This post is an exploration of a specific stock Tucows (TCX). Tucows, based in Canada, has built from their domain registration business into a company with 3 businesses poised for predictable cash flow generation.
In 2012 Tucows added Ting Mobile, a business that resells access to cell phone networks (Sprint, for CDMA, and T-mobile for GSM phones). This is not a flashy business but is a reliable cash flow generator.
In 2015 they added Ting Fiber, which builds fiber networks for small communities that have long been mistreated by incumbent Internet Service Providers (ISPs – such as Comcast and AT&T). This business requires a large up front investment but once it is operating provides a large and reliable cash flow.
Tucows has leveraged the cash flow from the domain registration business to build Ting business and now is leveraging the cash from both of those businesses to build the Ting Fiber business. I believe the Ting Fiber business is going to be a long term very profitable business.
Tucows’ commitment to customer service is a way they differentiate themselves from their competitors. They provide great customer service for the Ting service (I have been a customer for years specifically due to the good customer service).
Domain Services Business
OpenSRS and Enom are Tucows’ wholesale domain name providers.
This is a fairly boring business where the key is providing reliable service at a good price. It is not a high margin business, but one that consistently generates cash for Tucows.
If you look at the domain services business you will note that sales have decreased in 2018, this is due to Tucows a large customer (that had a very low margin deal with Tucows) that transferred away a 2.7 million domains. This seems to be a good business move but it does cause investors that don’t look closely to worry. They see a decline in revenue for their domain services businesses and worry about the long term prospects.
But investors that understand that this reflects a 1 time decrease in revenue may have the potential to pick up a bargain. The remainder of the business is expected to remain, and while it isn’t expected to grow much it should continue to provide cash to be invested elsewhere by Tucows.
Ting Mobile
Ting Mobile provides cell phone plans for as little at $10 a month. The charges are based off usage and are calculated based on the actual usage each month. For those that do not frequently use the data plans on their phones or have very high minutes of usage they are much cheaper than traditional plans. The average Ting Mobile subscriber bill is $23 (from Nov 2018 Tucows Investor presentation).
Ting coverage map
I don’t think they are competitive in prices for those that are heavy users of their smart phones. The image shows the phone call and text coverage map for CDMA devices on the Ting Mobile network.
So many companies market as though they care about customers yet they almost all treat customers very poorly. Ting is one the very few exceptions I have seen to that rule (Trader Joe’s is another).