John Linton .....or is it?
I spent most of yesterday working on the last details of Exetel's business plan for the 18 month period commencing 1st January 2009 which has become necessary as the initial assumptions on which the 12 month plan for FY 2009 were based (in terms of financial and general economic outlooks in Australia) have turned out to be even worse than we had initially taken in to account. I don't have any knowledge about this scenario but the US, UK and Australian media are pretty much in agreement and in summary this opinion in today's SMH summarises it for us 'beginners':
http://business.smh.com.au/business/banks-turn-their-guns-on-the-zombies-as-things-get-nasty-20081105-5ihk.html
Strangely, if you want to think about it in such terms, there has been no indication in the first four months of Exetel's monthly results that anything is actually amiss with our original planning with strong, slightly above target, growth being achieved each month. With the exception of the large number of initial payment defaults in the November bill run there are no signs at all that there is anything either wrong with our key assumptions or any direct impact of the current uncertainties and overseas 'problems' caused by the GFC.
Of course there's Whine Swan (Just how uneducated is this stupid man? During a radio interview on the ABC this afternoon he said that one of the topics Australia had raised for his forthcoming overseas junket was the reNuMeration of CEOs!!! He sounded like a real d***head) now scaremongering with his statement of the GFC "blowing a $A40 billion hole in the budget surplus" (what a great excuse for canceling all Labor's election spending promises) - but then he and Krudd were saying only a week or so ago that "the GFC would not materially affect Australia's strong economy" - so its pretty clear nothing that man says can be taken for anything except stupidity based on total ignorance. There obviously will be negative affects coming 'into play' in 2009 and they will have some, unquantifiable at least by me, negative affects on our small business specifically and Australian business generally.
I've discounted to zero any particular affect from the 'NBN Tender' in that period which, as I wrote in these musings some twelve months ago - it would never happen except as a means by which Telstra would disrupt infrastructure build out by other communications companies and it's already so, predictably, delayed it can have no affect whatsoever until sometime in 2012 in the event any 'tender' actually is awarded - which remains unlikely in any meaningful time frame. Maybe I'm wrong about that - it wouldn't be the first time.
My main concerns are Telstra's short term strategies and how the various 'independent' ISPs will react to them. We have stopped losing ADSL1 customers to Telstra over the last two weeks which I suppose means that Telstra have stopped their direct marketing campaigns while they use a different 'marketing campaign' to try and convince ISPs to sign up to wholesale their ADSL2 services - but doubtless when that 'marketing campaign' ends with whatever ISPs they manage to sign up they will re-commence their 'attacks' on other ISP's ADSL1 customers.
Our main loss of ADSL1 customers is still to TPG's ADSL2 offerings but, at least in this uncertain market that is only of marginal 'harm' to us as the customers who leave us to go to TPG are the least profitable of our users and it results in a net plus to us in operational cash flow terms. I will be interested in TPG's next progress report to the ASX (which I would have thought would have been due by now) to hear how closely they are to meeting their stated $A8 million profit per month as their shares continue to move inexorably closer to penny dreadful territory. (which just makes absolutely no sense at all given that their stated projected annual profit continues to exceed the value of the company on the ASX).
It's obvious, despite the strong net new ADSL1 customer 'inflow' over the first four months of the current planning period, that ADSL1 will continue a net decline over the coming 18 months to some unknown much lower share of the Australian broadband marketplace as Telstra continues to pursue its current policies and whatever the future versions of those policies are. How much affect that will have on Exetel is unclear to me and also to the people who I talk with about it who are also in this strange business but my assumption is that we will continue to lose ADSL1 'market share'. This isn't a problem in itself - we've had good returns from ADSL1 for the almost five years of Exetel's current life and nothing lasts forever and it also has a positive aspect in that it reduces our 'dependence' on Telstra Wholesale which can only be seen as a very positive 'event' in our short commercial history.
Over the next few days I will complete the rest of the detail and next week the Exetel directors will have to make some decisions of which, if any, of the recommendations we should put in to place - or should we continue to 'wait and see' based on so few signs of actual impact on the various aspects of our business at the moment. I really don't like making tough decisions and always have grave concerns about how they will affect our business generally and some of our customers.
I guess doing nothing is always a preferred option....but I actually don't think it's an option for very much longer.