John Linton
....and likely to get cooler still if not outright cold.
I was sent this late last night:
http://newsstore.fairfax.com.au/apps/previewDocument.ac?sy=smh&ss=SMH&docID=GCA01064662MTU&backTo%3Dhttp%3A%2F%2Fmarkets.smh.com.au%2Fapps%2Fqt%2Fquote.ac%3Fcode%3DMTU&f=pdf
and wondered what it referred to in terms of the company/part of a company being 'sold off' and what in turn that meant, if anything, for Exetel. Earler in the day I had seen that the shares in Eftel had dropped to a new low of $0.008 valuing the company at less than $A2 million before it ''recovered" to $0.012. For those of you unfamiliar with M2 - it is a 'bottom feeder' that borrows money or issues shares to acquire already bankrupt or failing businesses to build revenue volume - pretty much along the same lines as iinet. It's half yearly reports to the ASX are interesting to read if you enjoy skillful writing.
The Eftel situation (a smaller version of M2 buying up tiny failed companies and trying to make something out of them) remains a triumph of something or other - trading shares at less than a cent in a company with negative net asset backing to those shares is an odd scenario. Though the number of the shares traded over the last 2 weeks represents around 40% of the shares traded since January 1st 2010 and the price has 'plunged' over that trading period which, usually, indicates that someone knows something they don't like. I guess it will all become clear soon.
I have no idea what the $A4 million referred to in M2's Schedule A buys you in today's communications marketplace and the reference to small/medium business contracts is not very clear - I assume it means that the acquisition of business customers but what the services are could be anything. I have commented before that the changing technology in the 20 bps and below data link technologies has left many previous solid 'data service providers' to medium sized businesses very vulnerable with new data technologies exposing their over priced legacy services to technologies that deliver superior services at less than half the prices they have based their existences on for the better part of the last ten years. Perhaps that is the business type of M2's target company?
In themselves, those two scraps of 'information' don't mean anything very much except that they are yet more 'straws in a wind' that continues to blow slightly more strongly inferring that business is tougher than the "the economy is well on the way to recovery" would have it. Perhaps the economy such people talk about is based on averaging the mining industries strength and the federal governments multi billion dollar give aways with the rest of business sectors? The few people I talk to and the main writers in the Australian financial media all seem to be saying that times are getting tougher and there is nothing that is likely to be done about it as the government spent all available money jumping at shadows 18 months ago.
It makes me feel even more uneasy that I already do trying to plan for the issues that are specific to the communications industry and seem to take up all the available time in any given day. I don't have a clue how to read what implications there may be in an even wider 'down turn' in residential and business financial situations. What is becoming more apparent is that companies of quite significant sizes are now talking in terms of 'we must reduce expenses' as part of their financial planning for next year. We have also noticed at least two of the companies we compete with for medium sized business data links have radically reduced their end user prices over the past few weeks which is probably the most obvious sign yet that things are getting a lot tougher than they have been in even the most recent past.
One day soon perhaps the morning will start with good news?
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