John Linton
I've been reading the financial press a little more thoroughly over the past ten days to try and get an 'impartial' view of where Australia's disposable incomes are heading over the next 6 - 12 months. As you'd expect - you can read any view across the spectrum of wild optimism to deepest pessimism. I thought this short article:
http://www.news.com.au/adelaidenow/story/0,22606,22909357-913,00.html
encapsulated the current measurable trends succinctly and with little/no bias either way.
As is almost invariably the case each year, order inflows for all services are very strong in the last 10 days of November and the first 10 days of December - with the expectation that the strong order inflows will continue right up to around December 20th. This is, obviously, fueled by people buying for Christmas presents (for themselves) and, in the case of parents with children, doing their best to provide 'entertainment' for the endlessly stretching school holidays.
Looking beyond December 24th 2007 there is not much to sustain an optimistic outlook from the viewpoint of a company like Exetel. "Disposable income" is an amorphous term that is impossible to really determine or apply in a micro economic way to a services business like telecommunications. Higher interest rates can demonstrably affect new housing builds and the sale of established homes and the metrics tying housing transactions to interest rate levels is fairly well documented. The same applies to large ticket item electrical goods such as flat screen TV screens and home use computers - but even those sectors blur in terms of what is 'disposable' and what is now 'essential' spending in terms of education, work and entertainment.
I look at more mundane and more directly measurable 'indicators'. One of these is the default percentages on credit card and direct debit monthly payments. Another is the percentage of 'arguments' submitted asking for credits for various reasons.
In terms of payment defaults on the 1st December bill run of well over $2,500,000 - there was nothing unusual with the default percentage on the first pass in line with previous months and the collection of those defaults, if anything, tracking a little ahead of previous months - so no indication there.
In terms of disputes of no merit I also can't detect any change - again, if anything, they are slightly down on the rolling average.
So - no signs of anything out of the usual at this particular time and, without wishing to jinx anything, it appears that December will be another record total revenue month for Exetel (the 46th consecutive month on month record) with the bill run on January 1st again, even at this early stage, almost certain to set another recurrent revenue record.
So I ask myself why do I feel so uneasy?
One factor that has caused me some concern is the 'departure' of so many of the first and second level contacts from companies who supply to Exetel. While I may not hold those people in very high regard I don't think I can remember a time when so many people have decided to "pursue their career opportunities elsewhere" at this, difficult to get another job, time of the year.
Another, possibly more worrying factor though this may sound perverse, is the number of suppliers who have offered lower pricing for a wide range of products and services we buy over the past few weeks during our contract renewal discussions (ignoring the amazingly good offer I previously referenced from a DSLAM manufacturer which still baffles me).
I suppose the new Labour governments immediate repudiation of three of its "core" election promises:
1) "We never said we'd agree to those climate change carbon emission reduction percentages being demanded by those unrealistic UN/Kyoto Accord Renewal people"
2) "We never said we'd allow boat people refugees in to Australia and not immediately send them back to their country of embarkation without review of their status"
3) "We never said we'd actually deliver a national high speed broadband service in less than 5 years"
As The Australian wryly noted earlier this week "The first week of Labour in power has dealt them a jolting reality check of the difference between criticising the government and promising to do the reverse and being the government and finding that isn't really possible.
So there will be the expected "policy turmoil" that comes from 'me tooism' coupled with rash and hopelessly forlorn ideological promises which in turn will slow everything down (the most obvious of these actions affecting Exetel is the throwing out of the recommendations by the last government's expert committee's recommendations on a new fibre broadband service and setting up a new committee to do exactly the same thing. (Sir Humphrey must be having a quiet smile of satisfaction in bureaucrat heaven - "Yes Prime Minister, we'll immediately set up an inter-departmental committee to examine that in detail and report back in the fullness of time after the appropriate consultation with the various stake holders within and without government and..........").
So no new fibre network for you in the forseeable future then.
Maybe it'll all become clearer in January?