John Linton
Exetel has been a wholesale customer of Unwired for a little over three years now - I think we were either the first or second ISP to use Unwired for access via wireless to Sydney customers and, as far as I know, have been the only ISP to do any reasonable volume of business with them.
As with all the companies we do business with, I take an interest in whatever information is published about them and therefore read their first quarter report for the new financial year with interest when it was published late last week. I had, probably like many other people who take some sort of interest in the Australian communications industry, formed a view some two years ago that Unwired would need to be bought out by some entity with a lot of money if it was to survive as a wireless competitor to fixed line and mobile competitors and therefore the recent offer by Kerry Stokes to buy the company for some $A120 million was no surprise.
The financial report for the first quarter of FY2008 released last week doesn't appear to have changed anything though. Unwired chewed through another $A4 million in cash losing money on its operations for the 17 successive quarter and incurring increased financing costs and, still after that time, has less than 75,000 subscribers.
More worryingly, despite, spending a massive $3.7 million in the last quarter on advertising it resulted in a net gain of only 4,428 customers - a cost of acquisition of over $900.00 a customer (surely the highest coa of any comms company in Australia by around 300%?). As an example - Exetel increased is user base in the last quarter by almost the same number without spending one cent on advertising or marketing and in a previous musing I did a rough calculation of iiNet's advertising where the coa appeared to be around $250.00.
I don't take any comfort in looking at numbers like these especially as Exetel provides services to customers via the Unwired network. My interest is simply in what direction WiMax inAustralia is heading in terms of competing with the mobile 3G solutions now available from every Australian mobile carrier. With the Federal Government awarding the regional broadband contract to OPEL (which will pump at least a billion dollars into WiMax) plus Kerry Stokes ambitions for Unwired there appears to be real money being made available to which must be added the heavy influence, and financial muscle, of Intel and Navini's more recent rise to acceptance in terms of the concepts it's promoting to boost wireless data capabilities and the subsequent buy out by Cisco.
Today, only the Unwired Navini (and possibly iBurst) network can deliver a reasonable amount of data for a reasonable price wirelessly-but both those networks are relatively small in terms of total Australian coverage. However 'tomorrow' the 3G networks will begin to offer more affordable data services and have four already established Australia wide networks that give them a technolgy edge and require no new nvestement in overall structure- there only drawback is the cost to themselves and therefore to the end user of carrying data via those networks.
Exetel is edging closer to providing a data service via a 3G solution but that, assuming it happens, is nowhere near where we would believe it needs to be and is only going to be a small step along the way. We haven't found a way of working with Unwired to make our wireless offering via Navini more competitive in the Sydney data market and we have spent a lot of time and money attempting to do that.
In the not too distant future we are going to have to make a decision on which way to go but we need to be a lot clearer on the future of WiMAx (in Australia) before that decision will get any easier than it is today. The recent moves forward on WiMax becoming an ISO standard and the Navine buyout by Cisco plus Intel's increasing involvement all point in a positive direction - as does the buyiut of Unwired by an entity with a lot of money.
I'm just not sure that the new owners of Unwired will be any more interested in a wholesale relationship than the old owners were.