John Linton
If I was as stupid as CK takes me, along with the rest of the Australian population, for, I would have been heartened by the 'top' (if you can use such an adjective when applied to this bunch of ill educated dorks) Labor party (though it hadn't previously occurred to me how meaningfully the words "Labor" and "party" go together) apparatchik's comments yesterday that "the current problems in the USA financial sector won't have any affect in Australia' (Lindsay Tanner). That's good to know - I must slip out a borrow some money later today.
(I am using the word apparatchik in it's non-specific Communist party usage: "appointed to positions in any government, on the basis of ideological or political loyalty rather than competence.")
If our country isn't being affected by financial difficulties in the USA it makes you wonder why our ASX index keeps falling and is currently predicted to fall by a further 12% to 15% over the next six weeks? Telecommunications is an industry that should be less affected than any other, by 'financial issues in the USA'. However that appears to be far from the situation - at least as far as I read the various share performances over the past 6 months or so. I commented earlier this month on the unfortunate timing of Michael Malone's sell down of his shareholding in iiNet which, predictably has either caused iiNet's shares to fall 20% in a couple of weeks or, an unkinder observer might 'observe', he sold down the day before the shares began their latest steep decline:
http://hfgapps.hubb.com/asxtools/Charts.aspx?TimeFrame=D6&compare=comp_index&indicies=XJO&pma1=20&pma2=20&asxCode=IIN
(note the date of the sale of M Malone's 3 million shares and the immediate decline in iinet's share price from $A1.75 to $A1.40 down, in turn, from it's most recent 'high' of $2.40)
The current closing price of SPT/TPG's shares hit a new low yesterday (and lower again when the ASX opened this morning) which continues to make you wonder how a company that is stating it will make $A100 million in profits in the current financial year can be valued by the 'market' at less than its stated planned annual profit?
http://hfgapps.hubb.com/asxtools/Charts.aspx?TimeFrame=D6&compare=comp_index&indicies=XJO&pma1=20&pma2=20&asxCode=SOT
(You would think with two major shareholders owning the bulk of the shares that this ongoing sell down wouldn't be happening - but that in itself raises interesting issues if you think about it for a few seconds)
While those two companies 'stand out' in telco land the news from the top end Telstra and Optus is not really good either with both those companies (that you would think would be immune to 'financial issues in the USA') showing a steady share price decline over the past six months.
So, if overseas situations aren't affecting Australia's economy why is the overall share index declining and why is it that communications companies (who almost always see increases in revenues and profits in 'tough times') are being eyed so badly by Australian investors? Perhaps it's all due to the No Bandwidth Now 'tender'? Telstra has stated publicly that Terria will have extreme difficulty in borrowing the money needed to proceed with an NBN so I would have thought that was one view indicating that Australia was being affected by .........
It's all too hard for me to form any view other than everyone I talk to seems to think that business is tough and getting tougher and if that spread of people in different parts of the Australian economy are, without exception, holding that view then I would think it's more likely to be correct than the current 'government's' views. I think business is tough - but then it's been tough for us since we started the company in January 2004 and I can't really distinguish between 'tough' and 'tougher'.
One result of the toughness (should the Labor party be wrong of course) will most likely be of benefit to ADSL customers as I think that many ISPs will attempt to cope with any slow downs in their new application rates and increases in their churn away rates by raising/increasing the 'content' of their ADSL plans (particularly their ADSL2 plans that they desperately need to fill up ports on to pay their lease charges) and if that doesn't work they will find ways of offering new customers lower prices (watch out for the "XX free months!!! deals etc). The preferred option may be to use lower back haul and raw IP costs to provide increased down load allowances but - I would think those savings had already been taken in to account for other purposes.
The more conservative companies will think about raising prices (the only certain way of protecting revenues and profits in tough times - at least according to 'conventional' financial wisdom). For companies such as Telstra and, to a lesser extent, Optus - this will take the form of less "XX months free!!" offers and a wind back in their advertising and freebies generally as they have locked their customers (and therefore themselves) into 2 and 3 year contracts which reduces their 'wriggle room'.
So it will be a good time to buy from the smaller ISPs between now and Christmas and not such a good time to buy from Telstra and Optus.
Of course - if the Labor party is correct and there is no recession - then it will continue to be a good time for everyone.