Telemedia leaves NZ to score tax breaks

By Chris Barton

New Zealand's lack of research and development tax breaks has driven high-tech startup company Telemedia across the Tasman, where it will list on the stock exchange next month.

"The environment for development and exports is attractive in Australia. It's a good, logical point for us to work from," said chief executive Chris Jones, who founded Telemedia three years ago.

Speaking by teleconference from Sydney, Mr Jones announced a public offer of 16 million shares at $A1 ($1.23) each to fund expansion of the telecommunications software company.

Though software development staff would remain in New Zealand, he said the company's headquarters would be in Sydney.

There are no plans to dual list on the New Zealand market.

A $A7 million chunk of the $A16 million to be raised is earmarked for unspecified acquisitions "of businesses with an existing customer base and additional complementary products and services." Telemedia has made sales to some major telecommunications companies. Its New Zealand-developed suite of products includes software for the prepaid mobile and calling cards market, interactive and voice messaging systems, call centres and intelligent network systems.

Mr Jones described intelligent networks as "large computer systems with a billing system on the end," which enabled new-entrant telecommunications companies that had interconnect agreements to rapidly set up in a market.

He said the key to Telemedia's expansion plans was attracting five high-calibre sales staff - "individuals who are currently working for the competition and who have a proven track record of $US10-15 million in sales per month."

Such staff, used to earning about $US200,000 a year, would be wooed with attractive incentive-based packages and share options.

The company has allocated $A1 million to setting up sales and support offices in Sydney, Bangkok, Singapore, Hong Kong, London and Tokyo.

Sales are predicted to soar from $A5.72 million for the 15 months ending last June to $A22.98 million for the year ending June 2000.

Asia and Europe are seen as the company's growth engines, with predicted sales of $A8.5 million and $A6.7 million respectively.

Based on the offer price, Telemedia would have a market capitalisation of $A59.8 million, with $A43.8 million, or 73 per cent of the shares, held by Mr Jones in escrow for 12 months after trading commences on October 21.

The offer has been underwritten by Hartley Poynton and will also be available to New Zealand investors.

Telemedia has been selling its products and services overseas since 1997, including sales to Thailand and Sweden.

Its PayGo mobile and phone platform is used by Telstra, NetTel and Freedom Mobile in New Zealand and AAPT in Australia.

The operating profit after tax for the 15-month 1999 fiscal year was $A1.19 million.