Article Excerpt:
TWST: What is iBasis?Mr. Gneezy: iBasis is one of the largest carriers of international phone traffic in the world. Most of our business is providing completion of international calls on behalf of other carriers like Verizon and AT&T and many of the new service providers like Skype and Yahoo! We do this over a global VoIP network that we have deployed, which comprises more than 1,000 points of presence in more than 100 countries for the termination of international traffic. We also provide retail prepaid services for international calling, which accounts for about 20% of our business. I co-founded the company with Gordon VanderBrug in 1996. This was in the very early days of VoIP. We were one of the first networks to deploy that technology. Today, we are probably the largest VoIP network for the carriage of international traffic. The company went public in 1999, had a secondary offering in 2000, and we are traded over the NASDAQ exchange. The market started deregulating telecom services with the 1996 Telecom Act here in the States and the ITU agreement on deregulation in 1997, which effectively deregulated most of the international market. This created a lot of new competitive local and regional carriers that needed a wholesale provider to terminate international traffic for them. This is when iBasis stepped in, and we have continued to grow our market share quite significantly year after year ever since. In Q2 2006, our most recently completed quarter, in which we achieved revenue of $127 million, we had more than 14% sequential increases in both revenue and gross profit, as well as 26% sequential expansion of EBITDA. Some of the most significant developments in our business were during the second quarter. We announced a transaction with the national carrier of the Netherlands, Royal KPN, in which KPN carved out its international carrier service, and agreed to merge that operation into iBasis. KPN will end up with 51% equity ownership in iBasis, and iBasis pre-merger stockholders will receive $113 million in a special one-time dividend. On a combined basis, iBasis now will be perhaps the world's second largest carrier of international voice traffic behind Verizon. This will put us near the very top of the pyramid in carriage of international traffic, which is very important in that business. International traffic is a commoditized business in which scale is an essential success factor. Achieving very large scale enables us to maintain very low cost of terminating the traffic, thereby giving us a very strong competitive position.
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