John Linton
....for the word had passed around...(apologies to ABJ)
...that the price of IP was going through the ground and had joined the wild decline of markets every where.
If you follow the stock markets you will have seen the blood bath on Wall Street overnight which was tracked by the futures index in Australia showing the likelihood of an imminent bloodbath on the ASX this morning. Though, as people are now beginning to report, it might have been a "computer error"! The A$ has tanked and bad debt is rapidly rising in Australia. Definitely a 'bad news on the doorstep' start to the last day of the working week. I read about the rapid increase of households defaulting on non-bank related bills in the SMH yesterday which I suppose shouldn't surprise anyone with so many people buying in to real estate courtesy of the 'first home buyer's grant schemes' fueled by the ultra low interest rates of early last year and similar insanities. Not very difficult to predict that people mortgaged up to the hilt would begin to suffer after 7 interest rate increases over the past nine months (or whatever the actual number is).
We noticed a slight increase in our '1st of the new month' payment defaults but nothing that, of itself, would cause major concern. However I'm pretty sure (no disrespect intended to our ever growing in competence young corporate sales force) that the 'flood' of new business and corporate orders for higher end circuits (20 mbps to 100 mbps) over the past two months at least partially reflects some belt tightening across the board in the commercial sectors of the economy. I am an innately cautious person and, as I begin to reach 'maturity' I tend to have become more rather than less cautious than I once was so maybe I am reading too much in to the various indicators but it seems to me there is every sign of, at least a mild, double dip recession that the 'pundits' have been talking about since they came back from their Christmas 2009 break. It will become obvious sooner rather than later and I have zero credentials in such matters but I would think the 1,000 point plunge in less than an hour in the DOW (before it recovered a little) doesn't suggest that the 'insiders' have very much confidence of economic and financial issues getting better over the coming months.
One 'bell wether' indicator of how times are changing is the new pricing for IP that we were offered yesterday - sub $A40.00. Nice price - though we cannot take advantage of it at the moment having just added another 1.8 gbps over the past two weeks at a much higher price than that (Damn! - should have been more patient). What it does indicate is that there is a 'surplus' of IP bandwidth in Australia at the moment and I find that a bit odd. If you look at the MRTG reports in the user facilities you will find that the bandwidth used by Exetel customers has doubled from around 3 gbps 12 months ago to over 6 gbps at the moment. Exetel's growth over the past 12 months has, compared to previous years, been slower than average for all sorts of reasons including the saturation of the ADSL marketplaces so this growth is more than in any other year of our existence. I have no knowledge at all of other companies growth in IP deployed but I assume it would be along similar lines but in any event it wouldn't be declining. So why is there this obvious 'pressure' on carriers to reduce prices by so much? It was only a little over 12 months ago that Exetel was paying $A175.00 per mbps so, in the event that the pricing we were offered yesterday is a reality, it means the price of commercial IP has fallen by around 80% in a little over 12 months. An unprecedented fall. Along the lines of "I sense a great disturbance in the Force" magnitude.
http://news.smh.com.au/breaking-news-business/telecom-q3-net-profit-down-39-20100507-uhe7.html
If you look at the comment in the above article about how its revenue from SX cable dividends is falling it might explain, at least partially, the offer we were made yesterday.
Like so many other things lately - I really don't know what to make of the financial news overnight - nor yesterday's IP offer - one more thing to worry about I suppose.
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