John Linton
....and while it was always true that Australia didn't need, or perhaps didn't even have 'room' for, four mobile carriers the Voda/3 'merger' illustrates that even trillionaires can't 'make it happen' in the "GFC":
http://www.australianit.news.com.au/story/0,24897,25029119-24169,00.html
So the first major 'Australian' telecommunications company has 'bitten the dust' and that may just be the first real sign of the financial events around the world are going to affect Australia even in an industry that will grow between 4% and 5% over the balance of 2009. Of course the deal has yet to be approved so it isn't certain but the message it sends, irrespective of regulatory approval, is quite clear.
To build a viable mobile network costs billions to establish and then more billions to keep operating as technology continues to advance and has, looking at Australia only, a long ROI - around ten+ years. So there will never be many mobile carriers in any country and three is probably just right for a country of Australia's population; two clearly wasn't enough as a duopoly will always reach a modus vivendi that will mean no 'real competition'. However the loss of '3' will have bad results for mobile phone end users because they did have to try so hard to build their 8% (or whatever it really was) market share they did force the other mobile carriers to take some heed of their stream of low cost offerings especially, most recently, in the HSPA services.....or as the article puts it so delicately:
"financially irrational pricing"
So is it just the inevitable capitulation of an overly ambitious investment by a Hong Kong conglomerate that was bound to happen sooner or later? Or is it the first sign that these tougher financial times, for Australian communications companys that have borrowings disproportionate to their revenues and balance sheets, that the game is up and their grand dreams and delusions are now confronted with the need to pay back what they have borrowed?
I certainly would have no idea.
What I do think is that it has only taken until early February for the first major company to 'withdraw' from the Australian telecommunications market and that it won't be the last.
Australia clearly doesn't need 32 (or whatever the latest ABS report will show) ISPs and, as the Strathfield Radio collapse showed, it clearly has far too many mobile phone and HSPA 'discount' retail chains.
The 'demise' of PeopleTelecom also showed that telecommunications companies that try to be 'a one stop shop' just can't ever make a profit irrespective of how they grow their revenue.
So these three 'incidents' can be regarded as inevitabilities, a long time in the making and whose time had come coincidentally at the same time or they can be aggregated as a clear trend that 'marginally' profitable/unprofitable, continuously needing investment companies will find it very hard to continue operating in 2009 in the communications markets in Australia.
Given the worldwide collapse in mobile phone hand set sales (down 12% in the December quarter) continues in to 2009 you would expect to see Strathfield Car Radio as only the first of the mobile discount chains to disappear owing their mobile carrier suppliers many, many millions of dollars and disrupting that "Emperors New Clothes" mobile phone marketing fantasy leading to a reduction in mobile revenues and bringing the free flowing growth of mobile telephone call revenue and profits to a screaming halt.
The same scenario could very well apply to ISPs who have relied on easy growth in broad band customers to 'forgive' their inefficient operating structures for the past five years. I obviously don't know what the December half year ABS statistics will show but I will bet real money that they will show a sharp reduction in ADSL growth over the last half of 2008 and an annual reduction in broad band growth rate from the 12% (or so) of the previous 12 month period. What this may mean, if it is in fact the case, to the 32 remaining ISPs (or I guess that is now 31 with the demise of People Telecom) can only be guessed at, but it would probably mean more ISPs ceasing to exist.
So, while a 'merger' between two multi billion dollar mobile carriers, that seemed inevitable for many years, may mean very little/nothing in any other parts of the communications marketplaces the signs are that it will simply be the first of more than a few such changes over the coming months.
As in every "down turn" - the weakest go first....and for those that think all is rosy in telco land:
http://www.australianit.news.com.au/story/0,24897,25029119-24169,00.html