Txt idea sets speculators drooling

It's as if the dotcom bubble never burst. In the last few months investors have been clambering to buy into Plus SMS, a tiny company with a hi-tech idea, no revenue and a rocketing share price.

Plus SMS's mysterious business plan has enthralled sharemarket speculators and bewildered analysts since the company popped out of nowhere last year.

Its share price quadrupled in two months (now 62c), sending the company's market capitalisation to a peak of more than $250 million in November. It had settled back to just under $200 million when the market closed for the year.

Plus SMS's vision of revolutionising the way the world's biggest companies use text messaging has been dismissed by some as pie in the sky, but it has also been endorsed by a leading global sports rights management consultancy.

International Sports Television has signed up to market Plus SMS's concept which, it says, has already attracted strong interest from sporting federations and clubs with an international following.

Plus SMS appeared on the NZX Alternative Market in July after a back-door listing using the shell of failed retailer RetailX.

Founder Garry Donoghue is a 25-year veteran of the telecommunications industry. His previous business activities have included running Somalia's only phone network in the early 1990s when occupying US troops would queue for the chance to call home.

Donoghue says he is using his global experience and international telco contacts to build a network that will allow the company to offer single text numbers for global campaigns and competitions run by corporates.

"We are in the right place at the right time with the right product to make a significant impact on the way SMS messages are sent," he told shareholders at the company's annual meeting in Auckland in September.

Plus SMS's relatively low liquidity, its listing on the secondary board and a perception of high risk mean most analysts have ignored the stock.

But one analyst who has taken a look at the company concluded the business model did not stack up.

"They may not find any takers for their global numbers," said the analyst, who asked not to be named.

"There are not too many global promotions. The problem is a Nike promotion in one country is not necessarily the same as a Nike promotion in another country." But ISTV general manager Jarrod Frykberg disagrees, saying sports federations were always looking for new revenue streams, and SMS competitions were an increasingly attractive option, particularly if they could be easily promoted on a global scale.

"You start to get a much bigger number of participants and with a bigger number of participants you can offer bigger prizes,"says Frykberg.

"Bigger prizes will then drive more participants so you get an exponential effect."

Frykberg says the ability to promote a single promotional text number during a global sports broadcast is a powerful marketing tool.

ISTV - which has negotiated some of the world's biggest sports television deals including ICC Cricket, Sanzar Rugby, AFL and English Premier League football international rights - has held initial positive discussions about Plus SMS's concept with some sporting bodies, which Frykberg would not name.

"What we can say is that as the technology comes on stream we'd expect to be closing deals in the first and second quarters of next year."

Plus SMS says it is is presently testing its technology in Asia.

Last month it reported an unaudited loss of $1.3 million for the six months to the end of September.

Donoghue said the company had $6 million in the bank to see it through its start-up phase.