John Linton
We are heading home in a few hours having stopped over in Singapore again due to the difficulties of getting reasonable connections to and from Australia to Sri Lanka. I keep in regular touch with what is happening in Australia whenever I am away mainly through our GURUS management system and, of course via many, many emails and the occasional phone call. We have had a very good week in Australia with ADSL setting a new daily application record after we returned the application fees to their previous levels which is the first time we have ever set a 'record' for ADSL applications in a February. We have also made our largest ever business sale (and surprisingly this was made in Tasmania) which is really nice to see as another indication of how our young business sales force is maturing and how they continue to out perform their much more 'experienced' competitors in all sorts of situations. So they were both very satisfying 'events' to have been achieved in a week that in the past 6 years has never produced very much of interest.
Assuming the last week of February stays on the same 'tracks' as the first three weeks we will have another consecutive record month (despite the 28 days) which will be a really good result in these more difficult times in terms of ADSL market saturation and the beginning of the series of 'initiatives' by all sorts of communications companies to address their first six month shortfalls in terms of both their sales/revenue levels and their profits. I have referenced the AAPT 24 x 7 unlimited ADSL2 plans but there are now signs that several other ISPs are trying to make changes to their offerings. I think it will be another ten days or so before new initiatives from Telstra and Optus become clear but the rest of the publicly listed ISPs will report their half year results in that time and the December 31st 2009 half year report from the ABS is due next week.....which will shed more light on ADSL progress in Australia.
We keep building out our Australian network in terms of upgrading edge and core hardware and continually, as we always have, increasing the amount of customer connectivity and IP bandwidth we deploy. The stronger dollar has helped us a great deal in buying much larger routing and switching power over the past year which has provided us with much more flexibility and at least two new capabilities that our multi 7300 architecture never allowed us to do. These new facilities plus the new caching provided to us by both Akamai and two of our other caching suppliers continues to push the cost of a gB of IP ever lower as the months go by. Interestingly the two new multinational IP providers that have been 'tiptoeing' around supplying IP in Australia are getting a little more committed and a little braver and it will be interesting to see what IP pricing will begin to be offered over the balance of 2010. Our current buy prices of 'raw' IP are now falling well below $A100.00 per mbps with the caching contributions driving the per mbps price to well below $A30.00 for the first time in our operating history.
Our costs, as a relatively small communications company, can't approach the much lower costs of a company like AAPT (which allow them to offer their unlimited plans) and nothing like the costs enjoyed by Telstra and Optus but they currently look like falling by around 40% from our bench mark buy prices in 2009. If that in fact turns out to be the case then it will give us some interesting opportunities if we can work out how to use this scenario to our benefit. Of course the benefits that Exetel may derive from these circumstances will also be enjoyed, and to a greater extent, by all of the companies with which we compete so they may not give us any real advantage other than we don't try and make as much profits as our competitors do.
As always after a few days in Sri Lanka I feel invigorated and I am looking forward to getting back to Australia and seeing first hand what has changed in the week I have been away.