John Linton .....clearly much bigger than I, and the ABS, think they are.
It was an interesting start to the week with a 'stream' (if four calls can be called a "stream") of phone calls before midday yesterday from people wanting to see what interest Exetel might have in buying internet companies and one call (definitely not a "stream" of itself but perhaps can be considered as similar enough to the other four calls thus contributing to the overall creation of a "stream") from a person expressing "urgent interest" in buying Exetel as "he had heard from a very reliable source that we were about to dispose of the company" - I assured him the reliability of any "source" who made such a statement must, regrettably for the "source", be regarded as so incorrect that it would have to be regarded as unreliable to the point of being a completely lying piece of (fill in the noun of your choice).
It makes me wonder what happened over the weekend? Did four company owners look at their draft results for FY2009 and realise that it was red ink into the future as far as the spread sheet could calculate? Did those depressing outlooks cause a co-ordinated reach for the phone to call their accountants with a chorus of: "get me out heres"? Well...something like that must be happening - obviously not the exaggerated scenario I just attempted to depict but some sort of disturbance in the "Force".
I asked the four 'agents' acting for the 'sellers' for size of the companies for which they were acting and their ball park sell prices and after the usual attempts to obfuscate they each produced a few numbers that allowed me to say that we weren't able to raise that sort of money so we wouldn't waste their time by signing NDAs etc and reminded them that we were much too small to ever be approached by them in the future - though I did give them the phone number for M2 and said they were always in the market for failed communication companies. I told the agent for the 'buyer' that (after he fluffed around trying to recover from the comment about his "reliable source") that we had no current plans to sell Exetel but if he told me who his potential buyer was we would let them know if we ever changed our views - he wasn't able/prepared to do that so I hung up....he must have thought that I am even stupider than I obviously am.
Ignoring the time frame coincidence, until yesterday morning I don't think we've had a "please buy me" enquiry for over six weeks, I am getting a lot more calls from all sorts of different people I have never heard of enquiring about all sorts of aspects of the broad band and related marketplaces looking for all sorts of information as opposed to trying to sell Exetel products or services - in fact those sorts of calls have diminished to virtually nothing over the past two or three weeks. So I'm wondering what may be happening. Someone who might be assumed to know told me last week that he believed there were more than 20 ISPs with more than 100,000 ADSL customers outside "the top five". That surprised me but if it's true then there must have been a great many of the tiny/small ISPs being quietly sold up or simply quietly going out of business if that is the true situation. While I understand that there would be almost no basis for tiny/small ISPs (with the exception of Exetel of course that has very different objectives to those normally espoused by 'commercial entities') to actually stay in business the last ABS statistics indicated that there were still well over 200 - if I read the report correctly.
It would take at the consolidation least the 200+ of those tiny/small ISPs to build so many other ISPs up to greater than 100,000 broadband users if you, extremely optimistically, take the average user base of the ABS 'rats and mice' as being (at best) 2,500 users.... personally I doubt the average is more than 1,000 but my opinion isn't based on any knowledge. If there were 20 ISPs with greater than 100,000 broadband users then I must have completely lost touch with the marketplace. If you assume that the "top five" are:
Telstra, Optus, TPG/Soul, AAPT and iinet
and the likely bigger than 100,000 ISPs are iPrimus, Internode, Dodo, M2 (including PeopleTelecom) and Adam - where are the other 15? I would struggle to think of more than couple of 'maybes' - I could get nowhere near 15. But my informant who was getting his information from what he regarded was an impeccable source was very sure of his 'facts' so clearly a lot of things have happened while I have been buried in the tiny detail of running a small business and have lost track of the 'bigger picture'. I have put Exetel somewhere in the 'top 15' ISPs for some time now but if the information I was given is true then I must hire a research assistant to correct my yawning knowledge gap of what has happened over the past twelve months.
Perhaps what has happened is that several hundred tiny/small ISPs have gone out of business by being bought out/absorbed by 20 of the larger ISPs and their 250,000 users have been distributed widely enough to push 50 - 100,000 broad band user ISPs over the 100,000 customer level - but the numbers don't seem to work unless you get to around 300 plus small ISPs being absorbed in to other entities. I suppose it doesn't really matter in an Australian user base of something like 4 million with Telstra having something like 50% of that. Two million users between 24 other companies is never going to result in the smallest of those companies having a minimum of 100,000 users.....unless my math is even ropier than usual....particularly when at least four (excluding Telstra) of those 24 claim to have over one million users between them. That would leave 1,000,000 users divided by 20 'medium' ISPs and some unknown number of 'small' ISPs....the math just doesn't work. The Australian broad band user base would have to be much bigger than the ABS reports it as being for there to be 25 ISPs with a broadband user base bigger than 100,000 (and personally I would put the ABS figures as 'exaggerated' but I could be being too cynical in that view).
I only have a mild interest in what the actual numbers are because I try and ensure that the 'numbers' planned for Exetel over the new financial year are consistent with us continuing to grow above the 'market average rate' by a factor of at least X2. If 25 ISPs have more than 100,000 broadband users then that can't be the case.