John Linton
I was sent the TPG latest annual results which, unsurprisingly, matched the guidance they issued a few months ago and the figures were very impressive as can be seen here:
http://www.asx.com.au/asxpdf/20090922/pdf/31kvdctrxcmvmz.pdf
Very impressive numbers, somewhat spoiled by the flim flam of many of the claims that distorted the pure numbers which had no need for distortion. Also, I would have thought, that it made it perfectly clear that iinet's constant use of "iinet is the third biggest ISP in Australia" an even more embarrassing lie than it ever was as the numbers published in iinet's same period annual report here:
http://www.asx.com.au/asxpdf/20090817/pdf/31k3w5j5j1v9y5.pdf
show that TPG has much larger annual revenues than iinet and makes much more money - it also makes you wonder about iinet's claims of the number of ADSL customers it has based on having less revenue and the same 'ARPU'. Not that it matters - most of iinets claims have a lot of doubt about them from my obviously jaundiced viewpoint and inability to add and subtract or even multiply simple numbers. Clearly AAPT is much larger than than iinet in terms of being an Australian communications company and equally clearly TPG has a much larger revenue from ADSL and telephone operations. Maybe the ASX should advise iinet to stop making claims that seem, based on the published figures, to be simply untrue?
I really liked both the internal consistency and the, compared to iinet, straightforwardness (and brevity) of the presentation of the TPG numbers. The other thing I liked was that an ISP that stresses and offers true value for money does so much better than all of the companies that drone on about customer satisfaction and quality of service. TPG provides lots of downloads at much lower prices than anyone else (with the exception of Exetel which is far too small to be considered in such a comparison) and as you will see if you look at all the slides provides slightly more downloaded data at half the price iinet charges. So there not only is a place for Australia's third largest ISP to grow faster than the two ISPs larger than it but it is able to make a larger EBITDA profit even though charges much less and provides much more.
TPG provides a true contradiction to Telstra's, and its major competitors, constant over pricing and under delivering of "value to our shareholders".
So what's the difference that allows TPG to out perform the Australian communications market so significantly? (assuming that is the case). Not being privy to any of TPG's internal workings and decision making I have absolutely no idea. Having done two years consulting work a long time ago I have some views but my 'intimate' knowledge of how TPG operated was more than ten years ago and a great deal changes in a commercial operation every year let alone over more than a decade. I would hazard a guess though that some of the key major strengths I observed in my time working setting up TPG's internet and business data services haven't changed. These were all associated with TPG's owner, David Teoh, who was the best person I have ever met in Australian business in terms of the ability to understand future market trends and opportunities and the ability to hire, and fire, really excellent people who could help him make the most of those opportunities - he also exercised a level of financial control at a micro detail level that would make Ebenezer Scrooge look like the Rockefeller Charity Foundation.
Doubtless there many other factors and people who have contributed to TPG's overwhelming success over the years and I may be completely incorrect about the factors I observed from an 'insider's' viewpoint. One thing that is undeniable is that TPG is growing faster than any other ISP and is delivering more profit percentage than any other ISP in Australia. If this continues to prove to be the case then what sort of problem does TPG pose to the ISPs smaller than it, that have copied its decision to implement their own small scale DSLAM networks? If TPG continues to increase the number of exchanges it provides services from and if it continues to maintain a price per gb delivered price advantage over all of it's competitors then what is the short/medium term future of companies that are going to increasingly be seen as 'not worth the extra monthly cost'?
I'm glad that Exetel is far too small and far to timid to have to ponder that question based on the latest TPG figures.