John Linton ...."competition" in Australian communications provision continues to reduce.
I read about the possible/probable sell off of the AAPT residential communications business to iinet by Telecom NZ with a degree of concern yesterday. I understood that it been an on again/off again 'disposal' for some several years but it is different when it actually appears to be about to happen. Of course I know absolutely nothing about what is actually being proposed or why the sale of the wholesale business to TPG (as well as the retail business) failed to proceed. The insider gossip appears to be that TelNZ is selling its 16% stake in iinet to a range of institutions today and will sell the residential base direct to iinet for around $A50 million also today. In one sense it is just one more sign of the current turmoil in the Australian communications business and the pressure the 'NBN2' is bringing on all Australian communications providers and, in turn, the changes that will continue to take place because of that 'initiative'.
We will wait to see what actually happens before making any decision how/if what ever it is will affect Exetel's purchases from AAPT Wholesale. In one way the only effect could be that the loss making part of AAPT is disposed of and the remaining part becomes instantly profitable as a stand alone operation - just as the previously absorbed Powertel was. That will very definitely be the 'story' coming from whatever stays in existence as AAPT. However, apart from our main business with AAPT of business services, we have some 15,000 residential customers on BYO telephone line ADSL2 services which must be affected by the sale of the residential ADSL2 customers to iinet or TPG (I think the reason iinet's shares are on hold is the sale of the 16% stake by TelNZ rather than a conclusive indication that iinet are the buyer of the AAPT residential business rather than TPG).
I am not sure how selling off the residential ADSL2 customer base to iinet/TPG/whoever affects the financial calculations of costs of wholesale services or even if the DSLAMs themselves to which the residential services are connected become part of the deal - we'll have to wait and see. Irrespective of the 'configuration' of the deal there can be no doubt that the economies of scale will change in some way. As everything we have with AAPT is contracted there is no problem with the situation in the short term but, as we discussed at yesterday's board meeting, we would be foolish to assume that circumstances won't change over time and that time is in no way under our control. We moved the relatively small amount of business we did with Pipe away as soon as we could after Pipe was taken over by TPG (for the obvious reason that we didn't want even a small part of our business under the control of an aggressive competitor) and we would view the current sell off by AAPT in the same way.
If the wholesale part of AAPT is not now, at least for the moment, being sold we can breathe a sigh of relief that a company like TPG is not going to control the 500 or so business Ethernet services we have installed over the past year or so on two and three year contracts. However the 'published' statements from AAPT that they are not proceeding with a current sale because they expect to make a future sale on more favourable terms to NBNCo is even more worrying in itself because, irrespective of such statements, I don't see how NBNCo is going to be interested in keeping alive the copper that the Ethernet services run over. So this is something that we will have to do something about after discussion with AAPT that go beyond the bland re-assurances that nothing will change - things will very obviously change - and not to Exetel's benefit.
Fortunately in both the residential and the business scenarios we have some immediate solution choices albeit that involve some significant amounts of effort by our provisioning and sales personnel. We could move the current residential AAPT (SSS) customers to either Telstra or Optus - depending on which of those suppliers was the more accommodating. We could stop selling new AAPT Ethernet Business solutions and provide pretty much identical Optus business Ethernet solutions and move the current customers to an Optus network once their contracts expire - doubtless there would be commercial advantages for us in doing that if it became necessary.
So - another day - another left field problem. Lucky we are a very resilient bunch of people.
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