Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Clarity On Elephant Talk's Press Release

|Includes: Pareteum Corporation (TEUM)

There may be some confusion by investors on the Elephant Talk (ETAK) press release today. Elephant Talk Receives $10 million service prepayments as part of the new 5 year contract with existing MNO client in Europe. "Under the financial terms of this new contract, the Company expects that hosting fees will increase approximately 13%, on average, per SIM per month, in exchange for improved service levels. Elephant Talk will receive continuous prepayments of approximately $10 million for the duration of the contract."

That appears to read that Elephant Talk will receive $10 million prepaid yearly for the existing user base (per SIM). So minimum of $10 million yearly, 13% higher rate than what they received per user on the old contract.

Also, remember this is not a new client, so the added revenue in 2014 (clearly from Vodafone), will only be incrementally higher, a minimum of 13% higher from this contract to be exact. So this isn't $10 million MORE in total revenue.

But the deal is still good from the perspective that it gives the company long term stability of ongoing business with their 2nd largest client. More importantly it gives them cash now--and they need it. This also may help with the failure to meet NASDAQ listing requirements: biz.yahoo.com/e/131212/etak8-k.html

It should, albeit very marginally, help boost margins next year.

However, this deal doesn't materially change the business prospects in 2014. This will be determined by the Iusacell contract, which, if executed fully, could double revenues year-over-year for Elephant Talk. This is key for the business in 2014.

But this success may be partially working against the grain, leaving investors fighting an uphill battle. Total shares outstanding has risen over drastically the past several years (and may very well continue: biz.yahoo.com/e/131211/etak8-k.html )