John Linton As is the case for most Australian businesses, Exetel's planning is done on the basis of a financial tax year of July 1st to June 30th. Partly because we started the current form of the Exetel business in January 2004 many of our contracts run from January/February which means this is a particularly busy time of year in terms of contract renewal discussions/negotiations although many of our contracts have end dates spread over each month of the year due to 'interim' changes.
Exetel is, by no measurement, anything but a small/medium company in overall Australian terms based on its current revenues, numbers of customers and number of employees; and in terms of the main telecommunications suppliers in Australia - Exetel is very small indeed. However the annual spend we have to manage and contract is over $A30 million a year and the contracts are very serious indeed as they, effectively if not contractualy, are guaranteed by the personal assets of the owners of the business. While that has never been a problem in the past and isn't a problem at the current time it is something we are beginning to address in discussing new contract terms with each of the providers to the current business.
Another thing that we have made a point of in this 'round' of contract discussions is that we are no longer prepared to enter in to anything but short term contracts for the supply of services. If a supplier wants a contract of longer than 12 months on any monthly spend greater than $A20,000 then we are taking the very firm position that we aren't going to use those services beyond the end of the current contract. This has caused a problem for at least two providers who want to insist on a longer term. Personally I'm not interested in some account manager/sales manager's desire to increase the "bookable" value of Exetel's business to them and, as a reasonably responsible decision maker in charge of the disposition of our family's life time savings, my view is that the changes that will become ever more difficult in 2008 make any contract longer than a few months a serious liability.
Because I view 2008 with a measure of misgiving and because some of the current Exetel suppliers view it as their 'right' to tie Exetel up in long term fixed price contracts (something that when we started the company we had to accede to as we had no track record and absolutely no 'bargaining power') I think we are going to have to make some quite hard decisions regarding what services we continue to offer beyond the end dates of the contracts due to expire in 2008. As we have never leased any of the equipment we use to operate the business we have no exposure, in terms of ongoing lease/HP payments on the hardware used to provide the services, if we decide to stop offering a service. In fact, as by far the largest 'investment' in hardware is in Cisco boxes, we would make a capital return if we stopped offering some services at some future time.
I think some of our current suppliers have been more than a little surprised at our position of not considering re-signing with them on anything but a month by month basis when their current contracts with us expire; I think at least one has expressed their surprise in what I would consider to be somewhat inappropriate terms. I have attempted to explain to each of the suppliers we are talking with that our requirement not to enter into further specified term arrangements other than month to month is due to the likely continued volatility in pricing of services to end users by both Telstra and Optus as well as the uncertainty of future decisions by the Federal Government and the new Federal Government's relationships with Telstra in terms of funding and availability of new delivery infrastructures.
As we firm up the business plan for the second half of 2008 we are finding it prudent to base those plans on a completely different service offering mix to that which we currently now base our business on. If all my concerns turn out to be just 'jumping at shadows' then, perhaps, nothing will change and Exetel's service offering mix in the last half of 2008 will be pretty much the same as they are now. If things do take a negative turn, in terms of Exetel's aspirations, then I want the flexibility to be able to react appropriately and not to be 'locked in' to contracts that give Exetel no hope of making decisions that it may need to make.
I seem unable to make these points with a number of suppliers and possible suppliers to Exetel in a way/ways they either want to understand or are even prepared to accept are sensible for both parties. I think part of the issue is the constant change in account representation that has been the case with almost all of our suppliers over the time we've been in business - we lost the services of the two remaining 'good' account managers (one to maternity leave and one to 'following the boss to his new company') in the last month. So we find ourselves dealing with yet another new 'account manager' with whom we have no rapport or empathy and therefore the consequences of that.
There must be an easier and more enjoyable way of spending the time between now and Christmas.