Datawind gained attention for its affordable hardware – generating headlines after winning an Indian government contract to produce a cheap tablet.The Canadian Press
Datawind Inc. shares gained more than 20 per cent on the Toronto Stock Exchange Thursday as the Canadian maker of cheap tablets and smartphones for emerging markets inked a deal with a large wireless carrier in India.
The Mississauga-based company, which went public in 2014 and pulled in $6.7-million in revenue in its second quarter, said in a statement that it signed the agreement with a carrier that had "more than 100 million subscribers" in India, giving the Canadian firm the ability to sell devices bundled with wireless data subscriptions.
The vote of confidence buoyed Datawind's shares, which closed at $2.30, up nearly 22 per cent on the day.
Although Datawind declined to name the Indian company, there only four major wireless carriers in India with at least that many subscribers, according to a recent report from the Telecom Regulatory Authority of India: Bharti Airtel Ltd., Reliance Communications Ltd., Vodafone Group PLC and Idea Cellular – and a Canaccord Genuity analyst wrote in a research note that he believed the company was Reliance, which is controlled by Indian billionaire Anil Ambani.
The deal is exclusive for about 90 days, but Datawind chief executive officer Suneet Singh Tuli said in an interview that he hopes to bring on board at least a couple of other Indian carriers, as well as push into Mexico, Brazil, Indonesia and South Africa with similar deals. Currently, about 75 per cent of the company's revenue come from India, where there are about 930 million wireless subscribers, according to the country's regulator. Datawind's initial public offering last year raised about $30-million, mainly for expansion in new emerging markets, but the company is also going to expand in India with new smartphones in late February that cost less than $50, Mr. Tuli said.
Although Datawind gained attention for its affordable hardware – generating headlines after winning an Indian government contract to produce a cheap tablet – Mr. Tuli said the real profits lie in selling bundled Internet services to "the next billion" poor, unconnected consumers. Mr. Tuli said the company's patented data-compression technology allows its devices to reduce by roughly 97 per cent the data that flow over wireless networks to its devices, allowing people using the congested, legacy 2G networks in many emerging markets – while also allowing wireless firms to pull in additional data revenue without spending on infrastructure to build out capacity.
"In India, what's happened is a significant number of people who have bought smartphones are not using data," Mr. Tuli said. "The operators are not benefiting from the data revenues, and part of that is because the operators have difficulty delivering the data, and its partly because the customers have a difficulty paying for it."