MGM Wireless Limited (ASX:MWR) CEO, Mark Fortunatow talks about the company's world-first Spacetalk two-way 3G communication and GPS tracking smartwatch, expansion plans and schools business.
Jessica Amir: Hello. Jessica Amir here for the Finance News Network, with MGM Wireless Limited (ASX:MWR) CEO, Mark Fortunatow. Mark, welcome to the network.
Mark Fortunatow: Thank you very much for having me.
Jessica Amir: First up, maybe you can just give us a quick introduction to the company?
Mark Fortunatow: MGM Wireless is a 17-year-old company that’s been listed on the ASX for the last 15 years. We’re the leaders in school communication and attendance management systems. And we’re the company that first developed the use of SMS in schools, to enable schools to notify that their kids hadn’t come to school on time, or at all. About 2,000 schools have been using our systems over the years. And we have 1.7 million users that are parents and students.
So, four years ago, we decided to expand our business into children and family wearables. So we started developing a kid’s watch for four- to 12-year-olds and the accompanying software system. So Spacetalk, I’m pleased to announce that after a four-year development program, is now released. We released it in October of last year. And this is actually our second watch, because the first one, we just couldn’t get it to work reliably.
Jessica Amir: Now let’s talk a little bit more about your lead product, the Spacetalk watch. Why is it so unique?
Mark Fortunatow: Spacetalk is an all-in-one smartwatch, phone and GPS tracker for kids between the ages of four and 12. So it’s before they get their smartphone. So it enables kids to make and receive phone calls and send text messages, but only from the list of people that parents have set up on their phone. So they can’t just call anyone or send text messages to anyone, or receive messages from anyone. So it’s also very high quality, it’s what we call best of breed, very high reception quality, call quality and location quality. But at the end of the day, what it does it keeps kids safe and secure, and busy family members connected.
Jessica Amir: Wonderful. And where is it being sold?
Mark Fortunatow: It’s being sold currently on our online store at www.allmytribe.com, but it’s actually been designed to be sold through bricks and mortar retailers. We anticipate that soon we’ll be making announcements of the first bricks and mortar retailers coming on board.
Jessica Amir: What does a smartwatch phone cost, how is it selling and what’s the market potential here in Australia?
Mark Fortunatow: The recommended retail price is $349, but the good news is leading up to the school holidays, we’ve a special at $297 at the moment. During the four years that we were building Spacetalk, we never really knew what size the market could be. So our initial production run was 3,000 units and we’ll be sold out of those fairly soon. We’ve actually got another production run that’s in process at the moment.
Now in terms of market size, Gartner the tech research company came out with some forecasts earlier this year. And they’re predicting that 30 per cent of all smartwatches will go into this kids four- to 12-year age bracket group. They’re predicting this market to be $21 billion by 2021. So it’s a big market opportunity. Translating those numbers into Australia, the market potential looks like being between 120,000 units and 180,000 units per year.
Jessica Amir: Very compelling market indeed. What are the plans to really scale up the rollout following your cap raising?
Mark Fortunatow: The entire development and first production run of the watch was funded through our existing cash flows. But the extra capital that we’ve raised will be used to hire the smartest, the brightest people, with a background in consumer electronics and mobile phones. In fact, only last week, we announced our two first hires and there’ll be more to come.
Jessica Amir: And prior to launching into kid’s wearables, the company has actually been helping schools for some time now. So how is that other aspect of the business going?
Mark Fortunatow: Our school communication business is going actually quite well. I’m pleased to say in the last three months, we’ve added about 12 per cent more schools to the mix. And the revenue from these new schools will flow as the schools are implemented. And we’ll see those revenues coming through in the beginning, or the first half of next financial year.
Jessica Amir: Now to the first half 2018 finances and strategy, maybe you can tell us how it’s all progressing?
Mark Fortunatow: What we’ll see is we’ll see meaningful new revenue coming through from Spacetalk sales. We’ll see the company investing quite a bit in marketing- and sales-related activities to promote Spacetalk. And we’ll see similar results with the school business as compared to the last year.
Jessica Amir: Brilliant. And last but not least, why should investors be considering adding MGM Wireless to their portfolio?
Mark Fortunatow: First of all, it gives them exposure to a very large and emerging market, which is wearables, in particular kid’s wearables. It’s a brand-new product category. From a company that’s been around for a long time and has all the disciplines, and track record of delivering profits and financial discipline. A seasoned experienced management team and absolutely the best product in the category. And finally, our market capitalisation is extremely low compared to our peers. We’re just not very well known amongst the investor community.
Jessica Amir: Mark Fortunatow, thank you so much for the update.
Mark Fortunatow: Thank you, Jessica.