Upstart wireless ISP YourLink could get major network expansion following parent’s IPO

YourLink Inc., an up-and-coming wireless Internet service provider, could begin a major network expansion in the coming months following its parent company’s decision to float common shares in an initial public offering (IPO). VCom Inc., a broadband wireless and cable network infrastructure provider based in Victoria BC and owner of YourLink, announced its IPO on September 29, the proceeds from which will be used for capital expenditures and to expand manufacturing and research and development activities (see box on page 2 for details of use of proceeds). The price per common share, the amount of shares to be sold and the total value of the IPO have yet to be made public.Saskatoon-based YourLink operates seven small cable TV providers in B.C. and several broadband video providers and ISPs in Saskatchewan, the most notable being Image Wireless, which it acquired last year (RoW, April 21/04). One of YourLink’s most valuable resources is the substantial number of spectrum licences it holds. The vast majority of the spectrum was acquired by VCom, but has since been transferred to YourLink. Under its previous moniker WaveCom Electronics, VCom acquired 10 licences in Industry Canada’s 1999 spectrum auction, spending nearly $160,000 for seven 100 MHz blocks of 38 GHz spectrum and three 400 MHz blocks in the 24 GHz band. More recently, the company paid nearly $1.3 million for 60 spectrum licences in a 2004 spectrum auction: 15 in the 2.3 GHz band and 45 in the 3.5 GHz band. The following year, YourLink spent nearly $200,000 for 28 licences: one in the 2.3 GHz band and 27 in the 3.5 GHz band. The combined spectrum holdings cover all of British Columbia and Alberta, parts of Saskatchewan and southern Ontario and portions of Atlantic Canada. Other major licences held by the company are Ottawa, Vancouver, Victoria, Edmonton, Calgary and Saskatoon. But VCom isn’t ruling out a total exit from the service provision business, according to the preliminary prospectus. The company has an equipment supply agreement with SaskTel, under which SaskTel has an option until April 2006 "to purchase at fair market value our Saskatchewan high-speed wireless Internet subscriber base, contracts relating to the subscribers and all segregated assets required to provide service to such subscribers. We are also in ongoing discussions with a number of parties for the sale of spectrum and other broadband assets," reads the prospectus. While the company has considerable interests in the provision of cable TV and high-speed Internet services, it is best known as a provider of broadband cable, Internet and digital video equipment. YourLink’s $5.2 million in revenue last year accounted for only 8% of VCom’s total. VCom’s fiscal 2005 revenue was about $63 million. Increasing market exposure, penetration and revenueVCom has established itself as a small but key player in the fixed wireless and cable TV infrastructure market, and needs additional funds to expand sales, marketing and channel distributions. According to figures released in the prospectus, three main equipment supply agreements accounted for 61% of the company’s fiscal 2005 revenue: Cisco Systems Inc., BigBand Networks and SaskTel. VCom took in $24.2 million from Cisco for the 2005 fiscal year ended June 30, 2005 with an additional $16 million expected by December 2005. VCom reported $4.2 million from the BigBand agreement and is expected to derive an additional $10.8 million in revenue by April 2006. From SaskTel, VCom has also recorded $4.2 million with an additional $1.7 million by November 2005. The company aims to grow its revenue derived from these three agreements, but also expand into new markets. "We also plan to expand our direct sales capability, both to increase revenue and decrease our reliance on OEM marketing channels. We believe that this strategic effort will assist us in achieving regular and more predictable increases in sales levels in the broadband wireless, digital video and in the emerging market for IP video," reads the preliminary prospectus. VCom is also looking to potentially expand into the customer premise equipment (CPE) market. "The evolution of non-proprietary conditional access standards, which lowers the cost to the consumer, has created a new high-volume market for CPE products for the IP video market. With the diversification of our technology base and the growth of our manufacturing capacity, we are well positioned to take advantage of that opportunity," notes the prospectus.

Upstart wireless ISP YourLink could get major network expansion following parent’s IPO

News | 10/05/2005 4:00 am EDT

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