John Linton
Annette and I will be getting an early morning flight back to Australia later today after we finished the business meetings in Singapore late yesterday evening.
Our first meeting today was with another company interested in buying Exetel and, for once, with the cash on hand and balance sheet strength to allow us to believe they could be serious. We had a pleasant preliminary discussion with their CFO who we were told was the key investigator of acquisitions and who proved to be a knowledgeable and competent person to have a sensible commercial discussion with - quite a change from the people who have approached us in Australia.
He was intrigued with the unique aspects of Exetel's business 'model' and like many other people found it hard to believe how Exetel was set up and operated and what it has achieved since it began to offer communications services in Australia. He initially found it very hard to reconcile the number of personnel to the number of customer services and the monthly revenue but what really gave him the most trouble was the concept of a start up company not having any marketing or sales personnel and doing no marketing or advertising activities but relying on a web site to deliver all business.
As with the previous prospective 'buyer' we advised him that the price was going to be far more than could be supported based on earnings multiple type valuation and there would be no point in wasting any time if that was to be there basis of making an offer for the company. I pointed out that until the savings from the foreshadowed reduction in IP pricing was reflected in the monthly P and L and the reductions that could be achieved by ramping up the operations in Sri Lanka the monthly profits are over $A150,000 per month less than they will be by the end of this calendar year. I also made the point that until the impact of data over 3/4G was known:
Negatively - in how quickly current low end ADSL download users will move away from wire based broadband solutions
Positively - in how finally getting away from Telstra's over priced infrastructure and allowing greater broadband margins
any forecasts of how the current ADSL1 and ADSL2 customer bases would change are pointless - it could be that Exetel will have no broadband customers within three years if we can't find a suitable 3/4G carrier willing to sell infrastructure access to us.
So we had a brief exchange of views on how we were going about that (and our lack of success to date) and he explained what they were doing. We came to the conclusion that we could find some common ground in combining our investigations and I explained that I was going to a meeting later in the day to bring one possible opportunity to a conclusion.
We parted on friendly terms with us saying we'd keep him advised of developments in data over wireless (should there be any) and him saying his CEO would be in touch about visiting Australia should they wish to take their interest any further. Later we went to the meeting to finalise what we could commit to regarding data over wireless minutes and that, too, was a pleasant and positive meeting.
We didn't reach a point where we have a final decision but we have now reached a point (at least with this supplier) where we could consider making a final decision in a relatively short time frame. We just need to be more certain of what is going to happen in Australia between the four mobile network operators in terms of how 'stupidly cut throat' they are going to be in trying to rapidly build an inroad in to the ADSL wire line marketplaces and how they will view wholesale 'partners' in whatever their go to market strategies are.
The Singapore based data over 3/4G provider has the very realistic view that mid sized ISPs represent an infinitely better and quicker 'vehicle' for data over wireless than their traditional retail store resellers and have the attraction of established customer bases who would be interested in switching to a wireless based service. I have no reading on the views of the Australian mobile carriers whose marketing departments are almost certainly wrapped around using heavy advertising and retail stores as their major/only strategies.
So......it's been a very stimulating trip with the main objectives already met and with some interesting things to think about on the way home.