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Manx Telecom’s hearing software adds tech edge to steady telecoms base

There are 3mln people in the UK with moderate to severe hearing problems and within five years Manx wants to have a fifth of these or 600,000 as customers.
Mobile phone
Software establishes a profile of the user and adjusts sound accordingly

Even to someone with perfect hearing Manx Telecom PLC ’s (LON:MANX) new mobile-based solution for hearing loss makes a clear difference.

For many millions of people with partial deafness, it seemingly offers hope for a real improvement in their life quality.

WATCH: Manx Telecom delivering 'unique' and 'life changing' technology for the hearing impaired

While helping with hearing loss might seem an unusual departure for an Isle of Man-based telecoms group, at the root is a core business that is about as steady as it gets.

Manx has been the dominant telecoms operator on the island for 129 years.

Services include the normal suite for an incumbent telco - broadband, telephony, mobile, managed services and IT.

Gary Lamb, Manx’s chief executive, says the telecoms arm generates cash, pays dividends and invests in infrastructure but with a very stable population there is not much opportunity to grow the business.

Tech start-up 

That was why Vannin Ventures was established in 2016.

While a 100%-owned subsidiary, it is a deliberately separate operation to the telco operation.

Vannin’s most recent significant investment (after its first investment in Partitionware) is a 67% stake in Goshawk, the company that invented the hearing loss solution.

Lamb says the Isle of Man is an ideal place to develop technology.

The island was the first to introduce 3G, for example, while a captive population of 85,000 is an perfect testing ground for new products.

And that is what Manx is doing with Goshawk.

Trials have been ongoing for some months to an enthusiastic response -  89% of those taking part said it would help.

Formal launch

A formal launch took place the island last month ahead of a roll-out into the UK mainland over the EE network in 2019.

And as impressive as the tech are the projected numbers if all goes to plan.

Lamb believes Vannin’s revenues can eventually outstrip those of Manx.

There are 3mln people in the UK with moderate to severe hearing problems, he says, and within five years Lamb wants to have a fifth of these or 600,000 as customers.

Pricing is likely to be between £15-20 per month, which is £180 per year at the lower end,

That equates to annual revenues of £108mln on 600,000 subscribers.

Manx Telecom, meanwhile, generated £80mln in sales in 2017.

Admittedly these are best case projections fro Goshawk, but Lamb’s enthusiasm is understandable especially as there is scope to develop the technology further.

The product has been launched initially as a mobile application but should work equally well on fixed lines, he says.

European roll-out

Matthew Turner, Goshawk’s inventor and himself profoundly deaf, meanwhile is working on the European roll-out.

Language is not an issue and as the software required is installed at the network provider end, ie Manx, and not by the user, roll-out costs should not be excessive.

Vannin, meanwhile, is looking at other products such as an e-sim card that can be updated remotely and eliminates the need for the physical plastic version.

Steady telecoms

In short, that is a lot of potential all of which seems underpinned by the steady telecoms business.

For instance, if the final dividend is increased by the same amount as the half year, the dividend yield currently is 7.1% at 169p.

Like other incumbents, Manx Telecom is upgrading the network under its licence area to superfast broadband but the costs currently seem well within in its capability.

“We are broadly generating £27mln in EBITDA a year and generating £25mln of cash from which we pay £13mln dividends, £8-10mln of capex and debt interest.

“That leaves between £1 and 4m to fund new ventures such as Vannin.”

Manx Telecom is committed to provide £10mln of funding to Goshawk over three years, after which the expectation is that it will become self-funding.

Own identity

Possibly there are doubts that such an established business as Manx Telecom is the right vehicle for a tech start-up, but management has made a major effort to keep the two apart.

The idea behind different management and premises, for example, is to build up Vannin’s own identity.

All will be much clearer in a year’s time once the UK roll-out is fully underway and when Vannin could be on the way becoming a very valuable asset. 

A rating of 13 times at the current share 165p share price would seem fair for the telecoms business even without this possibility.

 

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