John Linton
I met with one of the possible financial 'backers' this morning to begin the process of determining whether, or not, Exetel could offer services in the EU. I had provided the background information they required prior to leaving Australia and had refined the requirements in terms of money actually required and the time frames of using that money in response to their requests prior to arriving in London.
It's very different for me to deal with 'financiers' as in the whole of my life to date I have only dealt with Australian banks. London financiers are very, very different to the Australian bankers I have ever met and it was a pleasant experience. We spent around an hour going through the base business plan for the UK operation that I had put together, only in concept, and then spent another hour on the Australian operation's progress over the time it has been in business.
It was a very useful meeting and the upshot was that we could borrow up to GBP 3 million based on our personal security (house second mortgage in Australia) for a three to five year period or we could could get a mezzanine investment partner who would require interest on their money plus a share of the company of at least 20% - 30%. It was a good experience and I learned a lot in a short space of time. However the thought of mortaging our Australian home to such an extent to finance a risky business venture is not going to find favour with at least one person I know quite well.
Following that meeting I met up with a possible HSPA 'wholesaler' for the UK and four other EU countries. Again, it was a very useful and productive meeting and, again, it was easier to deal with the people who could make decisions (or at least appeared to me that they could) than it is in Australia. Based on the very simplistic model I had sent them before I left Australia and the subsequent replies to their follow up questions we had a good starting point.
Once again, the volumes they want to begin a business relationship are very demanding but doable if you take a deep breath. What surprised me more than a little was the pricing for minutes which, after 40 minutes of explaining I just wanted an HSPA only arrangement (not mobile voice and SMS or anything else), was almost half the cost we have negotiated in Australia for volumes that, in reality, aren't that much higher.
They also quoted some interesting statistics claiming that 80% of the UK's population was now covered by 3G - not my experience over the last two weeks though, admittedly, I was using a 'rival' network. As a mobile carrier they were more interested in bundling mobile voice services than a 'pure' broadband replacement and they cited recent research stating that data via mobile phones had increased hugely in the UK over the last year (I had read one of their sources - Vodafone saying that UK mobile data revenue had increased 31% in the last year). Overall they were quoting worldwide data over mobile revenues had increased to GBP100 billion in the current year from GBP 77 billion in the previous year.
In the event that any final contract reflects the discussed pricing then it would be possible, for instance, to offer much better rates in the EU than we can do in Australia in terms of monthly plans and we could make a realistic profit from 'day one' rather than accept the Australian scenario of breaking even until we build much larger volumes. Of course we would have to take the major gamble that we could find a cost/effective way of building a 'presence' in the EU using different methods than we have done in Australia which is always pretty daunting.
From what I have learned to date the cost of delivering a gb of data to an end user in the UK via an HSPA network is around $A7.20 compared to the price in Australia of around $A15.00. Of course that is based on Exetel's miniscule buy power in Australia and even less in the UK - but in the UK their overall economies of scale and lack of 'distance' seem to significantly reduce their operating costs - or maybe I have presented a better case for Exetel after two weeks 'holidays' than I was able to do in Australia.
If we can somehow eventually link our buy volumes in the EU to our buy volumes in Australia it could, eventually, be a major set of benefits (assuming the large capital investment risk is considered viable).
A busy but productive and exhilarating morning.