John Linton
......and then I read this:
http://www.itnews.com.au/News/158524,aanet-to-raise-adsl1-plan-prices.aspx
and this:
http://www.news.com.au/perthnow/story/0,21598,26229791-5017962,00.html
While anything stated by Eftel seldom even vaguely relates to what could be
called 'truthful' (their successive annual reports are my favourite annual
fiction being prime examples) these two pieces of arrant nonsense (once you try
and sort out what is really being said) tend to illustrate just how difficult
the current ADSL marketplace is at the moment - if not for everyone, then
certainly for the lunatic fringe players like Eftel who persist in thinking the
laws of business can be defied indefinitely.
Eftel/aanet continually make ludicrous claims about their size and
importance while remaining a tiny company (even tinier than Exetel which makes
no bones about how small it is). This typical claim is from the last piece of
Eftel fiction I read in their 2009 annual report presentation:
"Eftel is an Australian Top 10 Internet
Service Provider that has invested $8m over the past 2 years establishing its
Broadband network which through its its
own infrastructure and partnerships has given Eftel the 6th largest
broadband footprint.”
What a total load of cobblers.....and the same piece of fiction announces a
FY2009 revenue of $A38.2 million on which the company managed to lose $A5.7
million after tax. A top 10 ISP? What a joke.
However the two 'announcements' made yesterday, in conjunction with their
desperate attempts to raise money from whatever source is gullible enough to
provide it to stave off imminent bankruptcy over the past few months illustrate
that losing money year after year has to end sometime - no matter what you try
and persuade yourselves will happen in the future.
For ANY ISP of any size to attempt to say that prices are increasing in ISP
land at the moment is a nonsense. Apart from the dramatic falls in IP costs
generally (falling by more than 50% in less than a year) the costs of equipment
have fallen by 40% (courtesy of the $A exchange rate) and the costs of 'cross
connects' has fallen by over 30% while interest rates for those companies that
borrow money (and Eftel is, for its size, a massive borrower) have fallen
dramatically. So, all in all, the costs of running an IP business are much
lower than they have ever been particularly, for the larger ones, if you take
economy of scale of a growing user base in to consideration.
Of course these simple facts only really apply if you are competent enough
to deal with tough and changing marketplaces well enough day to day so that
your business doesn't lose money - which the Eftel/aanet management have never
been able to do in the five or so years I have been aware of their existence.
In the case of Eftel they were also so totally stupid that they borrowed money
to fund a tiny ADSL2 network and have failed to pay for it since the first deferred
payment due date....hence the frantic attempts over the past year to get
'forgiveness' from Huawei and then three attempts to raise more loans to make
some token payments to defer the inevitable for a few months longer. Not the
case? How could I possibly know that?
Well of course I don't know that via indisputable documentation but this is
a small industry in many ways with most companies using the same suppliers and
dealing with the same media and the same ex employees (as they seek new
employment). But, in my case, I also read the industry media fairly
comprehensively as well as the financial press and have good 'sources' within
the industry.
So here are two things that strike me as being contradictory to the Eftel
statements:
1)The announcement of the PAYU ADSL2 offering is a crystal clear indication
that Eftel have got nowhere near the take up of even the lowest level of ADSL2
ports on their vendor financed ADSL2 DSLAMs and are having to 'give away' those
ports to get some semblance of usage. This is in stark contrast to the ADSL2
network suppliers that Exetel deals with who continually run out of ADSL2 ports
and our 'knowledge' of at least two other ADSL2 network suppliers who also
struggle to expand their exchange ports to meet demand.
2) Eftel keeps claiming to be Number 10 in this aspect of business and
Number 8 in some other aspect of business etc so you would have to assume,
unless such statements are total fiction, that there is some semblance of
reality behind, what appear to me, to be simple lies But if in fact such
statements are true then do some simple arithmetic. Like - How many ADSL1
customers would the tenth largest ISP in Australia actually have? Well Exetel
is something like the 14th or 15th largest, by number of customers, ISP in Australia
and it has around 40,000 ADSL1 customers. You'd have to think that Eftel, who
claim to be much larger than 14/15th would have many, many more - a lot more.
So taking the smallest likely number, say 50,000 and multiply it by $6.00 (the
stated amount of the increase) and you get an extra revenue of $A300,000 a
month. Does it really cost that much to add a few support engineers? Exetel
provides 7 day x 16 hour a week support at a total cost (personnel, floor
space, utilities, equipment, network, telephone etc) of $A25,000 a month so it
seems unlikely to me that any company would have to ADD $A300,000 a month to
its already established support operation to add a few extra hours.
Of course any possible reality of Eftel's 'numbers' claims are completely
destroyed by the one number they are forced to disclose - their annual revenue
which clearly shows that they have nothing like the numbers of customers they
claim and never have had.
All that can be interpreted from Eftel's last annual report (apart from the
very low annual revenue and its almost zero growth from the previous year), its
desperate money raising attempts over the last few months, its 'announcement'
that it had deferred some current debt to non-current debt and the nonsensical
announcements yesterday is that it ran out of money some time ago and has to
now turn a monthly profit in a desperate hurry to satisfy its new 'covenants'
or simply close up shop via a fire sale to some predatory competitor....if
anyone is still in the business of buying up failed ISPs.
There is little doubt that raising ADSL1 plan prices on the one hand and
dropping ADSL2 prices on the other hand (though by charging $A100 to connect to
the new plans is an even more obvious give away that they desperately need
money as the cost is far less than that) is an amazing dichotomy that simply
signals blind panic.
Or that's what it looks like to me.