012.Smile Communication's IPO: Why I'm Reserving my Smile

It’s great when you read about your own service provider going public. It’s a tremendous feeling of accomplishment as a consumer when you think your well-spent dollars have helped propel your ISP into the big leagues. On Sunday, I read with excitement that my ISP, 012 Smile.Communications (SMLC) was gearing up for an IPO this week.

SeekingAlpha has a short write-up on the IPO. I love Smile’s service — I love its logo (the cute little smiley a la Incredimail (MAIL)). At first blush, I don’t love the IPO. There is only 40% yoy revenue growth off the back of a 60% rise in cost of revenues. This is not a particularly jiggy biz in my mind.

In fact, it hearkens to the same discussion we’ve raised before at IsraelNewsletter.com about the interest in investing in native Israeli service providers: where’s the growth? Take a look at Aaron “Buy Everything” Katsman’s write up on Israeli cellular leader: Cellcom (CEL). Aaron’s pretty tough on CEL, and explains that eventually, growth is going to have to come from international expansion. The same will probably hold true for SMLC.

I’m reserving my smile for now on 012 Smile.Communication’s IPO. Let’s watch how the market receives the new offering.

Disclosure: The author’s fund has no position in any stock mentioned as of October 28, 2007.