John Linton
James set me this URL yesterday with the cynical comment that "our tennis court is worth more than some of these 'large' ISPs":
http://markets.smh.com.au/apps/mkt/industrylisting.ac?code=50
by which I assume he was referring to the current market capitalization of People Telecom and Eftel (PEO and EFT on the summary). A bit of an exaggeration, certainly, but it conveys a sobering message that after many years of many people's efforts and many millions of investor's funds so many companies in the communications business (and these are the ones that have survived) are worth less than a Sydney house in a wealthy suburb. Very poor investments on the part of the people who put money in to funding small communications companies rather than investing that money into Sydney (or any other Australian capital city probably) residential real estate.
For those people who are interested, this summary provides a great deal of information about the situation in today's communications industry. If you aren't familiar with the ASX codes for the various companies they are:
AMM = Amcom, EFT = Eftel, FRE = Freshtel, HTA = "3", IIN = iiNet, MTU = M2, PEO = PeopleTelecom, PWK = Pipe, SGT = Optus, SOT = TPG, TEL = AAPT, TLS = Telstra
It doesn't make very pleasant reading and in fact it makes you wonder why anyone would bother investing in communications companies in Australia other than Telstra (which as you can see is more than six times the market value of every other company put together and the only one that pays a decent dividend). Don't be fooled by the current blood bath in the Australian and global share markets - even if you valued these companies at their share price of 12 months ago the picture is only slightly less dismal. (check the 52 week highs to see for yourself).
Obviously HTA ("3") takes the all time winner's crown for trashing investor value with the $A3 billion it has invested in developing a mobile network in Australia now valued at a mere $A71 million - but then they knew that when they started and realised they would not get to a sensible pay back for a minimum of ten years (a la Vodafone and Optus).
The current prize for investor equity destruction has to go to SOT (the merged TPG/Soul entity) which at the time of the merger (5 months ago) gave David Teoh $A150 in cash and another $A100 million in shares valuing the merged entity at $A400 million which was worth $A96 million yesterday - an impressive achievement in such a short space of time given the constant statements that the company will make $A93 million profit in the current financial year.
I won't bore you any further by giving my thoughts on the financial performance of the other companies in this summary other than to say that, with the exception of the top three companies, this marketplace sector seems to have rivaled the less august parts of the finance sector for dismal performance in protecting share holder value and providing a return on their investment.
So what does it mean? I sometimes wonder but as I have no knowledge of why so many different people invested in these companies rather than putting their money into any number of more solid and dividend paying investments I can't answer my own question. The triumph of hope over experience is the only explanation that comes to mind.
I took some interest in this information because as I get closer to completing the Exetel five year plan there is a need to place some sort of estimate on what all the hard work and money that will need to go in to the achievement of the year on year targets will yield in terms of shareholder value as opposed to the value shown in the balance sheet. As with the values put on the companies in the summary I can't really see that Exetel is worth very much as an investment - from an investor's view point. For the past almost five years all of the 'profits' except for a very small amount of 'dividends' has been re-invested in to the business to buy the equipment we have needed to service a continually growing user base. While the gross ROI has been very good the net dividend hasn't been very good at all - a little higher than long term bank deposit interest each year and much less than an investment in basic real estate.
I think the 'value' of Exetel, at least at this particular time, is only to its employees (who get paid regularly with constant increases and get to learn a great deal more quickly that they could almost anywhere else) and our customers (who get the lowest priced communications services in Australia) and several bird, animal and plant species (that almost certainly have a brighter future because of the money that Exetel and it's customers provide for their care and survival).
I am really struggling to put any increased 'shareholder' value' on the net results of almost five years of unbelievably hard and risky work other than we survived and get to do it all over again, if we survive, for another five years. So, I now realize that we have to change several aspects of our business in line with redefining how shareholder value and dividends benefit from the capital invested and the great many skilled people who are part of providing the services we have developed over the years and will continue to develop into the future. I'm struggling to define what they might be but the summary I referenced at the start of this rambling is a stark reminder that it's a very difficult thing to do.