John Linton
....according to Telstra in, presumably, preparing their shareholders (and market commentators) for their six monthly results early next year.....at least according to this short announcement yesterday morning:
http://www.smh.com.au/business/telstra-cuts-sales-forecast-20091218-l0ru.html
There is a slightly fuller version in today's AFR on page 12. Depending on how you count, Telstra makes up between 60% and 70% of the Australian communications market so you can be fairly certain that the overall market will grow less in the current financial year than it did in the last financial year simply because the dominant provider will not grow much if at all. Of course you could see that as a good indication that the rest of the market is picking up market share from Telstra but that wouldn't be likely given that Telstra has cut its prices on many services - either publicly or by non-published negotiation.
Irrespective of the lower than originally forecast revenue growth you will be comforted to know that Telstra will make even more profit than it did last year:
"The company said all other guidance measures remained unchanged, including .................... low single-digit growth in earnings before interest and tax.
I was worried when I first saw the headline that lower revenue would mean lower profits but that apparently isn't the case with Telstra making even more money out of providing the same amount of services than it did in the previous year. A 'trick' that its competitors would love to learn how to pull off year after year....but then they aren't monopolies so don't have the same overwhelming advantages.
Doubtless, as was seen from the recent 'pricing changes' Telstra introduced for its massively over priced wireless and wire line broadband services, Telstra will attempt to discomfort the smaller Australian communications providers by re-working the offered pricing for its various services thus causing a cascading 'deck chair re-arrangement' by the smaller providers......though that never seems to be the case (apart from Exetel of course) does it? Each of the "price reduction" announcements I have read so far actually don't include any "price reductions". In ADSL terms, every supplier has announced a "price reduction" has simply added some sort of download increase to its previous price points. As the price of downloads has tumbled at least 50% in the last 12 months such 'squirmings' are far from appropriate as the cost of providing ADSL services has very definitely fallen over the past 12 months....except this is not seen in any ISP's pricing (except for Exetel's where some middle/higher end prices have fallen by as much as $20.00 per month and the very low end prices have fallen by $A3.00 a month).
My perceptions may very well be wrong (despite the fact that I keep relatively 'sophisticated' records of the various ISP's price changes as I notice them) but the impression of desperate clinging to revenue/price points indicates across the industry revenue problems so far this year with no abilty to lower prices to protect/increase customer numbers as is done in so many other industries that face slow/no sales periods and deal with it by "massive discounts" Christmas, New Year, Spring, Easter, Summer etc, etc "sales". From clothing to cars - from books to liquor - it seems there never is a time when something isn't on sale - more usually many things.
Communications services, for the most part, aren't as volatile because Telstra 'owns the infrastructure' and is therefore indifferent to things like customer value; monopoly pricing is always based on "take it or leave it" which works just fine in growing markets but works less well in saturating markets or in markets where true competition exists - in Telstra's case only mobile telephone is a residential service they can't control via a monopoly presence and only mobile and data connections in the commercial marketplaces. Wire line telephony, ADSL1 and ADSL2 partly are all controlled by whatever Telstra wants to charge....which is fine (not really but it is an inevitability so you live with it) until the market is saturated and tougher economic times make even the 'ovine' segment of the marketplaces (the majority) more discerning in where their money's going.
Telstra's sales may be flattish and the signs from the frantic re-pricing of offerings by many other data and telephony service providers are indications that all is not as planned with their sales forecasts but we don't seem to be seeing that at Exetel. Our 'pure' ADSL orders are up 25% in every month of the current financial year (compared to the same months in 2008) and if you add in wireless broadband then our sales are up almost 50% over the ADSL sales in the same months in 2008. In business sales, and certainly because of the efforts we have put in our sales are up between 200% and 400% over the last six months as the efforts we have put in begin to 'bear fruit". Similarly most of our other services have grown between 50% and 100% in the same period. Obviously higher growth percentages are always easily achievable for small companies such as Exetel but we have certainly noticed no diminution in new sales over the period Telstra's announcement refers to....though we have noticed some changes in emphasis.
I was going to look at some of our pricing parameters over the week end but as I have been far from 'well' over the past week I think I'll excuse myself (with the exception of the necessary tidying up of the 1500/256 plans) on the basis that our results are tracking almost exactly as planned so why meddle with something that appears to be working (at least to our modest standards) just because Telstra and its copyists have some price issues with their customers at the moment?