John Linton .....they have well and truly changed and I don't think we have made enough progress in the time we have been preparing to meet those changes.
We have been trying for some time to make new wireless and mobile plans available to Exetel customers but have had no success in doing that despite some progress seemingly being made on a few occasions. Why it should be so much more difficult today than at any previous time to make this happen has surprised me but it seems that times continue to change and Exetel is not moving quickly enough to meet the challenges of moving from one business 'model' to new model made necessary by the changes that are inexorably seeping aside the old 'givens' of the Australian communications industry.
Our 'desire' to move from being a supplier of services to mainly (by weight of monthly revenue) residential customers to mainly (by weight of revenue) a supplier of services to corporate customers is 18 months 'old' and has made some considerable progress - but not nearly enough and the lengthy transition is leaving us in 'no man's land' as far as our relationships with our current suppliers is concerned. One of the things this means is that our current suppliers see us as far less 'desirable' when it comes to 'residential services' than they did wen we started and therefore are less able to provide us with sufficient wholesale margins than we need to more effectively compete with their larger customers. This becomes a 'vicious circle' (I have never understood how the meaning of this phrase relates to its actuality) in that as the supplier is less able to provide us the margins they supply to larger buyers the less we are able to compete with those companies unless we sell plans/services at such low prices we can't make any profit at all.
I think this most evidences itself in the current wireless and mobile 'discussions' where when we look at the opportunities we may be able to address we constantly run up against the current market realities that larger suppliers are selling at prices which we cannot possibly meet. So the problems I alluded to yesterday regarding dealing with Telstra who sells to residential customers at lower prices than it sells to wholesale customers are very similar to other suppliers to Exetel who sell to our competitors at much lower prices than they sell to us. I am not complaining about this situation just making the point that it is an inevitably of changing business models if you take too long to execute the changes - which we have done/are doing.
There is only one way to address this situation - we have to rapidly increase our buying volumes. Easy to say - pretty difficult to do. The QAD way of beginning to address this scenario is to reduce the number of suppliers in any given 'product category' b.y transferring the volumes from one supplier to another which gives some sort of greater 'buy' with one supplier at the risk of seriously 'annoying' another supplier.....and also subsequently reducing Exetel's future buying flexibility of course. We need the capability of providing wireless and mobile services in the future and we need the ability of selling them at a profit today but the two requirements are becoming very difficult to achieve.
I don't know how to 'make this happen' more quickly than we have managed to do so far but there is less time to bring about a sensible result than there was back in December 2008 when it first became obvious (to us) what was going to happen in the ADSL, wireless broadband and mobile residential marketplaces. Any ideas would be welcome.
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