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Billionaire Kirsch backs startup offering low-cost roaming

Jan 27 2016 07:24
Colin McClelland

Johannesburg - Riaan Momberg, a manager in the South African travel industry, mistakenly switched on his mobile phone data for just one day while in Sydney last year. His phone company charged him about $500.

The operator sent messages warning of usage amounts, “but I was asleep by then,” Momberg, 43, said in an interview in Johannesburg. “I’ve certainly learned my lesson.”

His experience was typical of the shock that increasing numbers of travellers and businesses experience when they are charged hundreds of dollars for using their phones abroad to locate restaurants or watch YouTube content.

Enter billionaire Natie Kirsh, who’s backing a quick fix by Toronto-based tech startup KnowRoaming to offer what it says are the cheapest fees in 200 countries. Customers can save as much as 85% on roaming charges through deals with local mobile networks by slapping an electrode-studded sticker on their SIM card that forwards calls to a home-country number, according to the company.

“I immediately identified with the opportunity,” Kirsh, the South African owner of Jetro Holdings, a restaurant supplier that’s among the largest perishable goods distributors in the US, said by email. “The investment met all the criteria I look for and in that meeting I agreed to give them seed and growth funding.”

Kirsh, 84, paid an undisclosed amount for a 50% stake in KnowRoaming, with the rest owned by management of the company, which is still to make a profit. Kirsh lost most of a retail fortune in the 1980s before moving to New York where he expanded Jetro and is now worth $5.7bn, according to the Bloomberg Billionaire’s Index.

‘Any device’

KnowRoaming CEO Gregory Gundelfinger and his cousin, Mathew Stein, both 32-year-old South Africans, developed the concept in Canada, where operators charge some of the world’s most expensive mobile phone fees, according to the Organisation of Economic Cooperation and Development.

The unit costs $30 online, including $10 airtime and free shipping to most places, Gundelfinger said. There’s also an $8 a day unlimited data plan.

“Our agreements can be used to connect any kind of device,” Gundelfinger, who has a South African law degree, said in an interview in Johannesburg. “We’re perfectly positioned to enable the new devices coming online for the Internet of Things,” he said, referring to using handsets to control systems such as home air conditioning.

The company is working with a manufacturer to embed the technology in new handsets that will first appear at the Mobile World Congress in Barcelona on February 22, he said. The concept can’t be contained in a software application because it has to be integrated with hardware, Gundelfinger said. He wouldn’t identify the maker because of a confidentiality agreement.

New regulation may erode the need for KnowRoaming’s technology as Europe targets mid-2017 to eliminate roaming charges, while several African countries met last year to discuss harmonizing fees. Operators such as Hutchison Whampoa unit Three in the UK, T-Mobile US and Vodaphone Group offer reduced-cost roaming packages, according to Tim Miller, a partner at London-based Plum Consulting LLP.

‘Silent roamers’

A big part of KnowRoaming’s marketing strategy is to target so-called silent roamers, travelers that simply switch off their phones because they’ve been stung by roaming charges, Gundelfinger said. They instead use wifi or local SIM cards when abroad, he said.

KnowRoaming was set up in Toronto, where Stein obtained a computer engineering degree at York University and drew on a network of technicians after working at nearby Evertz Microsystems, a manufacturer of broadcast equipment.

The Canadian government’s Scientific Research and Experimental Development program kicked in 70% of salaries for engineers and 40% of capital expenditures when the company started in 2012, CEO Gundelfinger said.

“That was a big motivator for us,” he said. “Mathew had a team ready to go and now we have 70 employees.”

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