Boingo IPO Will Test Whether Investors Believe in Paid Wi-Fi

Published on May 3, 2011
by Ina Fried

With Starbucks and McDonalds moving from paid to free wireless and many airports doing the same, the idea of paying for Wi-Fi would appear to be on the wane. Nonetheless, a company that specializes in offering paid Wi-Fi is aiming to go public this week in a stock offering that will provide a temperature check for a tech market that appears to be heating up.

Boingo Wireless, started by Earthlink founder Sky Dayton in 2001, is hoping to raise around $75 million by selling more than 5.7 million shares at an expected price of between $12 and $14 apiece.

The company is clearly one of the leaders in its market with 214,000 paid subscribers as of March 31, up from 158,000. Boingo had 2010 revenue of $80 million, up from $65 million a year ago and earned $10.7 million, reversing a loss of $4.2 million in the prior year. It is forecasting modest revenue growth for the March quarter as well, estimating that it took in between $20.5 million and $21 million, up from $18.5 million a year earlier.

But its market is also a tough and fickle one. Each month, more than 9 percent of Boingo’s paid subscriber base drops out, forcing the company to be constantly searching for new users.

In March, the company announced a new version of its Wi-Finder software. The new version of the software, for Macs, PCs, Android and iPhone, helps users not only locate the nearest of Boingo’s paid hotspots but also to find a free one. Boingo is hoping that those who download the app will, on occasion, decide a reliable connection is worth paying for.

The company is also counting on another customer being willing to pay for Wi-Fi: the cellular carriers themselves. The company is building a business that allows the wireless carriers to offload traffic from their heavily burdened networks onto Boingo’s Wi-Fi networks. Such customers are part of the company’s wholesale business, which made up nearly 44 percent of revenue last year, up from 36 percent in 2009.

So will investors bite? We should find out later this week when the stock begins trading under an extremely apt ticker symbol: WIFI.

Update 10:05 a.m.: The story initially incorrectly stated Boingo’s number of paid customers. Its customer base was 214,000 in March 2011, up from 200,000 in December and 158,000 as of March 2010.

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