In September, Manx Telecom (MT) subsidiary Goshawk announced the launch of clearSound (MTcS), an innovative mobile phone service for people with hearing needs. Following positive feedback from test groups, MT has signed a deal with BT/EE to launch the Goshawk proposition on their UK networks and it intends invest £10m on the launch over the next three years. This has a five-year target to attract 20% of the three million people in the UK with moderate to severe hearing loss. The recent sell off of MT shares, exacerbated by UK small-cap weakness, has exposed good value in the stock, now at a high 30% P/E discount to its peers.
Conceptualised by the CEO of Goshawk who has hearing loss and developed by leading audiologists with patents pending for its advanced voice print technology, MTcS tests each customer’s hearing and delivers tailored audio content to their phones. This unique product embeds its technology in telecoms networks and compensates for the typical removal of 50–75% of audio content in mobile phone calls during transit. It also tailors the signal to the user’s needs. Many people with moderate to severe hearing loss do not use mobile phones due to poor audio quality and EU limits on mobile handset volume. Goshawk’s own studies show that two-thirds of respondents would be willing to pay £5 or more for access to the technology, which is substantial in comparison with the average EU mobile ARPU of €13–14/month. Added to the current high level of public confidence in EE’s network, this could translate into substantial demand for the mobile virtual network operator’s (MVNO) services.
By the end of 2018 MT will have completed a two-year transformation programme to reduce its cost base and develop more digital and cloud-based services. The group’s new international innovation arm, Vannin Ventures, has also created a pipeline of global solutions including e-SIMs, next-generation critical coverage using satellite technology and the MTcS hearing technology. The group is also rapidly rolling out fibre to the premises with household cover to grow from 6% to 12% in H218. We see this all providing a strong basis for future earnings growth.
MT’s shares have fallen in recent months due to UK small-cap weakness and poor H1 results caused by declines in international roaming rates. We see the stock as attractively rated at a 30% below-peer 2018 P/E of 11.5x, which does not reflect the group’s quality (margins, advanced network, strong economy) or its high yield.