John Linton
I see the NYSE fell another 500 points yesterday and that the UK government is going to have to buy into Britain's fifth largest bank (HBOS) to prevent it going broke:
http://online.wsj.com/article/SB122337732542911119.html?mod=article-outset-box
http://business.timesonline.co.uk/tol/business/economics/article4902837.ece
It will be interesting to see how the ASX goes today as to whether the 1% cut by the RBA has any effect in preventing the Australian share market losing more value today - the $US700 billion 'bail out' in the US only seemed to make the NYSE fall even faster. Perhaps both the 'bail out' and the RBA cut have simply served to confirm that the US and Australian governments have no idea of what to do either but have finally recognized that something appears to be badly wrong.
I think my original thought that the best thing to do at the moment is to stop reading the financial press as, apart from the deluge of negative articles, I don't get the impression that any one writing, in even the most conservative and thoughtful papers and magazines, actually has very much more idea of what is going to happen than I have (and I have no idea).
I was pleased to see that yesterday was a near record day for Exetel in terms of service applications but, while being very pleased to see something positive amongst all the bad news that streams out of my computer screen, I realized that the figures were inflated by Monday's public holiday in NSW. Nevertheless it was one more contradiction in a maze of 'business indicator' contradictions that I am trying to make sense of in terms of the day to day decision making required in anyone's life. Everything that I read and hear tells me the economy is coming to a screeching halt but in our day to day business I can't see any real signs of that - I seem to see the reverse in some ways - either that or I'm completely misinterpreting what I see and hear.
One puzzling aspect of the ADSL applications yesterday was the very high percentage of churns from other ISPs - over 30% of all applications instead of the usual 15% - 20%. The percentage of churns versus 'new user' applications has been climbing over the past few weeks but over the past few days it has very significantly increased. A few days aberration is not something to make any decisions about but when I looked back it is a very definite trend starting some two months ago but as it was very gradual I didn't notice it. If it continues I will have to take some view as to what, if anything of importance, it may mean. Perhaps just a confirmation of a market that is growing more slowly than in the past?
The other interesting, and largely positive, signs are that all of the 'add on' services that Exetel introduced over the past twelve months are growing more rapidly (SMS via email, FAX via Email, VoIP and equipmentless VoIP, all of our hosting services). These are very low cost services, mainly, and therefore their financial contribution has always been very small but I hadn't really noticed how much they had increased - particularly over the past three months - I don't know what to make of that beyond the obvious concept of more Exetel customers have become aware of the value of these services.
Perhaps there are more signs that the overall commercial activities in Australia are slowing. I am getting a much greater level of 'contact' from people wanting to sell Exetel something - both from people we already do business with and from people who want to do business with us. Even our bank follows us up regarding the facility they approved for the purchase of commercial real estate and the funding of HSPA modems - an unheard of event in my experience in dealing with banks. They must have run out of people to lend to if they actually call us to see when we want the money they approved!
In particular I had, for me, a long telephone conversation with a quasi-competitor yesterday. I have known the CEO of the company for some years on a casual basis but have never had any personal dealings with either him or his company so I was surprised to get a message to call him/email him. The purpose of the call was not really clear to me but, if I interpret it correctly, it was to sound out our ability/willingness to provide outsourcing of their ADSL services (or to outsource part of our business) to allow them/us to reduce operational costs and to improve our 'economies of scale' in our smaller PoPs. At least that's what I understood the conversation to be about.
We have contractual reasons why we couldn't consider 'outsourcing' our inter-State operations to anyone - even if we would consider such a thing operationally and strategically sensible - which I don't in any way - so I closed that possibility off quite quickly and expected the call to end shortly after that. However it didn't as he was apparently quite serious in looking for some sort of cost reduction via a "PoP sharing" arrangement or a total out sourcing arrangement. I listened as attentively as I could but as the concept made no sense at all to me, on any basis, even ignoring the very obvious conflict of interest aspects of it we agreed that it wouldn't be possible and ended the conversation amicably.
I am all for ensuring that operational costs should be constantly examined to ensure they are kept to the minimum. I respect and admire 'lateral thinking' in business that goes beyond the obvious and the 'tried and true' but the concept of sharing key operational facilities with a competitor is so far outside my concepts of the 'nine dots' it's out of sight.
I think I need to find myself a dark cave to hibernate in until the current madness is all over.