John Linton I think last week was a record for approaches from 'intermediaries' determiining whether Exetel would like to acquire small communication service providers - a total of 8 plus two enquiries about 'consolidation' or taking over Exetel. As we are a very small company with no 'presence' or track record in the acquisition of other companies it makes you wonder just how many small/tiny companies are looking to 'exit' the communications supply market - almost certainly a lot more than the eight in one week who approached us. (though an alternative explanation could be that these 'exiters' have already been rejected by the more likely buyers and are now even more desperate to find a buyer).
I didn't waste any of the time of the people who approached us and emphatically said that we had no money to make purchases of 'customer bases' and we had zero interest in spending our and their time pursuing discussions that could have no positive outcome. An indication of the desperation of two of these 'intermediaries' was to get calls back to offer to provide the customer bases for no immediate payment but a future payment based on an agreed set of terms linked to profit generated from the customers over an agreed period. I pointed out to these two people that there was at least one company who specialised in such transactions and suggest they contact them.
I think it is just one more indication that the business of providing communications servces is getting unbelievably tough. I have alluded to the 'assault' that BigPond has mounted over the past 18 months on other ISP's ADSL customers offering 'incredible' deals to move to Telstra ADSL2 and was amused to finally see the start of protests at the, apparent, new levels of dishonesty allegedly reached by one of the 'out sourced' telemarketing companies being used by Telstra:
http://www.smh.com.au/news/biztech/telstra-spruikers-accused-of-harassment/2008/10/03/1222651326770.html
Exetel has lost over 6,000 customers over the past 12 months to Telstra's telemarketing to our customers (one can only wonder how these telemarketers know the person they call is an Exetel ADSL1 user?) and some of the offers that have been made were amazing - assuming they were true and as we had copies of letters sent to our customers detailing one of these "special offers" the offer we saw in writing was truly amazing and I would have dumped Exetel to take it up. So I can imagine how even smaller companies than Exetel would have been adversely affected.
Another aspect of the pressure on smaller service providers is the increase in enquiries we have had over the past three months from people looking for an alternative VISP arrangement as their current provider has tightened their terms/raised their prices 'recently'. Exetel has provided VISP services to a very few companies or around two years now but has never 'pushed' ths service becase of the obvious financial issues involved. However we have developed some very good VISP facilities over that time and have some quite sophisticated facilities in place for VISPs which work very well.
I started to look at VISP pricing last night and have made some improvements to the margins a VISP can obtain and will completely revise it over the next few days partly to help our current VISPs make more money and therefore stay in business and partly to rationalise the disparate arrangements we have made with the different VISPs. Perhaps there is an opportunity in this maket segment that might be useful to Exetel and VISPs that are underpressure to improve their margins - assuming we can do that of course.
Overall it seems to me that everyone in the communications business needs to tighten their belts and look at making more money rather than growig their voumes as the times don't look like getting easier - quite the reverse.