and saw that the much tougher times in the ADSL marketplaces are claiming their first victim. If you can be bothered to read them - they are the sorriest set of numbers that it seems possible to report and still be in business. I am constantly surprised, each year, that this tiny company continues to report significant, for its overall revenue, losses each six months yet remain in business. It reported a 3.35% drop in revenue over the period and a loss of $A985,000 in the six month period which wiped out the previously cobbled together asset backing to a negative 1 cent a share on shares that traded yesterday at an (almost) all time low of 2 cents. Presumably every shareholder who is not closely associated with the company has already sold their shares before they are completely worthless.
It gets worse once you move past the first page. You will see that the current cash and debtors (and debtors for such a tiny company are alarmingly high at $A3,444,000 (meaning more than $A2 million of that money is in 60 days and beyond and therefore of doubtful collectability) and even assuming the amount of debtors is collectible combined 'liquid assets' are well below current accounts payable which are listed as being $A6,243,000. That lamentable situation results, among other things, in accumulated losses for the business approaching $A30 million and an audit that cautions that the company may not continue to survive (PKF letter reproduced on page 18). Notable, by its absence, is any of the usual up beat 'hype' that has always accompanied the half year and annual reports from EFTel (a euphemism for complete fiction) - it seems with numbers like these it has defeated even the rhinoceros hided 'creative' skills of any EFTel director to describe the last six months as anything but a total disaster. Pity - the commentary and Powerpoint slide show always makes amusing reading.
There are probably more companies at the lower end of the ISP and communications market that have half year accounts that follow EFTel's in telling a story of extremely difficult marketplaces and dangerously exposed financial resources. When the very large companies (even Telstra) report tough times it is pretty certain that those tough times are going to be reflected pretty much all the way down to the very smallest communications companies and while there will always be a few exceptions there won't be many.
Will EFTel continue to survive as it has been able to do after reporting similar dire results each year for the past five years? I wouldn't have a clue as the company's balance sheet and operating results always resemble a wasteland from my limited knowledge perspective and it has continued to 'walk on financial water' for many years now. The major shareholders kicked in around $A1.7 million a few months ago to keep it alive and you would have to think they would not want to lose a big chunk of their remaining cash assets (assuming they didn't borrow the money against pledged assets). However they have already burned through $A400,000 of that money and at their current rate of losing a million every six months and with an already stretched creditors payment schedule life at the accounts department at EFTel must be pretty miserable.....and that sort of misery doesn't stay confined to the accounts department in a tiny company. With the share price continuing to fall it will almost certainly head towards sub 2 cents in March and once that happens the company is effectively worthless with only the owner/directors and related entities holding on to shares in EFTel.
I think, irrespective of how tiny and irrelevant EFTel is, their results are the first tangible indications that "the writing is clearly on the wall" in terms of just how difficult life is about to become for almost every company in the communications business and unless you have a balance sheet like Telstra's or Optus then it's probably past time to look to marketplaces other than ADSL for the future survival of your business. With the increase of 'unlimited ADSL plans at increasingly lower prices it isn't difficult to see what is going to happen - and hasn't been for many months now. It's time to begin getting out of the residential ADSL business for any company that doesn't have very, very sound current financials and even sounder access to more money. The 'trick' is, of course, how to do that for many companies currently in those market places? I have my own ideas but I am beginning to think that the time frames are shorter than I had thought. Then again I am often wrong but I don't think that it would be wise to ignore the fact that it's past time to raise our prices for ADSL services to something more financially comfortable than they are now.
On the unrelated topic of providing high levels of support to residential ADSL customers I was amused by something sent to me from the iinet web site showing that the likely wait time for telephone support yesterday was 53 minutes and 40 seconds:
As you may know Exetel has been executing a program for the past two years to make our end user support the best available from any Australian communications provider and we are approaching our goal of providing support with a less than 60 second answer time. Exetel are much closer to answering any support telephone call in less than a minute than we have ever been as can be seen here: