will market its products to customer segments that require the basic mobile telecommunication services (such as voice messaging, fax, and email) in a single solution. Other features will be specific to each customer segment. The company will spend substantial marketing efforts in determining which set of features are the most attractive to each customer segment. Offering customized quality product to each customer segment at a competitive price level will be one of the marketing goals of TeleSpace.

4.2.1 Market Needs

All customer segments that we target seek reliable communications that are easy to use. However, feature preferences vary in between the segments. ‘Soccer moms’ that spend so much time driving their kids around are in need of an ‘always on’ accessibility. A permanent 800 number is what they covet.  Business travelers, on the other hand, have a strong need for a universal communications portal that will take care of all their communication needs. In this respect, TeleSpace will specifically tailor its market offering to each customer segment.

4.3 Service Business Analysis

TeleSpace is part of the telecommunications industry, including the following sub-industries:

• National and international carriers (AT&T) which dominate the long distance market and offer unified messaging system (UMS) to their customers.
• Regional operating companies (Pacific Bell, GTE) which provide local service and switch long distance traffic to the carriers and CLECs. They also offer UMS to their customers.
• Competitive local exchange carriers (CLECs) provide both local and long distance service and market UMS to their customers.
• Resellers aggregate traffic and provide discount long distance service and UMS to their customers.
• Unified messaging and personal communications service providers with in-house switching capability, such as TeleSpace, that offer MyLine and similar services to all consumers and businesses.

4.3.1 Business Participants

The personal telecommunications and unified messaging system sub-industry of the overall telecommunications market is a new, technology-driven, and immature industry characterized by a high growth rate, low barriers to entry, several large, and many small, competitors. The industry evolved during the last ten years as a spin-off the the telecommunications de-regulation, and subsequent explosion in competition and technological innovation. Overall industry sales should continue to accelerate for at least the next three years as consumers learn they can have their own unique local and 800 phone numbers for anyone to find them anytime, anywhere. Several industry leaders have emerged including:

• AT&T: The overall industry leader is expanding both vertically and horizontally into new markets and technologies and will probably have an impressive UMS.
• Excel Communications, Inc. is a wholly-owned subsidiary of Teleglobe, Inc., a large public telecommunications company. Excel is aggressively marketing its UMS.
• Linx Communications, Inc.is a leading national communications service provider which recently received venture capital financing. See Competitors, Section 4.3.3.
• Nextel Communications, Inc. is a large public company providing digital and analog wireless communications services throughout the U. S. See Competitors, Section 4.3.3.
• Sprint PCS offers a wide variety of UMS services marketed primarily to its long distance customers.
• Voice Mobility, Inc. is a public company offering UMS for CLECs, wireless and other communication providers. They offer a MyLine clone to providers who re-market to their consumers.

There are numerous small competitors, the primary of which are described in the competitor section.

4.3.2 Competition and Buying Patterns

The primary buying factors in personal telecommunication systems are price, accessibility, and ease of use. There is significant brand loyalty based on the company’s experience with its current customer base. Once an individual has acclimated to the MyLine system and memorized the access routine, he tends to be reluctant to switch to another service. Very much the same attitude prevails in consumer long distance, where demonstrable savings fail to sway a large segment of the population to switch carriers. AT&T still has over 60% of the market even though they are the highest cost carrier in a commodity business. Powerful branding and advertising, even with premium pricing, will create a significant barrier to competitors taking our customers. Being the market leader, like AT&T, will strengthen the company’s branding position and also make it more difficult for the competition.

Management feels the primary competition will be other well-branded companies like Nextel and Linx Communications, which have deep advertising pockets, feature-rich and competitive services, and an established brand. All the major telecommunications companies, including the Baby Bells, are moving into UMS because they have the infrastructure to support it and the brand to promote it. They will have the initial advantage in branding and marketing muscle, but their services to date are inferior. The marketplace is big enough to support all this competition and then some.

4.3.3 Main Competitors

Our main competitors include both telecommunications and unified messaging companies, most of whom have deep financial pockets, and all of whom appear to be competent at packaging and marketing their products. They are shown below with brief descriptions of the company and product(s):

1. Webley Systems offers a UMS called the personal assistant, which Small Business Computing and Communications Magazine has rated the most sophisticated product they have rated. The personal assistant provides subscribers with a phone number where you can leave faxes and voice messages. Messages may be accessed either through a password-protected website or by phone, where you can listen to voice mail or have email or fax headers read. It also supports fax forwarding and broadcasting and offers an effective voice recognition engine to navigate through menu choices. The assistant will notify you by pager when new messages arrive and can also screen and selectively forward calls to any phone number you designate. You can also load your contact list into the assistant and have it place calls for you while on the road, including conference calls. However, the assistant only supports one email account at a time.
2. StarTouch International, Ltd. entered the UMS arena in July, 1996 with its Electronic Secretarial Administrator (ESA). ESA offers a switch-based service including call answering, forwarding, voice mail, fax, broadcasting, and conference calling. The company claims to be debt-free and to own their own switch. Overall, ESA is impressive and competitive, though sign-up is difficult and rates confusing.
3. Nextel Communications, Inc. is a large public company offering a digital, nationwide service competing with other cellular service providers such as GTE, Cellular One and AT&T. Nextel operates on radio taxi frequencies, and their system is based on radio “walkie talkie” style communications for short-range communications. The service is thus tied to the range of their wireless transmission system. Within that range they do offer many features including caller ID, paging, voice mail, call waiting and forwarding, and conference calling. Nextel offers a national system within their transmission range with unlimited long distance. For example, a national account with 1,000 minutes costs $135/month with an additional $.10 per minute for call forwarding.
4. Linx Communications, Inc. offers a Web-based unified communications platform called LinxWeb, a personal Web portal that manages personal daily communications including phone calls from any landline or mobile phone, messages, pages, and faxes. LinxWeb is very similar to MyLine. Linx has teamed with Focal Communications to co-locate their switches in Focal facilities across the U.S.
5. JFAX.COM unified messaging provides a single phone number in one of 60 cities world-wide allowing faxes, emails, and phone calls to be managed via your email account. The system is accessible via phone but best accessed through computer.

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