John Linton
I spent some time this weekend looking over the 'prospectuses' (prospecti?) of three companies that have been offered for sale recently. These are not companies like aaNet, Koala, Veridas,WildIT that were either about to be wound up by their creditors for non-payment of bills or actually in the hands of receivers/liquidators, but companies that are trading profitably whose owners, for diverse reasons, want to move on to other things.
I've never, to date, considered that there was any point in paying money for another,smaller, company's "customer base" as, usually, the price per customer could never generate a profit and the numbers of customers are unlikely to raise the combined customer base to a level that could deliver either economies of scale or better buying leverage.
My interest in the three companies that are currentlyfor sale is only based on the fact that their customer bases are principally business/corporate users and that they all, at least based on the information provided, seem to make a much healthier net profit than Exetel currently does from its business SHDSL and Ethernet customers. Of course these figures are based on internally generated documentation rather than the actual tax returns the companies would have lodged but, nevertheless, as they are going to be scrutinised in that detail by a prospective buyer I'm, perhaps naively, assuming they are pretty close to reality.
With asking prices of over a million dollars, closer to two million dollars for one of them, it's not likely that Exetel will proceed with a serious discussion that would only waste the owners and their agent's time in these three instances. However it is one more 'straw in the wind' that things are very difficult in ISP land and in the view of these owners of profitable businesss that have been around for over five years (and from the initial information provided) continue to grow in a very acceptable pattern over the past three years it's time for them to take a profit on their investment and move on to other things.
My cursory look at the information provided indicated that each of the companies would be able to greatly reduce their total expenses if they were able to buy from their main carrier/providers at lower prices than it appears they are currently paying and that may well interest other potential purchasers of these companies (assuming that those purchasers buy at the rates I would have thought would be avaialable to an ISP with a reasonable spend with the main carriers). So I would think that each of these companies will find a buyer in the not too distant future.
My view is that if I offered Exetel's agents a sign up commission of $2,500 per customer for each new SHDSL or Ehternet customer they signed up for two years then Exetel would get more new customers, revenue and profit for it's $1,000,000 than we would get by spending $1,000,000 on buying one of the three businesses I examined over the weekend.
It makes me wonder why anyone would buy another ISP/comms company at any realistic price.