Lets do the math..as we know it..
Domincan Republic Facts
Population is approx 10 million
Average Per Capita Income $5464
5.5 Million Cell Phone Users in Dominican Republic
3.0 Million Internet Users
Sources of Information: CIA World Factbook; InternetWorldfFacts.com;
Cell Tower Information
GSM Tower can support between 2000 and 3500 users
SDMA Tower can support nearly 3 times as much up to 9000 users
Cost to Build approx $200k per tower plus ancillary equipment and lease arrangements.
450 Towers needed in DR; Plans to capture 10% of Market, which would be 300- 500k users
Total capacity of 450 towers would be appox. 4 million users
OTOW plans 450 towers over 5 year, which is 90 towers per year or 7 towers per month.
Per the 10% of market goal, that would mean adding 1100 customers per tower per year, or 91 customer per tower per month
Installation time 1 months per site (Assumption) 7 sites at a time aggressive for a new company like Vertical (founded June 2010) but possible with enough money and new hires.
Sources: AT&T; Steelintheair.com; per Val PR
Internet/Cell Price to Per Capita Income Comparison (Mexico to Dominican Republic)
In order to estimate how much money people will spend on Cell/internet I've elected to use Mexico for the following reasons:
Both have a relative substantial population within the US that sends money back to family members
Per Capita Income can be easily extrapolated.
Mexico per capita income is $14000
Average price paide for both Cell and internet monthly $50 USD, or roughly 4% of annual income
If we use this as a basis for the Dominican Republic then we have; 4% of $5465, or $218 per year, $18 per month
I know Val has thrown out $100 per month but I belive that is reasonable only for the US market not DR. This is a poor country.
Therefore, if the assumption is correct that the annual revenue per user in the DR will be the ultra conservative $218, and if Val can execute his customer growth strategy as noted in his PR's, then we can project the number of customers, annual Gross revenue, and tower costs (excluding Florida) during the build up:
Customers needed to meet Vals goals:
Year 1 42500
Year 2 143000
Year 3 242000
Year 4 343000
Year 5 445000
Gross Revenues based on $218 per DR Customer (4% per capita income)
Year 1 $ 9.2 Million
Year 2 $31.1 Million
Year 3 $52.8 Million
Year 4 $74.7 Million
Year 5 $97.0 Million
Accumulative Tower Costs:
Year 1 $18,000,000
Year 2 $36,000,000
Year 3 $54,000,000
Year 4 $72,000,000
Year 5 $90,000,000
While the gross revenue of this model is significant, the ratios are concerning for years one and two, especially considering his goals are agressive in terms of the number of new customers he must add on a monthly basis during start-up, learning curves to be expected, operational challenges, and the percentage of annual income someone in DR is willing to pay for the service (definitely a fraction of what we pay in the US), and type of customer (pay as you go.. inconsistent spending patterns)is also a concern.
My opinion is this is why Florida was added to the equation, it could possibly improve the ratios and mitigate risk, thus making it more attractive to potential investors.
IMO
AI
