John Linton ....who or what do they mean?
I am not sure whether it is the 'season' or whether there is an increasing missing of half year targets by all sorts of different sized companies but I am getting a much higher level of 'approaches' about various 'joint ventures' or merger/takeovers that I can ever remember in past years at this time. I mentioned the approach late last week from a Singaporean company which had come a few days after an approach from an Australian company and yesterday I had two more approaches, both from Australian companies, wanting to explore 'merger' opportunities. From these various, completely different, contacts it seems to me that there are things that are happening in the industry that I have either seriously under estimated or am completely unaware of - almost certainly the latter.
I suppose such re-evaluations are always going to happen when market conditions are changed for such a long period of time by the actions of the largest provider. This must be particularly true for those companies that depend on reselling mobile services and relying on their carrier suppliers to provide them with the massive commissions that have allowed them to build largish revenue based businesses over the past five plus years. Some of those businesses have been incredibly successful and have become a major part of the retail success in driving the huge growth in the numbers of mobile phone services used in Australia - approximately 1.25 services per man, woman and child inhabiting the continent at the present time. I noticed a Telstra statement that they get 30 million visitors a year to their current Telstra stores alone - 30 million - now that's an amount of traffic that would be envied by any retail chain in any market/product type. In that report Telstra said they were so happy with the results they were investing some huge amount of money to build a lot more retail stores.
But you have to think what MUST be the case today. The ABS stats indicate that every person from a day old infant to the oldest person in Australia already has one and a bit mobile services - is that some sort of definition of market saturation or is the expectation that saturation doesn't occur before that ratio is two or three, or more, services per Australian inhabitant? Presumably with Telstra claiming 1,000,000 net new mobile customers in the period 1/7/10 to 31/12/10 and Optus claiming 250,000 net new customers (I haven't seen the VHA figures yet but, despite their well publicised problems recently, I wouldn't mind betting they will claim an increase in new mobile customers) seem to indicate that Australians are heading towards 2 mobile services each - or that some or all the reported figures are highly suspect.
Were there REALLY well over a million 'new' mobile service customers in Australia over the last six months? That is something over a 10% net annual growth in mobile services in the last six month period - something that appears improbable but if it's true what does it mean for the immediate and medium term future? One thing it has meant in terms of Telstra's own figures is that they added a million more mobile customers and 160,000 new ADSL customers yet their total revenue for the period declined. If Telstra's revenues declined in those markets you have to wonder what is happening to the companies that compete with Telstra in those markets. Given the way mobile resellers fund their business you also have to wonder what effect Telstra 'winning back' 1,000,000 mobile customers means in terms of commissions that have to be repaid to Optus and Vodafone?
So, it seems to me, that the Australian communications industry is plunging ever deeper in to a period of "profitless prosperity" - where all the numbers of sales of the various products and services are all up side yet the revenues don't reflect those numbers and neither do the profits. I could be totally wrong but I am only using the numbers published by the companies that have published their half yearly reports so far.
You have to wonder why there is an apparent large increase in the number of companies that want to enter these markets at this particular time.
PS: Despite what the national government says the following article confirms what I and the people I talk to have been saying for some time - business conditions, at least in Sydney, are not good at all:
http://www.smh.com.au/business/business-confidence-sags-20110222-1b385.html
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