John Linton
......been talked about for ten years......beginning to happen?
It seems like this year is speeding by even faster than ever with the end of financial year looming and the planning for the coming new financial year about to start. This year which we began so pessimistically due to the litany of doom sayings seemed to be holding up amazingly well for the first 7 months but the last three months have been as hard as any I have personally experienced. Maybe I am just too old for this job and it has always been this hard but from what I see around the communications industry it appears that it really is as hard for some other data service providers as I currently find it....at least in terms of ADSL1 and ADSL2.
The end of Netspace was one of the more concrete examples of the business generally becoming more difficult and more uncertain but there are many others. The takeover of Hutchisons by VodaFone was another example. The new rumour of Telecom NZ selling off AAPT in the not too distant future is of some concern to us (and I'm sure of much greater concern to AAPT's employees and their larger customers). AAPT has been the 'nicest' wholesale supplier we deal with for a long time. We have no billing disputes, we get superb support in terms of selling aids and 'accommodations and we have really good relationships with our account manager, her manager and senior management as well as good relationships between our provisioning and problem resolution people and their AAPT counterparts. It would be very disappointing for us if AAPT were to be sold to TPG (I wonder what TPG would do about their stake in iinet?) and only marginally better if were to be sold to two of the other companies mentioned - probably only a sale to Optus would be beneficial to Exetel (though it's hard to see how the ACCC would permit that).
But, if the AAPT sale does happen, it would mean that three of the 'top ten' communications providers in Australia would have been sold off during a twelve month period and that, very definitely, constitutes 'industry consolidation'. It is no longer a bunch of tiny ISPs running out of their start up money and supplier credit but the number three and five carriers merging with the number two and number four carriers - that's an almost unheard of scenario....plus a highly profitable (at least according to published data) ISP calling it quits and selling out to the number seven communications provider.
Times very definitely are obviously tough across almost all sections of the communications suppliers and sectors and I can't remember a time remotely like this when the 5th largest carrier (Hutchisons) merged with the 4th largest carrier (Vodafone) and the 3rd largest carrier (AAPT) looks like it will be sold off to the 2nd largest carrier (Optus) with a long term communications company (Netspace) being swallowed up by 7th largest communications provider (iiNet). Certainly a sign of currently troubled times and more of an indication that the future doesn't look any better - even discounting the impact of Federal Government meddling in the communications industry. The only real question is how tough will it be in the different sectors of the communications market?
Either by good luck or good planning Exetel has virtually no exposure to the steepening decline of wire line telephony use across Australia. We have never wholesaled 'stand alone' wire line services and have only a few wire line connections on the bundled ADSL2 services we buy from Optus. So we don't have to concern ourselves with how to deal with a progressively increasing 'revenue loss' from those services - we have none. Companies that do have significant wire line revenues (Telstra being magnitudes larger than any other company) will have some significant problems to deal with and 'shrinkages' to both their revenue and profits on a continuing basis. One immediate benefit is that we won't have to deal with the ramifications of this sort of thing:
http://www.theaustralian.com.au/business/industry-sectors/telstra-aims-to-hike-rivals-access-costs/story-e6frg9hx-1225856608774
Similarly we have virtually no exposure to the price wars that continue to rage in the mobile telephony market places. Our mobile business is very small and comprises a very 'loyal' user base that slowly grows each month who prefer low cost mobile calls on zero contract plans to the "free" offerings of the major mobile sellers. Our MoIP offerings are also beginning to have an effect on some market sectors.
Our revenues, and small profits, for Wireless broadband, VoIP, SMS, MoIP, FoIP, SHDSL, EOC, Fibre all continue to grow month on month.
Our only concern is ADSL1 and ADSL2 where the overall market is beginning to decline and growth has slowed dramatically over the past three months with increasing pressures on pricing which, obviously, puts profits under a lot of pressure. We have re-worked our current ADSL2 plans to make them more attractive (while not losing us money) and will look at how we could do the same for our ADSL1 plans over which we have little 'room to move'.
Overall we will have a more difficult 'planning period' this year than any other year I can remember.
10, 9, 8, 7, 6, 5, 4, 3, 2..................