HOW many Mesdaq-type companies boast a dual listing in Australia and Britain? e-pay Asia Ltd is one of this rare breed, a made-in-Malaysia company that is simultaneously quoted on both the Australian Stock Exchange and Britain's Alternative Investments Market. 

Believed to be Southeast Asia's largest regional provider of electronic top-up airtime for mobile phone prepaid users, e-pay also provides a stable of services as diverse as Internet service payments, long distance IDD airtime, and utility payments.  

“As long as there are numbers, we can do it,” says Datuk Hassan Said, business development director of e-pay Asia Ltd, showcasing the flexibility that has got the company to where it is today.  

But just how do they do it? Essentially, the technology being propagated by e-pay via its terminals randomly generates a PIN number that customers use in exactly the same way as they would the same number on a physical top-up voucher.  

“We do a variety of products, from pay television to MOLePoints to prepaid diesel. At one time, we were selling Formula One tickets via our terminal. AirAsia Bhd is looking to sell (tickets) through us, and we are thinking of (collaborating) with cinemas as well,” adds Hassan.  

Established in Malaysia in 1999, e-pay has since successfully expanded into Indonesia, Pakistan and Thailand. The company has close to 14,000 point of sale terminals in those four markets as at end-June, in addition to a direct sales network of 15,000 mobile/SMS agents.  

One foreign research house expects the number of terminals to reach 41,000 by the end of this year, expanding a further 70% to 70,000 terminals by end of 2007.  

For the first half of this year, e-pay processed over seven million transactions per month, making it the market leader for electronic top-ups in Malaysia and Pakistan. It is ranked third in Indonesia.  

As long as there are numbers, we can do it, says Hassan.

Today, the company has a workforce of 200 employees, agreements with a total of 13 mobile operators in Malaysia, Pakistan, Indonesia and Thailand and a market capitalisation of approximately A$80mil. e-pay has a dual listing status in Australia and England (see sidebar).   For the 2005 financial year, e-pay recorded net earnings after minority interests of A$2.7mil on the back of A$376mil in revenue, representing impressive increases of 156% and 94% respectively over the previous financial year.   For the first half of FY06, the company has already booked revenue of over A$260mil, with net earnings after minority interests of more than A$3mil. This upswing led e-pay to upgrade its earnings estimates to A$6mil, up from A$5mil previously.

Unsurprisingly, it's a prospect that has struck a chord with fund managers. e-pay recently conducted a roadshow in London, Melbourne, Sydney and Malaysia with certain fund management companies, resulting in some 15% of the company's shares being snapped up by funds including Pacific Mutual Fund Bhd. 

Electronic flexibility

At the turn of the millennium, e-pay came to the conclusion that physical vouchers for top-ups would soon be replaced by their more nimble electronic counterparts.  

Hassan recalls logistical difficulties regarding the allocation of physical vouchers, as well as the cost of printing, transporting and warehousing them – not to mention the ever-present threat of pilferage. On top of that, the predetermined denominations of these cards greatly limited flexibility.  

“Some of our fringe markets seek top-ups as low as RM3 or RM5,” says Hassan. “It is impossible for you to print a card of those low values and distribute it, it would be a nightmare. So you need a flexible reload system, and the only way you can do that is electronically.” 

Another benefit of electronic top-ups is the sheer speed of both transaction and allocation. However, the rapid pace of consumption presents another conundrum for the industry.  

Initially, the PIN numbers generated had 12 digits. Because they cannot be recycled, these PINs will steadily increase to a maximum of 24 digits. The current amount of digits on an electronic prepaid voucher is 14.  

“The only way to overcome this is to go real-time online and have a pinless base,” says Hassan. This approach has been adopted in Britain, and though it has yet to catch on locally, Hassan feels that the Malaysian market is certainly sophisticated enough to eventually adopt it.  

Currently, prepaid users account for 75% of the market in Malaysia. Of that percentage, Hassan estimates 25% to be electronic, with e-pay making up the bulk of the segment. He feels that the percentage will largely remain the same, with possible expansion up to 80%.  

Going forward, his opinion is that the migration of physical top-ups to electronic will be operator-driven, given the cost and logistical benefits that can be derived from the switch. It would also be good news for e-pay, which derives about 95% of its revenue from mobile top-ups.  

According to a foreign research house, high growth in the industry is achievable. The house adds that electronic top-ups have been “rapidly stealing market share from (physical vouchers),” while pointing out that e-pay is undervalued against its peer group. 

Competition  

 “We were surprised that for seven years, there has been no close competitor to us,” says Hassan. “There is competition, but it's not apple to apple ... it comes from physical cards, ATM machines and websites.”  

It's not for lack of trying, however. Hassan recalls three potential competitors in Pakistan that eventually “fizzled out”, while a similar fate befell a local company. e-pay's unique strength is that it counts the three major telcos as its clients, a situation that an upstart in the industry would find difficult to replicate.  

“Suppliers have a love and hate situation,” explains Hassan. “Their mentality is exclusivity. So if a new player comes (to a telco), they would only let them sell their particular product.” 

With that in mind, how did e-pay build up the client roster it has today? Hassan's answer is refreshingly candid.  

“We had first mover advantage,” he grins. “If you ask (some of the telcos), they might say they made a mistake. By then, we were already embedded, so it is difficult for them to pull out. However, we have a good relationship with them...we both promote and add value to their services.” 

Visibility  

Likewise, e-pay doesn't quibble about the services it provides. As Hassan puts it, the company is a “conduit, a means to ensure an effective supply chain”. However, with e-pay seemingly reliant on the strengths of its partners and clients, is there an issue regarding the visibility of the company itself?  

“We don't want to be visible,” is Hassan's answer. “We want to be transparent. (To customers), it doesn't matter whether it's via physical cards, SMS or e-pay terminals, as long as they get a top-up.  

“However, we can't avoid the strength of our branding. In Britain, for example, the regulator decided to come up with an icon for electronic top-ups. If you go to a mall and see that icon, you know that there will be a reload centre nearby, just like (the system used for) an ATM machine.” 

After speaking to the Malaysian Communications and Multimedia Commission and local operators about launching a similar initiative, e-pay has since decided to develop this aspect of branding on their own.  

“We can do it by ourselves, because e-pay is an icon for top-up for any telco (or service), and that is a good thing. We should be able to do it before the end of this year, but the manner in which we are doing it has to be effective – the branding has to be mobile, it has to be on the street, because we are in a mobile business.”  

Becoming a gateway  

It's apparent that Hassan has a lot of faith in the Malaysian market's potential, as he is keen to implement other programmes that have proved successful overseas. Another idea he has is to integrate all cash registers, “from florists to laundries to mamak shops”, to the company's network coverage.  

“Tesco in Britain is doing this now. They don't want to have another terminal, they want one that links to their cash register. That would be an interesting idea (to implement locally),” he elaborates.  

“Many people are impulse buyers. While someone is waiting in line to pay a bill, they could be a last-minute purchaser or just realise that their talktime is depleted. When they see the e-pay logo, they can just add a top-up to the bill they're about to pay.”  

Meanwhile, despite the promising numbers that it has been recording in recent times, e-pay is hardly resting on its laurels. The company recently signed a deal with Pos Malaysia Bhd to set up terminals in post offices around the country (see sidebar).  

“It took us three years to woo (Pos Malaysia), and eventually they believed in our experience and our track record. So things have been good so far, and our intention now is to duplicate the success story in emerging markets like Vietnam, Bangladesh, Sri Lanka, Pakistan, Afghanistan and Iraq – that's where people need communication,” outlines Hassan.  

e-pay has also spoken to the police department regarding the provision of certain services, though Hassan declines to elaborate further.  

Instead, he takes the opportunity to outline his vision for the future: that having started out as a gateway for payments and then becoming a clearinghouse aggregator for e-payments, the company will eventually provide a greater scope of financial services, supplying efficient, speedy interconnections and transactions around the region – if not the world. 

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