- The Washington Times - Monday, February 26, 2007

Analysts are optimistic about InPhonic Inc.’s new business plan and see big potential for the D.C. wireless services company.

The Georgetown-based firm sells wireless telecommunications service, wireless phones and accessories over the Internet. Customers can purchase wireless service and products from InPhonic’s retail Web sites such as Wirefly.com, A1Wireless.com and VMCSatellite.com.

Practically all of the company’s revenue comes from its wireless sales and activation business, and the remainder comes from its satellite services business.

The company has 475 employees, offices in the District, Largo and Reston, and partnerships with Amazon.com, Staples.com and AOL.com. Its main competitors are large retail chains such as Wal-Mart and Radio Shack.

“We’re quite nimble … because we don’t have thousands of brick-and-mortar stores to worry about,” said InPhonic spokesman Tripp Donnelly.

InPhonic officials project a 25 percent increase in growth this year over 2006. Revenue jumped to $120.3 million for the fourth quarter of 2006 compared with $85.2 million the previous year. Net loss for 2006 fell 87 percent to $3.5 million compared with $24.6 million the previous year.

Shares of InPhonic fell 46 cents yesterday and closed at $12.79 on the Nasdaq Stock Market.

“InPhonic is moving to the point where they could see profits in the next year,” said David Coleman, an analyst for the Argus Research Group, a New York equity research firm.

InPhonic has grown over the past three years by increasing its partnerships with wireless communications carriers from three to five. The top six domestic wireless carriers are Sprint/Nextel, T-Mobile, AT&T;/Cingular, Verizon, Alltel and Qwest Communications.

“Our business model has changed dramatically, said Chief Executive Officer David Steinberg. “We should be seeing an acceleration off our customer base growth.” Mr. Steinberg said InPhonic has 7.5 million to 8 million customers.

Furthermore, InPhonic has been moving its business to a residual revenue model, which means it now receives a small percentage — approximately $2 — of each customer’s yearly payments. Formerly, InPhonic received a one-time fee from carriers for each customer to whom it sold wireless service and products.

“Now they are incentivized to put its customers into the right phone plan and keeping them there,” said Steve Weinstein, an analyst at Pacific Crest Securities, a Portland, Ore., investment bank.

Mr. Weinstein also said the new business model is better for customers. “InPhonic is on the same team as the carriers, and they are working for the same goal to make the experience positive for consumers,” he said.

This is important to the 10-year-old company because customer service has not always been a strong suit.

Last week, D.C. Attorney General Linda Singer settled a consumer-protection lawsuit stemming from complaints about InPhonic’s mail-in rebate program. The lawsuit, filed in June, charged that InPhonic imposed restrictive conditions on the rebates of its cellular phones that prevented many customers from receiving the promised savings.

InPhonic agreed to pay $100,000 to the District and make restitution to nearly 9,000 customers nationwide, the attorney general’s office said.

Company officials said the customer service problems stem from its third-party rebate provider.

InPhonic’s rebate program was handled by Continental Promotions Group Inc., a promotional marketing company in Tempe, Ariz. Since then, the company hired Helgeson Enterprises of Edina, Minn., a rebate provider of major consumer electronic companies.

Last spring, the company hired Brian Curran as chief operating officer and Andy Zeinfeld as president of electronic commerce. Mr. Curran was vice president of customer centricity for the Best Buy Co. Inc., and Mr. Zeinfeld was the senior vice president and chief retail services officer at Radio Shack.

“We’ve put ourselves in a position where our growth is more moderated so that we can keep up with our customer service platform,” Mr. Steinberg said.

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