Tuesday, March 30. 2010....And Another One Bites The Dust....John Linton
http://www.smh.com.au/business/iinet-buys-netspace-for-40m-20100329-r8bq.html I haven't changed my mind on just how tough this calendar year will be since I first wrote about the difficulties ahead some six months ago. Although Exetel seemed to be almost 'magically' shielded from the obvious effects throughout the first six months of this financial year and for January the predicted 'wars' to try and rekindle growth in customer bases and/or end the increasing erosion as the ADSL market stalled and began to fall back have begun to affect even companies of Exetel's size. While we very clearly saw this scenario as inevitable (and did the best we could to plan for it) the effect is still a little surprising in its severity as more and more ADSL suppliers realise how they are being affected and take their first tentative (at this stage) steps to address the situation that they must have seen coming. The termination/resignation of long term BigPond head Justin Milne, would seem to be an indication that Telstra is preparing to do things to prop up their residential ADSL customer base that, presumably, Mr Milne was unwilling to do and that change, whatever it might be, will come soon now. Optus is 'rumoured' to be contemplating some radical changes to its ADSL offerings but have 'missed' the Easter promotion period but they can't be far away. TPG's half year results for residential services were very positive but they have had to raise their value proposition three times in six months to maintain their growth and only time will tell on what the longer term effects of that might be. iiNet have done what they always do - buy another company when their growth falters so that the next reporting period's numbers will be very hard to work through and Internode is sending cautious signals that it needs more money to achieve its future plans via a share offering of some type. With the possible exception of TPG, all the signs from Telstra on downwards, are of companies not meeting their FY2010 targets in terms of either revenue or profit and struggling to address those twin problems. I obviously have no knowledge of what any other company's situation might be but the 'facts' that can be ascertained from 'the public record' is pretty dismal and appears to be getting even more dismal. If the ABS figures do show a further decline in ADSL numbers tomorrow (bearing in mind the sources of their figures) then you can pretty much make the assumption that the residential ADSL market will get much tougher and more quickly than it has done over the past year or so. In many ways this will be good for the end user of residential ADSL services because the different suppliers will need to find ways of making their current customers happier to stay with them than move to the next most attractive promotion made available by increasingly anxious suppliers. However, unless each of the companies who go down this path have found some new ways to reduce operating and supply costs, the 'profit squeeze' is going to be not insignificant and it will also be necessary to find the money for the various promotion costs whether that is via marketing/advertising or the lower costs of the services offered. The well defined "more downloads for the same price" gambit that has been the method of addressing these issues since the first ADSL service was made available has no reached its limit with AAPT offering unlimited downloads - there is nowhere for that company to go and similarly any company that goes down that path. This means the only real option is, Heaven forbid, lowering the cost per month of providing services which, for almost all current major suppliers, is not possible without a very noticeable bottom line erosion. Perhaps the owners of Netspace see the future in the same way and, in their case, saw an even bigger challenge in their corporate customer base where they, like so many long time providers have a large number of customers paying way over what data services are now capable of being provided for. I don't know any more than any other casual reader of the 'public record' but I was slightly saddened to see the end of one of the better Australian communication providers albeit via a handsome 'pay day' for the people who spent so much of their lives building the company from a zero base. Trackbacks
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I was with Netspace for 7 years from around 1997 on dial up. They were innovative and quick to provide services across Bass Strait.
Another ISP swallowed up! Comment (1)
An acronym suggestiong for your amusement
iiOWN iiNet Ozemail Westnet Netspace Comment (1)
Should be interesting to see if Bigpond have a response to the Optus offerings ($49.95 p/m for 75/75, 2 year contract for new customers inc bundled home phone).
Comments (2)
Life gets harder and harder.
I haven't seen that particular plan - where is it listed? Comments (9)
John,
Nothing official on the website however plenty of talk on OZ Bargain (http://www.ozbargain.com.au/node/23791 and Whirlpool http://forums.whirlpool.net.au/forum-replies.cfm?t=1410808) Sorry, it should have been $59.95 for bundled as well. Comments (2)
John what are your thoughts on the launch of Vivid Wireless? Can you see them taking some ground with their ability to market and offer services connected with their other media assets?
Comment (1)
I assume the business plan approved by Mr K Stokes would have been based on those assumptions.
However, I think that there is no indication, here or in any other country, that 7's media assets are a good fit with broadband generally at this time. I understand there is a lot of noise made about 'triple plays' but I have yet to see any positive results - that doesn't mean that there won't be in the future. I think Justin Milne's parting of the ways with Telstra demonstrates just how unready today's users are for 'bundled' media services. Comments (9)
I was reading this brief article on Telstra's rearrangement of the deckchairs on the Titanic,
http://www.smh.com.au/business/telstra-shakes-and-shrinks-senior-team-20100329-r8bo.html and if anything indicates corporatised beaucracy run rampant, the following job title does: "group managing director of customer experience, simplicity and productivity" Comment (1)
According to The Australian, AAPT has "only" 120,000 fixed line broadband customers.
More interesting, however, is their allegation that Exetel is a publicly listed entity. Comments (3)
Perhaps Steve sold Exetel while we were away?
Which article are you referring to? Comments (9)
The article in the Australian IT section: "iiNet pays $40m for Netspace":
http://www.theaustralian.com.au/australian-it/iinet-continues-takeover-drive-with-40m-buy-of-netspace/story-e6frgakx-1225847163884 Comments (3)
I notice that company presentations from TPG and IIN reveal low churn rates (
Comment (1)
While there are comments on the subject of competitors. Optus seems to be cold calling a few off contract cable customers to entice them to stay on board.
$39.99 = 10Gb + 20Gb Offpeak $49.99 = 50Gb + 70Gb Offpeak $59.99 = 75Gb + 75Gb Offpeak http://www.ozbargain.com.au/node/23791 The plans are not yet on their website and only come live at the end of April. Looking forward to your views on the ABS results. At a glance, they are certainly inline with your views of the Wireless market, with an almost 40% bump in subscribers for the half year Even DSL had a slight rise above the Dec 2008 high. Comment (1)
"We'd certainly have to be considered an acquisition target but it isn't our aim to be acquired. Our agenda is to make the company profitable," Mr Lane said.
I am not sure where to start..... Comment (1)
....at its current share price iiNet could acquire a majority shareholding for less than $A2 million.
However the issue really is it could pick the user base up from a future liquidator for far less than that. Alternatively - iiNet could pay 5 X current earnings and the EFTel directors would have to agree to PAY iiNet $A5 million to take the company off their hands. Comments (9)
But what about all that "goodwill" they have? Surely they don't just make that stuff up?
Funny stuff. Comment (1)
"Goodwill" is worthless.
It is an accounting transaction that, in the case of acquisition of another entity, uses a book keeping entry to balance the cash used to buy something to an entry 'on the other side of the ledger' called good will. In the bad old days, which seem to still exist in EFTel such entries/revaluations are used to make a terrible balance sheet appear to be better. The EFTel accounts show a negative asset backing to the shares issued - ie. the company is worthless. Comments (9)
13 DSLAMs in Tas and a number with free ports installed in capped exchanges in Victoria. That probably made Netspace a more attractive option to buy, than it would first appear.
Comment (1)
They own colocation space here in Melbourne as well. As iiNet don't really "do" business, it'll be interesting to see what they do with SpaceCenter and the other business products that are above-and-beyond what iiNet currently offer.
Looking at the example of Westnet, it looks like iiNet retained their Perth-centric fibre service but have not done anything to the branding at all. JL, congratulations are in order. On the same day that Netspace was sold, I've not seen any photos of the founders in the media but it seems that you're continuing to attract more attention: http://www.itnews.com.au/News/170827,exetel-seeks-out-of-court-telstra-settlement.aspx Comments (3)
Perhaps iiNet will need to deal with the Netspace users differently?
They are very different as a demographic from the sort of users that use iiNet or WestNet....at least as I understand it. Comments (9)
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