John Linton
....so how happy can we make you to get you to buy more from us?
Among the more bizarre aspects of the GFC (and it's non-impact on Australian business - I guess Krudd will have trouble maintaining that piece of fiction to the employees of Holden, Ford, Toyota, CitiBank, HSBC etc, etc for much longer) has been the dramatically increased frequency and level of contact that we are experiencing from our current suppliers and would be suppliers who seem to be becoming increasingly generous in their offers and promises that we could achieve if we would buy more from them.
I am well aware that Exetel is not a large or important customer of any of our current suppliers and the number of contacts I would have with them would vary from zero a year most years with the largest supplier to Exetel, Telstra Wholesale (whose account managers in my opinion, probably because of our insignificant size, are so junior and ill informed that meeting with them or even accepting a telephone call from them is a total waste of any person's time) to a maximum of three a year with the three or four main suppliers that we have some sort of reasonable relationship with. Most of our smaller suppliers I would have no contact with at all from year to year other than the occasional email exchange.
Over the last two months and especially over the last 2 - 3 weeks it seems that my day is constantly interrupted by calls and emails from one supplier or another 'wanting to catch up' or 'been meaning to buy you lunch for a while' type contact. Over the last 7 working days this type of call has averaged 3 per day which for a 'reclusive' and to be blunt, plain antisocial, person like me is an astonishing amount of attempted personal contact. I seldom, if ever, accept invitations for 'lunch' from suppliers - I long ago outgrew the sort of food and alcohol that even the most spendthrift of corporate expense allowances could afford in terms of viewing such events as being enjoyable gastronomically and my basic nature finds it difficult to prolong business discussions for longer than 20 or 30 minutes and I'm pitifully inept at filling in the rest of the time a 'business lunch invariably involves' with 'small talk'.
I have got an unmistakable impression that business is not good for a wide range of the larger suppliers to the wholesale communications market that includes buyers such as Exetel. There are obvious exceptions like Netcomm whose new contract with Telstra has sky rocketed their revenues and helped them reach targets they would seldom have dreamed possible and therefore our never too frequent contact with them has become even more infrequent - but they appear to be the exception.For the majority of our suppliers times appear to be not as rosy and we are being offered some very attractive 'deals' which, unfortunately we are not in a position to seriously investigate because of our total uncertainty of what the future is going to bring - or not bring.
Like everything else in life - almost all of the really good offers and opportunities seem to become available when you're not in a position to take advantage of them - like IP pricing at the moment which was beginning to reverse the trend of constantly falling and "due to the fall in the dollar" was beginning to increase from the extreme lows of a few months ago. Now I'm getting enquiries that if Exetel could sign up for much longer than we would ever consider we can get some amazingly low pricing from 'new' suppliers/brokers at prices below any of the levels I thought were deliverable when our current contracts come up for renewal mid 2009.
The same with ADSL modems - prices $20.00 less than we currently pay for the lowest priced product we currently sell which is a 'discount' of around 55% for an equivalently featured 'box'.
The same for ADSL2 'ports' and back hauls - offers of 15% less, minimum, than the prices we are paying today.
Same story with HSPA data - a minimum of 20% less than our current contract rates.
...and those are only examples of the offers we've actually received - which accounts for less than 25% of the people who want 'face to face' meetings to discuss a wide range of 'building blocks' we currently use.
Of course our contractual situation doesn't allow us, even if we thought it appropriate, to chop and change suppliers based on better pricing - we can't do that 'over night'. What is actually concerning, and I know how strange this sounds to describe receiving offers of much lower pricing as being concerning, is that while we might be able to take up some of these offers in 3, 6 or 9 months or so our competitors, or at least some of them, are presumably able to take up these offers now or in a shorter term than we can. You could, easily, look at this scenario pessimistically.
Or you could look at it again and ask yourself "why are these suppliers cutting their prices in such significant ways?" To which there is, generally, only ever one answer - they aren't selling enough at their previous prices. Which turns the pessimistic view on its head because if that were to be the case, then it means that Exetel's competitors whom the suppliers were forecasting to buy the products and services now being offered at significant discounts aren't buying in the forecast quantities. I see some 'evidence' of this in the pricing movements of one or two ISPs but nothing that would indicate that they have stopped buying from their wholesalers in the sort of volumes that would cause the discounts we are being offered.
Contractually we can't take any real advantages of the offers we have received at the moment even if they 'improve' as more than one person has said to us. Obviously we would take them in to consideration when our various current contracts are at an end and we can always use the actualities of today's offerings to ensure our current suppliers do their best for us between now and then. It's going to make things tougher for us than they already are if our competitors get financial benefits from these low offers but I would think that most of them would be in the same situation that we are with contractual obligations that can't be broken without a good reason or sensible 'notice'.
Flip a coin - take your pick - are things not so good for a good many ISPs in Australia? Or are they all about to get huge benefits from much lower 'building block' costs?