February 15, 2022

Profitability of a Network as a Service Business Model | NuRAN Wireless $NUR $NRRWF

Midas Letter
Midas Letter
Profitability of a Network as a Service Business Model | NuRAN Wireless $NUR $NRRWF
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NuRAN Wireless Inc (CNSX: NUR, OTCMKTS: NRRWF) is a network infrastructure company that provides connectivity in the most remote places on the planet. Its technology has been used for years, having been deployed in the most trying environmental conditions globally and proven to have exceptional reliability. The technology provides ideal solutions for rural areas that have never seen the internet because of the low cost, ease of installation and no required maintenance.

NuRAN made the bold switch of business plans from selling their products to disrupt the network-as-a-service (NaaS) billion-dollar industry with its recurring revenue model. Instead of a traditional transactional exchange for its technology, NuRAN has now partnered with the largest African telecoms and satellite communication companies to provide its solutions across the African continent.

The NaaS model helps telecom companies expand and upgrade their existing networks to meet coverage obligations and capacity requirements without large capital investment. Instead, NuRAN partners pay a service fee, either a revenue-share or fixed-OPEX model with guaranteed minimums.

Looking at the most recent financial statements, investors will see a dip in company revenues. That business model switch is the reason. But, that business switch is also why NuRAN is expected to become profitable later this year and be successful in bridging the connectivity gap around the world.

“We’ve made a switch from an equipment sale to a network-as-a-service. So, we’ve decided to leave the potential revenue from CAPEX sales to the sideline to focus on the NaaS contracts. That’s why you see that we just stopped selling the product, we are using the product ourselves, and that is why we are not pursuing the opportunity of selling the product, and that’s the reason why the revenue was down. You can expect the same thing over the next couple of quarters until we reach up to 450 sites delivered, which could occur at the end of Q3. This is where you will see the company go back to positive EBITDA.” – NuRAN Wireless CEO Francis Létourneau

With NuRAN’s initial assumption of operating 10,000 sites in the next five years, revenues are expected to be $250 million annually with a 50% EBITDA—equating to $125 million. However, those numbers are conservative from incoming data from NuRAN’s sites already operating in Cameroon and the DRC.

The NaaS business model also involves using loan facilities to fund the buildout of NuRAN’s sites. NuRAN announced last month it secured a senior credit facility with a development finance institution (DFI) to finance a portion of NuRAN’s planned installation of network infrastructure roll-outs. With additional DFI and new international financial institutions (IFI) equity partners, NuRAN looks to build more towers and expand its game-changer business model.

“The goal for these 2, of course, is part of the deal that has with the DFI’s. We go up to 850 in DRC and an additional 120 in Cameroon. So that will make it 242 plus 850—close to 1,100. But what we have engagement with as of today, all of the equipment has been sent to Cameroon and DRC and soon to come for South Sudan as well. We are using are own operating cash as we speak. and there is committed money for 120 sites in DRC, 120 in Cameroon and all of those should be deployed within the next weeks and months.” – NuRAN Wireless CEO Francis Létourneau

Transcript

00:00 – NuRAN Wireless $NUR $NRRWF CEO Francis Létourneau
01:05 – Development finance institution (DFI) loan updates
02:43 – New international financial institutions (IFI) equity partners
04:58 – Debt kickoff package & finishing DRC/new contract buildouts
06:00 – Orange Middle-Eastern Africa steering committee
08:29 – Debt structure cost of capital
10:17 – How many more future towers?
12:09 – Revenue decrease from switch to NaaS business model

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