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Citel Raises $15M, Sets for IPO

Ray Le Maistre

VOIP systems vendor Citel Technologies Ltd. has raised £8.2 million (US$15.1 million) from the sale of shares to institutional investors and is set to become a publicly traded company from next Monday, following the success of its vendor and carrier channel partner strategy.

The specialist vendor, which enables companies to migrate to IP PBXs or IP Centrex services without having to replace their legacy handsets, is set to list its shares on the London Stock Exchange 's Alternative Investment Market (AIM) next Monday (July 10) with a launch share price of 95 pence, valuing the company at £20.6 million ($38 million). Its ticker will be CITE.L.

The company's main message -– that enterprises can benefit from VOIP without having to replace their desktop equipment or incur training costs -– has attracted big-name partners on both sides of the Atlantic, where Citel's technology is sold to end-user companies by larger vendors, including Alcatel (NYSE: ALA; Paris: CGEP:PA), Avaya Inc. , Ericsson AB (Nasdaq: ERIC), Lucent Technologies Inc. (NYSE: LU), Mitel Networks Corp. , NEC Corp. (Tokyo: 6701), and 3Com Corp. (Nasdaq: COMS); and Tier 1 operators such as AT&T Inc. (NYSE: T), BellSouth Corp. (NYSE: BLS), BCE Inc. (Bell Canada) (NYSE/Toronto: BCE), and Verizon Communications Inc. (NYSE: VZ).

Now the company has added Sprint Corp. (NYSE: S) to its list of channel partners. The carrier is reselling Citel's products to customers that sign up for its IP Voice Connect service. And Citel's VP of marketing, Leigh Fatzinger, says "several household-name carriers in Europe" are engaged in talks about similar deals. (See Sprint, Lucent Intro IP Voice.)

Citel's SIP-based handset gateway sits alongside an IP PBX or works with IP Centrex systems from partners such as BroadSoft Inc. and Sylantro Systems Corp. , and enables enterprises to introduce IP telephony services without having to replace their handsets or train staff how to use new terminals. And market research statistics suggests that IP PBX deployments are growing fast. (See Citel, Sylantro Team Up and IP PBX Revenue Up 23%.)

The vendor has also developed products that enable enterprises to extend their IP PBX services to remote locations and mobile phones without the need for equipment upgrades at those locations.

Citel, which has more than 50 staff based in offices in the U.K. city of Nottingham, Seattle and Boston in the U.S., and Calgary in Canada, has found success in North America despite butting up against enterprise equipment giant Cisco Systems Inc. (Nasdaq: CSCO). "Cisco spends a lot of money marketing the 'rip and replace' solution, but there are thousands of companies that have invested millions of dollars in voice systems and handsets that they don't want to throw away," says Citel's Fatzinger.

Citel cites research statistics from Access Intelligence LLC that estimates there are more than 375 million legacy digital PBX handsets deployed worldwide, representing $100 billion worth of investment. And with new desktop IP phones costing upwards of $80 each (with many costing significantly more), replacing handsets as part of a migration to IP-based services can be a costly affair.

That cost-saving message has so far generated only low levels of sales, but they're growing significantly as distributor and OEM channel relationships take hold. In the year to March 31, 2006, Citel recorded revenues of £4 million ($7.4 million) and a pre-tax loss of £3.3 million ($6.1 million), up from revenues of just £1.1 million ($2 million), and a pre-tax loss of £3.1 million ($5.7 million) a year earlier. Citel wouldn't comment on its previous funding, but it is believed to have raised about $20 million from VCs such as Advent Ventures and Hexagon Investments .

— Ray Le Maistre, International News Editor, Light Reading

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User Rank: Light Beer
12/5/2012 | 3:49:32 AM
re: Citel Raises $15M, Sets for IPO
If much of the voip pay-off is from new functions, like unified messaging or integration into apps, can the old phones act as a usable interface to all this?
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