John Linton We had an uneventful flight home and as we drove over the bridge from the airport last night we realised that we had left in 'winter' and returned in 'summer' something that was confirmed this morning as we awoke to a very warm day. Nice to see that Spring is finally here. I did my best to catch up on the communication industry 'news' - but there didn't appear to be any. No follow up to the simple ASX announcements the TPG had acquired a small shareholding in iinet and nothing on the ACCC's views on Telstra's proposed 'split'. It's hard to see that TPG's small purchase is anything other than the precursor to an attempted acquisition of iinet and equally difficult to see that the ACCC could endorse the 'Clayton's' proposal to split Telstra's wholesale and retail operations. However neither issue has any real relevance to anything else and won't even if both events happen as currently speculated.
It's almost "Christmas" in terms of the business year with all that means from the steady stream of invitations to various 'end of year/catch up events' through the range of "Christmas promotions" by so many of our competitors to the mid year check pointing of various aspects of the business plans. If I could plan my personal business life better I would be in New Zealand today attending the final of the Rugby World Cup as the guest of one of our more generous suppliers which is perhaps a sobering thought as I involve myself in the far more serious planning sessions that occur in November and December. From everything I can see and read - business conditions in NSW continue to 'soften' (a euphemism for heading South which itself is a desire to describe conditions without using the real hard words.
So the business analyses to which I subscribe and the few financial journalists whose views appear to be more based on facts than headlines all point downwards and all indicate that is the likely future direction. What general commercial conditions mean to the Australian communications industry has always been unclear to me other than tougher financial times usually mean that the major suppliers crank up their 'special offers' to the residential markets and more discounts to business markets. The most obvious example is the current mobile promotions from all carriers. I have very little/no knowledge of many of the ways the carriers operate but it appears to me that at least two of them have reached a point where there commission models have reached either a highly cynical point or a recklessly dangerous point as they attempt to promote their mobile market shares. In one instance very recently this discounting cynicism led to a ten million dollar 'forgiveness' of commissions over paid to keep the Ponzi scheme this particular carrier/wholesaler's relationship is based on from collapsing and triggering a massive commission payback demand (in this context ten million dollars was a, relatively, 'minor' amount). That particular collapse both demonstrated the extreme cynicism of carrier commission schemes and also demonstrated that the cynicism can be pushed too far.
As general business conditions worsen I would expect more such carrier commission schemes to collapse because they simply are not financially sustainable - Ponzi schemes never are and although the carrier's slightly more sophisticated version of the basic Ponzi scheme has some measure of 'insurance' (for the carrier) it is fairly threadbare cover and, as in the recent case, is not going to really work. The other down sides of any general business 'lack of confidence' is that sales revenues fall across the board and after the more desperate attempts to prop up revenue streams prove inefficacious then it becomes necessary to resort to more conventionally proven measures of reducing expenses (which generally means salaries) which in turn increases the downwards pressure on the economy generally which then feeds back......into the self perpetuating cycle that creates all downward spirals.
The coming months will continue to pose quite a few challenges.
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