LOS ANGELES—Soon-to-launch mobile virtual network operator Xero Mobile Inc. said that it has completed a reverse merger with publicly traded Desi TV Inc.
A reverse merger allows a private company to control a majority of shares of a publicly traded company (typically one with few assets, according to the IPO Bureau), change the company’s name and thus become a publicly traded entity without making an initial public offering.
According to Xero Mobile, as part of the reverse merger, its stock was forward split at a ratio of 25-to-1, leaving the company with about 46 million outstanding shares. A forward split increases the number of outstanding shares without changing shareholders’ equity, so that the 25-to-1 split would multiply a shareholder’s number of shares by 25 but the price per share would be divided by 25.
Xero Mobile said it began trading on April 9 on the Over-The-Counter Bulletin Board, where stocks consistently worth less than $1 per share are traded. However, as of this morning no trade information was available for the company through the OTCBB Web site.
Xero Mobile said it plans to launch service nationally later this year “with a focus on college students in over 350 targeted U.S. markets. Prominent national advertisers will be able to send permission-based TV-style ads with the accuracy of direct mail, and the accountability of the Web—delivered with the intimacy of mobile,” the company said in a statement. The company added that it plans to “provide high specification handsets without contract and at notably competitive prices.”
“This is the first step in implementing our ground-breaking business plan, which delivers what both advertisers and college students both want—effective, affordable communications,” said Peter Lilley, chief executive officer of Xero Mobile. “By building a revenue stream through advertising and incentive programs, our service will allow Xero Mobile users to greatly reduce their mobile costs while utilizing industry-leading handset design and technology.”
The MVNO’s business model appears to closely resemble that of the Gizmondo hybrid mobile gaming/messaging device, which Lilley and others launched in the United Kingdom and U.S. last year. The Gizmondo device was discounted for users who agreed to allow several ads per day to appear on the device.
