Wednesday, September 2. 2009What Mostly Happens To Start Up Companies........John Linton .....though, to date, Exetel hasn't conformed to that pattern........however others linger on with various, sometimes creative, methods to prolong their survival. We started Exetel in January 2004 a few months after a company called Unwired raised money to use new technology from a US company called Navini to roll out an 'Australia Wide wireless network' based on that brand new technology. At the time we were interested in a wireless broadband service but in January 2004 they were some months away from any end user offering and were uncertain as to whether they wanted to use a wholesale distribution model.So we waited a few months for them to decide what they were going to do before eventually helping them design their wholesale contract. I read this item an hour or so ago with a mixture of feelings: http://www.australianit.news.com.au/story/0,24897,26016942-15306,00.html I'm not sure whether Exetel was the first wholesale customer to actually deliver an Unwired wireless service but if we weren't we were very close to the first back in August 2004 and we certainly quickly became the 'biggest' over the succeeding months and, even today, we still have many hundreds of customers using the Unwired network even though we stopped offering the service to new customers well over two years ago. If my memory is correct, which it may very well not be, at our 'peak' we paid Unwired something like $A120,000 a month and had around 3,000 customers in Sydney - I noticed our latest bill from Unwired was for about $12,000 - so very sad to see in many different ways. In the mean time "Unwired" ran out of money several times after using up the not quite considerable capital that it raised to initially start up the service. From what I read in this article Seven has abandoned the concept of revamping the old Unwired service via a WiMax roll out and therefore, presumably, is going to write off the whole of its investment in the Unwired Navini based network and start again using 4G in Perth - an odd place to start up a new network especially when you say you have 60 - 70,000 customers on your 'old' network in Sydney and Melbourne. There is little doubt that Seven have made the correct decision in abandoning a WiMax roll out in a 4G world but the real pity is that the concept Unwired's founders had six years ago was so correct but they fluffed around with trying to make retail work on a service that should have been wholesaled - (it needed far too much technical support for retail to have ever worked) that they well and truly lost their very real 'window of opportunity'. I'm not sure how much money has been run through over the past six years in trying to establish a viable wireless service but it an awful lot - hundreds of millions if I remember correctly. It just confirms the views that start up companies have almost no chance of getting to five years 'corporate life' - even when they get new capital injections along the way. Speaking of which I got my annual 'belly laugh' from reading the EFTel annual report - those guys really must think the public really do have the, mythical, memory span of a goldfish. I can't quote verbatim from their previous annual reports but they always announce some sort of 'surprise' loss immediately followed by the statement to the effect that "next year will see huge profit from all our house keeping activities of the past year". So sure enough, the latest report announces another huge loss (over $A5 million) on annual revenue that has barely increased and an increased deficit between current assets and current liabilities. I'm on holiday and am too lazy to try and analyse reality from the bs in the presentation but you can find it here: http://www.asx.com.au/asx/statistics/announcements.do?by=asxCode&asxCode=eft&timeframe=D&period=W Looking at the money this company has burned through over the period of its 'corporate life' and the lack of results to show for that money makes a rational human being wonder what the point of the venture is? Obviously not to make the shareholders a return on their investments - there never has been any. As they keep claiming they are the "number X" in this or that invented category of business you would assume there would have to be some reason for wasting so much money - but nothing is apparent. One thing that really amused me (Slide 15) was their self delusion and/or total lack of understanding of current ADSL2 port costs in pointing out that they had a "cost advantages" over competitors was this: "ADSL2+ BroadbandNext average port cost $A13.00 (plus $A5.00 Depreciation) per month" Now, Exetel is a tiny company, (though larger than EFTel) and we have no "advantages of the 6th largest owned network" (what a complete crock) but we, as a wholesale customer of no serious sales volumes, don't pay that much for an ADSL2 port from our wholesale suppliers - and we get no 'preferential' treatment I can assure you. I would have put the cost of an 'owned' ADSL2 port (based on our own investigations of investing in a DSLAM2 roll out) as around $A8.50 per port per month - but perhaps Exetel has much better credentials in terms of So Exetel, unlike companies like Unwired or EFTel, for all the problems it has faced over the 5+ years of its existence continues to out perform the conventional wisdom of start up companies in that we have never lost money since the first month of our existence, we have always paid an annual dividend, our business increases each year faster than our competitors, we don't borrow any money from anyone and we have never had to ask our shareholders (or any other company) to bail us out. Then again, we also don't publish total nonsense in the guise of an annual report on our progress. I've always wondered if the 'EFT' in 'EFTel' is actually an acronym for Ehrenfeld Family Trough?
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"What the point of the venture is? Obviously not to make the shareholders a return on their investments - there never has been any."
http://forums.whirlpool.net.au/forum-replies.cfm?t=1272304&p=3#r44 Well, prices are set to rise with their new "level of support". For additional laughs, here's the average times for their current support: http://forums.whirlpool.net.au/forum-replies.cfm?t=1260150&p=5#r98 Would you happen to have Exetel's on hand for readers? "you would assume there would have to be some reason for wasting so much money - but nothing is apparent." VDSL2 is their only edge and it's not available yet - nor will it have any value for residential use, perhaps business use? Comment (1)
Exetel publishes statistics each month here:
http://forum.exetel.com.au/viewtopic.php?f=324&t=27043 Current (updated each minute) call wait times are published here: http://www.exetel.com.au/contact.php VDSL2 is not going to happen in any meaningful way on any network in Australia.....it's something that can be offered on any DSLAM (with the appropriate cards) by any company - it isn't "exclusive" Comments (3)
If you read the ASX release from Seven http://www.asx.com.au/asxpdf/20090902/pdf/31khpbxmcy1tg1.pdf they actually are using WiMax, in the 2.3GHz band.
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Hey JL,
Checkout this comment by John Lane of Eftel in their AANET (supposedly budget brand) forums: http://forums.aanet.com.au/viewtopic.php?p=219611&sid=410411c9cfc8bf77a3ffd8f0ceb92d18#p219611 "We're intending to increase prices across the board as part of the whole business model change. I'd like to know whether existing customers feel that we could justify pricing at Westnet levels if we offered Westnet service levels?" Comment (1)
I suppose after losing so much money for so long and the owners having to find $1.2 million of their own money to stave off bankruptcy they have finally realised that they don't know how to run an ISP business at affordable pricing.
Maybe there's another explanation? Comments (3)
JL,
May I ask if you ever see Exetel making the transition from a 'small company' to a larger company? It is quite often referred to in your posts that Exetel is comparably small, and after all - it is, but with continued growth and success, could it ever become a medium sized ISP? I don't mean to quiz you on the direction of the company, just curious as to where you see it going into the next 5 years perhaps. If growth continues like it has for the past 5 years, will it become a bigger player in the market? Thanks for the interesting post. Comment (1)
I don't see Exetel ever becoming a 'large' company.
We currently have around 100,000 customers, 60 employees and a monthly revenue approaching $A5 million a month. By December 2010 we have planned to double the monthly revenue figures mainly by adding business customers so a revenue of around $A10 million a month....probably no longer a tiny company but still extremely small as a communications company. We have no detailed 5 year plan so I can't comment on any projections that far out. Comments (3)
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