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Current Larry Oakley's Stock Pick:

Date Posted: 06/03/10

Elephant Talk Communications, Inc. (OTCBB: ETAK)

Comment

I interviewed CEO Steven van der Velden & am impressed. In my opinion, this situation will produce very substantial appreciation for those who invest at this point in its history.

My coverage is in two venues for your convenience – this one & a much more detailed one in “Conservative Speculator.” If you do not as yet have access to Conservative Speculator, I arranged for you to request a free password at the upper right side of our home page.

In Conservative Speculator, I included two primary headline descriptions about ETAK. Here they are:

This is a Sleeper – a True Emerging Growth Situation

What Microsoft Did for Computers, ETAK is Doing For the Mobile Telecom Industry

My Initial Impressions

1. ETAK is making its Mobile Telecom Technology (called the ET Boss software platform)the main emphasis of its growth, although it still retains its land line international telecom operation. It plans to expand its software platform operations in Spain & The Netherlands to other countries to provide telecom companies, mobile network operators, banks, supermarkets, & other businesses in global markets a complete suite of products & services, enabling them to fully provide telecom services as part of their business offerings.

2. As a Mobile Virtual Network Enabler (MVNE), it offers companies in the Mobile industry the ability to lower their overhead by 75% by dramatically reducing the number of people required to manage their back office systems.

3. ETAK allows its Mobile Industry customers (called MVNOs) to not only increase their revenue base, it allows them to focus much of their efforts on marketing.

4. Bottom line, ETAK facilitates distribution of all forms of content as well as Mobile & fixed telecom services to global telecommunications B2B (business-to-business)customers within the telecommunications market.

5. It positioned itself as the premier outsourcing partner for both Mobile Network Operators (MNO’s) as well as for Mobile Virtual Network Operators (MVNO’s). At the same time, ETAK assists its MNO partners to more efficiently provide a broad range of
sophisticated services to their own existing base of MVNO’s. ETAK is positioning itself as the preferred MVNE partner of the larger, global Mobile Operators & currently operates sophisticated networks in over a dozen markets in Europe, Asia Pacific, & the Middle East.

6. ETAK offers:

(a) Innovative Mobile, Content, VoIP, & Media streaming.

(b) Carrier Pre)Select & Premium Rate Services.

(c) Shared Cost & Toll-Free Services.

(d) Telecom Services, Media Streaming, & Distribution Services primarily to the business-to-business (B2B)community within the telecommunications market.

7. I see positive cash flow & high profits beginning late this year.

8. ETAK has been & is well financed, & is in an excellent position to acquire other high potential companies, such as ValidSoft Ltd, which acquisition was completed as of 4/1/2010 (see the section of Conservative Speculator titled “Acquisition of ValidSoft Ltd.”).

9. ETAK’s development team worked during the last four years to develop its technology. That technology is extremely complex, but at the same time is extremely simple to use – a rather great accomplishment.

10. ETAK has over $54 million in its infrastructure, deployment, licenses, & connectivity already in place. Insiders have invested about $45 million to develop ETAK's simple-to-use technologies & its operating platforms.

11. I have noted estimates that call for over five billion mobile handsets worldwide within the next five years. Assuming that only 10% of those handsets are marketed by virtual operators, the worldwide potential of about 500 million handheld devices represents a very attractive market for ETAK to serve. Assuming that the average annual revenue per user is about $140, which would result in a worldwide mobile market for virtual operators of $70 billion per year if my math is correct.

Essentials

Traded at: OTC BB
Symbol: ETAK
Price (Close Friday 5/14/2010): $1.63
Volume on 5/14/2010: 17,738

Price (close Tuesday 6/1/2010): $1.95
Volume on 6/1/2010: 56,961
Average Volume (3 months): 15,178
No. of Shares Out (at 3/30/2010): 64,260,437
Market Cap* $125.3 million

* Using the price at 6/1/2010 as I write this & the number of shares outstanding at 3/30/2010.

My Opinion
In my opinion, Mobile Services will constitute ETAK’s largest portion of future revenue. As I understand it, there are dozens of Mobile operators that serve the rapidly expanding Mobile communication market. ETAK is presently in serious talks with about 12 such operations & management expects to add at least 12 to 15 agreements within the next 24 to 30 months. The size of each Mobile revenue source is in the range of $20 million to $40 million per platform per year. If you do the math, you can see why I feel that ETAK has rather substantial future revenue potential.

Here’s another way of looking at the potential revenue that ETAK may achieve. Let’s assume that ETAK works with many of its cell phone operation providers & receives an average of about $1 per cell phone per month. That’s $12 per year per cell phone. If ETAK’s Mobile operation customers serve an average of say four million cell phones, that computes to about $48 million per year per such customer. If ETAK has agreements with 12 such customers, we’re talking about potential pre-tax revenue of about $576 million per year, & a good part of the after-tax portion of that revenue will go right to the bottom line.

My personal projection of the share price during the next three years is a move during 2011 to about $10, & by the end of 2013 to about $37. As you can see, that means a rise of over 400% by the end of 2011, & a rise of over 2,000% from the present price to the one I see as possible by the end of 2013.

Even with the risk imposed by the current worldwide economic situation, this kind of potential growth looks good. Actually, in my personal opinion, I believe that these projected numbers may turn out to be somewhat conservative.

I recommend that you do your own homework on this emerging growth situation. Read ETAK’s news releases, & check its Internet site.

ETAK’s MVNO Hosting Agreement with T-Mobile

Check the news release – it’s reproduced in my June 2010 issue of “Conservative Speculator.” In that longer version, I also included sections on “The Mobile Market,” & details about ETAK’s acquisition of ValidSoft Ltd., including a news release I issued on that acquisition. I suggest that you check my June issue of Conservative Speculator & look at www.validsoft.com for further information.

Why I like this Situation

I like this situation because it is perched at the very top of my group of emerging growth situation finds in terms of long-term appreciation potential.

Assuming you read its 12/31/2009 82-page 10-K submission to the SEC as I have, you will see that it has a substantial loss carry forward caused by its huge investment in its unique technology. Please do not be discouraged with that loss. I understand that most financial gurus, including me when I write about a company that has been in business for a long period of time following the completion of its R&D phase, would not recommend a company that showed such a large loss.

This is an entirely different situation, however. ETAK has invested a huge amount of cash in the development of its unique technology, having brought together a worldwide group of impressive experts to do that task with great success over a multi-year period.

Now that its R&D phase is close to the completion of its initial grand development effort (although companies with a management team as qualified as that which ETAK has assembled will never stop both improving its technology & developing new technology), this company will rapidly expand its move into its marketing phase, exemplified, for example, by the 3/12/2010 news release reproduced above. I expect that ETAK will issue quite a few similar news releases during the next few years.

I recognize that ETAK, being a small company, is not as yet understood by the investing public. That will change, & I am pleased that I have found it for you at an early point in its history. I strongly suggest that you do your own homework on this situation, because I am rather sure that you will also find it to be one of the greatest situations that you have seen during your lifetime as an investor.

Watch my editorial columns for updates as this company moves forward. Its management team is doing what should be done by a company that has exceptional potential for growth.

For example, CEO Steven van der Velden was previously involved in the acquisition of Telfort NV through his ownership in a private equity fund. Telfort NV, acquired for 25 million Euros in 2002, was headed by van der Velden. Under his direction, it changed its business model to accommodate private label Mobile telephony (ETAK's model), & was sold for 1.1 billion (not million – billion) Euros in 2006.

Bottom line: ETAK has created a basis for exponential growth. I suggest that you take advantage of it.

Contacts

ETAK -- Mr. Steven van der Velden
Tel: + 31 20 653 59 16
E-mail: info@elephanttalk.com
www.elephanttalk.com

Investors:
Alliance Advisors, LLC
Thomas P. Walsh
Tel: + 1 212-398-3486
twalsh@allianceadvisors.net

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