Companies: VYKE   

The past few years have seen widespread take-up of broadband internet by households throughout the developed world. And as the amount of data that can be transmitted and received via a broadband internet connection has increased, so too has interest in using the internet to talk to friends and family.

Skype is the best-known provider of Voice over Internet Protocol (VoIP) telephony. Originally, its service was a peer-to-peer solution requiring that both parties to a conversation were sitting at computers, but today it also supplies cordless and WiFi phones enabling free Skype-to-Skype calls and low-cost calls to landlines and mobiles. It also offers a ‘To Go’ number that mobile phone users can dial to make low-cost international calls.

Yet Skype is facing competition from other companies keen to get in on the VoIP market. One of the more interesting is Vyke Communications, a Nordic-based company that reversed into AIM-quoted Tower in early 2005 and offers a range of services allowing people to make low-cost phone calls. As well as offering traditional phone cards (providing users with a PIN code to make a discounted long-distance call), Vyke also provides enhanced VoIP-based communication services:

• The company’s ‘PC-to-phone dialler’, which is similar to the Skype Out service, enables a computer user to make inexpensive phone calls to both fixed-line and mobile phones over the internet.

• Vyke’s ‘Web trigger calling’ service allows users to set up a low-cost phone call between any two phones worldwide simply by visiting the company’s website.

• Its Mobile offering allows GPRS and 3G mobile phone users to make cheap international phone calls using a pre-installed Vyke application.

• Vyke’s SMS service brings the company’s Mobile service to older GSM mobile phones that are not Java-enabled. A text message is sent to set up a Vyke-enabled low-cost phone call.

Key to Vyke’s business is its communications infrastructure, which does everything needed to facilitate a phone call over the internet, including switching, termination and billing. The company has invested heavily in this and consequently it claims to offer cheaper calls to landlines and mobiles than Skype. ‘We own our network ourselves, so we have all the advantages of that,’ says executive chairman Tommy Jensen, who claims it would take a rival business at least a year to replicate Vyke’s platform.

Vyke operates in a number of countries already and plans to expand further. Meanwhile, demand for its enhanced VoIP services has taken off over the past year or so. Sales of these services increased from almost zero in January 2006 to 42 per cent of the company’s revenues in the last quarter of last year. And in Q1 2007, they accounted for 56 per cent of total retail billings.

In 2006, turnover increased more than 75 per cent to £10 million, although losses widened to £4.2 million (2005: £2.3 million). House broker Hoodless Brennan has pencilled in another pre-tax loss, of £254,000, for this year before a profit of £2.2 million in 2008.

Jensen himself is cagey about when the company will make a profit. ‘It depends on how aggressive we are with our marketing of Vyke,’ he says, although he is insistent that the company has enough balance sheet headroom not to have to raise further funds, adding, ‘We are not looking for cash to cover operational expenses.’ With this year’s estimated sales greater than Vyke’s market cap, Vyke makes for an interesting, although highly speculative, play on the growing VoIP telephony market.

Vyke Communications	AIM	£12.1m	24.00p	1.50p
Click here for interactive charting
Other company articles:
Vyke dials up the numbers			05/10/2007
Vyke’s speculative VoIP appeal			06/07/2007
Technology teasers			09/02/2007
Tower in £1.8m internet deal			02/06/2005