John Linton
I looked at the preliminary December recurrent billing numbers that will be run tomorrow over breakfast this morning and, as usual they reflect another record month for Exetel continuing the unbroken 'run' since we began the business on 1st January 2004. While this was expected, it would be odd to contemplate otherwise in what is still a growing market, I was somewhat surprised at the continuation of the trends that have become more evident over the past 5 months.
When we began in business 100% of our revenues came from ADSL1 and all of those services were provided via Telstra Wholesale with IP provided by Powertel (as it was then). This began to change, but only very, very slowly as we added first business SHDSL services (from Optus and Powertel) and then our first attempt to free users from Telstra's copper network with Unwired. In that first, very exciting first year we went on to add wire line telephony services and then mobile services as well as expanding the initial hosting service options.
At the end of 2004, because of the rapid growth in our ADSL1 take up (and at that time we only operated in NSW) the revenues derived via the Telstra network still accounted for more than 90% of our total revenues. This stayed pretty much the case for most of the following year and it remained the case until we added ADSL2 services from both Optus and Powertel. It's over the last three years, as the revenues from ADSL2 accelerated and the other eight service types we now offer became established, that the percentage of revenue from Telstra based services began to decline. In December the percentage of revenue Exetel derived from 'non-Telstra' based services will exceed revenue derived from Telstra ADSL1 services for the first time.
What is really interesting overall, at least to me, about this trend is that non ADSL based services will account for almost 35% of our revenue having increased from around 25% at the start of the year.
Another obvious trend, in ADSL, is the increase of churning customers versus 'new' customers which has increased from an average of 12 - 15% a month to an average of 24 - 27% a month.
All other services continue to increase in both monthly revenue and in terms of percentage contribution to total revenue which was our major objective at the start of calendar 2008 and more 'emphasis' was put on that in the FY2009 plan.
So with only the non-recurrent revenue actual amount in doubt for the complete 12 month period it is obvious that we have had a very successful 12 months and actually slightly over achieved all of the monthly, quarterly, half yearly and pretty soon yearly targets we set over 12 months ago. Given the quite unusual conditions that have prevailed since the election of that bunch of educated morons to be the Federal "gubment" I got some quiet satisfaction from these results.
What I am far from satisfied with is the general uneasy feelings that persist in at least my mind about the coming six months for which I hold grave misgivings.
Although we have done a considerable amount, as the CY 2008 service type percentage contributions demonstrate, to making our overall business less reliant on any particular 'product' assault from a major carrier we are still very vulnerable if economic conditions over the next few months result in even more predatory actions by companies such as Telstra. My concerns were exacerbated over the past week by several conversations with people I know in multi-national companies who tell me they are now in to their second and third 'wave' of retrenchments and other cut backs with all of them citing pressure from regional Asian or US 'head offices' plus their own views of the 'business climate' in Australia, and especially in NSW, over the next six months.
We have reduced, by almost 50%, our planned service take ups over the coming six months and have therefore reduced our planned expense lines, particularly capital expenditures, accordingly. With the five months to November still tracking above the previous plan this may sound overly cautious but it is a simple observation that it's far too late to plan for lower revenues once they have begun to fall which then requires sudden and deep cuts in expenditure done with very little time for consideration.
I have never been a big fan of the mythical "Plan B". I always have a Plan B and a Plan A but I implement the planning around those ideas as a reverse of what I understand the 'conventional' view of those concepts to mean. My version is the Macchiavellian version but his exact quote escapes me but Wellington's version was "first ensure, as far as it may be possible, that you cannot lose - then use the freedom of planning that position gives you in taking advantage more boldly of the opportunities that occur that you could never have have planned for to see just how much better than that you can do".
We have taken all of the "recession planning for the under fives" actions beloved of the business school academics which, hopefully, now gives us the security and comfort to 'attack boldly' any opportunities that may arise from our competitor's errors or that our innovative thinking can now create - without the fear of sudden adverse overall 'market' changes to limit our abilities should such opportunities arise.
At least - thats the theory.