Research, page-2237

Yea exactly. There comes a 'theoretical' upper limit of how much we can earn off of these contracts before the company paying the money looks to alternatives: i.e. buying us or a competitor out, developing in house, etc.


At some point they would say 'we are paying a TON of money for this service, I'm sure we can accomplish this cheaper'. So they limit the potential for that, by using a very small %, as even with a very small %, there is still a large upside.

To illustrate: does anyone here see Indosat actually signing a contract that leaves them with the potential of having to hand over more than a billion AUD a year? As much as I'd like that, I'm pretty certain that wouldn't happen, and the contract wouldn't leave an exposure like that. At a $1b/year, they'd seek other alternatives as that's a massive cost. So in order to account for an unknown % of subscribers adopting the mobile platform, yet with a total payout limit, we need to assume a very low revenue %. So a billion is too high, but what about 750m or 500m? Where is the line drawn?



Is it reasonable for us to see 20% uptake? Maybe even 30%? Yea possibly - especially over a 3 year contract. Is it reasonable for us to expect a half a billion dollars a year as a result? No. It's not. I think the line is much lower than this.

And at 10% rev/20% uptake, we'd be at $480m - or 10/30, we're at $720m a year. Frankly, those numbers are just WAY too high (as much as I'd wish them to be true). So since I believe 20-30% uptake IS actually achievable, I think we are therefore bound to a revenue share below 10%. In reality I think it's closer to 1-5% like I mentioned in my last post. (and my gut says actually closer to 1%)

Plus, let's be honest here - this is NOT a 50/50 arrangement. Indosat is bringing both content and 100m potential subscribers to the table. Those are two MASSIVE bargaining chips. What are we bringing? Rhetorical question - but food for thought.

Even if we receive 0.5%, this value is not to be underestimated. With 100m potential subscribers and a 3 year horizon there is still a tremendous potential in this contract.