SurgePays Announces Master Services Agreement with TerraCom, Inc.

Rhea-AI Summary

SurgePays, Inc. (Nasdaq: SURG) has signed a Master Services Agreement (MSA) with TerraCom, Inc., effective October 3, 2024. This agreement allows SurgePays to offer the Lifeline program to its existing 280,000 ACP wireless subscribers. The company plans to finalize a stock purchase agreement to acquire the majority of TerraCom stock, subject to regulatory approval.

The Lifeline program provides government reimbursement ranging from $9.25 to $34.25 per month, depending on the state. SurgePays aims to transition from self-funding its wireless customers to having them funded by Lifeline, which is expected to help the company return to being free cash flow positive.

In addition to offering Lifeline, SurgePays is ramping up sales efforts on Linkup Mobile, Wireless Top-Up, and Clearline, pursuing multiple growth channels as it heads into 2025.

Positive

• Signed MSA with TerraCom, allowing offering of Lifeline program to 280,000 ACP subscribers
• Potential acquisition of majority TerraCom stock, subject to regulatory approval
• Transition from self-funding to government-funded Lifeline program for wireless customers
• Expected return to free cash flow positive status
• Expansion of sales efforts in multiple growth channels

Negative

• Previous self-funding of wireless customers after ACP shutdown required spending millions of dollars
• Acquisition of TerraCom stock still subject to regulatory approval

Insights

Financial Analyst

This Master Services Agreement (MSA) with TerraCom is a strategic move for SurgePays, potentially transforming their business model and financial outlook. The ability to offer Lifeline services to their existing 280,000 ACP subscribers could significantly impact revenue and profitability. With government reimbursements ranging from $9.25 to $34.25 per month per subscriber, this could translate to monthly revenues between $2.59 million and $9.59 million, assuming full conversion.

The transition from self-funding to government-subsidized funding through Lifeline is important for SurgePays' cash flow. This shift should alleviate the financial burden of maintaining their customer base after the ACP program ended. The company's decision to retain customers at their own expense now appears prescient, potentially leading to a competitive advantage in customer retention and acquisition.

Investors should monitor the execution of this strategy, particularly the rate of customer conversion from ACP to Lifeline and any regulatory hurdles in acquiring TerraCom stock. The company's return to positive free cash flow will be a key indicator of success. Additionally, the diversification into multiple growth channels (Linkup Mobile, Wireless Top-Up, Clearline) could provide additional revenue streams and reduce dependency on a single program.

Telecom Industry Expert

SurgePays' agreement with TerraCom is a savvy move in the competitive telecom landscape. By leveraging TerraCom's Lifeline provider license, SurgePays can quickly pivot its large ACP customer base to a new subsidy program without significant regulatory delays. This agility is important in the volatile government subsidy environment.

The potential acquisition of TerraCom stock, pending regulatory approval, could vertically integrate SurgePays' operations, potentially improving margins and operational efficiency. This move also positions SurgePays to capitalize on any future changes in government subsidy programs, including a possible return of ACP after the election.

The company's strategy to "reignite sales channels" for new Lifeline subscribers who lost ACP service is opportunistic and could lead to market share gains. However, the success of this strategy will depend on the efficiency of their sales and onboarding processes, as well as the competitive landscape in the Lifeline market.

The diversification into multiple service offerings (Linkup Mobile, Wireless Top-Up, Clearline) demonstrates a forward-thinking approach to reduce reliance on government programs and build a more resilient business model. This multi-pronged strategy could help insulate the company from future policy changes and market fluctuations.

Existing ACP Customers Can Now Opt-in to Lifeline Program

BARTLETT, Tenn., Oct. 10, 2024 /PRNewswire/ -- SurgePays, Inc. (Nasdaq: SURG) ("SurgePays" or the "Company"), a technology and telecom company announced today that it has signed a Master Services Agreement (MSA) with TerraCom, Inc. ("TerraCom"), a wireless service provider and licensed Lifeline provider, effective October 3, 2024.  SurgePays and TerraCom have agreed to finalize a stock purchase agreement to acquire the majority of TerraCom stock, subject to regulatory approval.  

SurgePays can now execute its stated strategy of offering Lifeline to its existing ACP subscriber base. Chairman and CEO Brian Cox commented, "This agreement allows us to offer a government-subsidized program to our 280,000 ACP wireless subscribers.  Equally important, we can now reignite our sales channels to acquire new Lifeline subscribers who lost their ACP service when their carrier chose to shut them off."

The government reimbursement under the Lifeline program ranges from $9.25 to $34.25 per month, depending on the state. ACP customers can qualify almost identically under the Lifeline program. 

Mr. Cox added, "We will aggressively move from self-funding our wireless customers to now having them funded by Lifeline, solidifying my confidence that we will return to being free cash flow positive.  I am happy with our choice to spend millions of dollars to keep our customers connected. We believe the decision to retain our ACP customers, by putting our strong balance sheet to work after the government chose to stop funding the program, looks to have been the right business decision. ACP may come back after the election. Either way, we believe we have set a path to profitability again with Lifeline as a safety net for our customers who qualify."   

Along with now being able to offer a Lifeline option to its wireless customer base, the Company is ramping sales efforts on Linkup Mobile, Wireless Top-Up and Clearline, pursuing multiple growth channels and putting the Company in a strong operating position heading into 2025.

About SurgePays, Inc.

SurgePays, Inc. is a technology and telecom company focused on the underbanked and underserved communities. SurgePays' technology-layered platform empowers clerks at over 8,000 convenience stores to provide a suite of prepaid wireless and financial products to underbanked customers. SurgePays prepaid wireless companies provide services to over 280,000 low-income subscribers nationwide. The company ranks as the 345th fastest-growing tech company in North America according to the 2023 Deloitte Technology Fast 500. Please visit SurgePays.com for more information.

Cautionary Note Regarding Forward-Looking Statements

This press release includes express or implied statements that are not historical facts and are considered forward-looking within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. Forward-looking statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance and may contain projections of our future results of operations or of our financial information or state other forward-looking information. In some cases, you can identify forward-looking statements by the following words: "may," "will," "could," "would," "should," "expect," "intend," "plan," "anticipate," "believe," "estimate," "predict," "project," "potential," "continue," "ongoing," "attempting," or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words.

Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future operational or financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements including but not limited to, our ability to acquire new Lifeline subscribers who lost their ACP service, ability of ACP customers to qualify under the Lifeline program, our ability to ramp sales efforts on Linkup Mobile, Wireless Top-UP and Clearline, and our ability to execute our business plan. Furthermore, actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond our control, including, without limitation, whether the ACP is funded again, our ability complete the transaction with TerraCom, statements about our future financial performance, including our revenue, cash flows, costs of revenue and operating expenses; our anticipated growth; and our predictions about our industry. The forward-looking statements contained in this release are also subject to other risks and uncertainties, including those more fully described in our filings with the Securities and Exchange Commission ("SEC"), including in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and our quarterly reports on Form 10-Q for the periods ending March 31, 2024, and June 30, 2024. The forward-looking statements in this press release speak only as of the date on which the statements are made. We undertake no obligation to update, and expressly disclaim the obligation to update, any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law.

View original content to download multimedia:https://www.prnewswire.com/news-releases/surgepays-announces-master-services-agreement-with-terracom-inc-302272359.html

SOURCE SurgePays

FAQ

What is the new agreement SurgePays (SURG) has signed?

SurgePays (SURG) has signed a Master Services Agreement (MSA) with TerraCom, Inc., effective October 3, 2024, allowing them to offer the Lifeline program to their existing ACP wireless subscribers.

How many ACP wireless subscribers does SurgePays (SURG) currently have?

SurgePays (SURG) currently has 280,000 ACP wireless subscribers who can now potentially benefit from the Lifeline program.

What is the range of government reimbursement under the Lifeline program for SurgePays (SURG) customers?

The government reimbursement under the Lifeline program for SurgePays (SURG) customers ranges from $9.25 to $34.25 per month, depending on the state.

What additional growth channels is SurgePays (SURG) pursuing as of October 2024?

As of October 2024, SurgePays (SURG) is ramping up sales efforts on Linkup Mobile, Wireless Top-Up, and Clearline, pursuing multiple growth channels heading into 2025.