John Linton
....at least based on the increasing number of offers we receive to 'take over' or 'buy out' very, very small data communications companies that would seem to be the case. Over the past 4 or 5 weeks the number of direct approaches and approaches that have been made to us by the owners or agents of very, very small companies enquiring about our interest in buying/acquiring their operations has reached the highest level I can remember, more than double figures, after being very 'quiet' for many months. Perhaps it's near the end of the year and people are looking at the current year and deciding they'd prefer not to go through that again - there are clearer signs of that in the UK and especially the USA as can be seen from this article:
http://online.wsj.com/article/SB125978866772073393.html
which seems to indicate that the data communications business will be worse next year for small companies than it has been in the past 18 months.
Exetel will never have the money to buy any other company as our basic premise when we set up the company was that we will not ever buy anything unless we had cash in the bank to pay for it and that if we couldn't grow the company to whatever size we planned then we had clearly failed in making our services attractive enough to do that and therefore it wasn't a sensible aspiration to continue to hold. In the case of the approaches we have had over the past month it's a very easy decision to make as the 'offers' are for companies in serious financial trouble which we can definitely do without. For such companies, or their agents, to even consider approaching a small company like Exetel as a potential buyer seems to be an indication of their desperation - we are in absolutely no financial state to be in the 'saviour' of failed commercial ventures business.
We have been reviewing our business and financial plans for the Australian company over the last few days as we do at this time every year having completed the Sri Lankan company review in late November. When we constructed the business plan for this financial year we expected that the ADSL1 and ADSL2 markets would turn out to be more 'viciously competitive' than it had been at any time in the past because of the 'saturation' in demand for those services. That has been pretty much how it has turned out and the current spate of plan 'improvements' sparked by AAPT's initiatives and now Telstra's attempts to protect its eroding customer base together with TPG's need to continue growing to meet its public forecasts. We have managed to deal, very well as it turned out, with handling the first six months of that problematic situation for which I think we can count ourselves very fortunate - having a record first quarter was a surprising bonus but it has significantly tightened since then as 'reality' has sunk in resulting in the changes in plans made by so many ISPs since October 1st.
We have failed so far to generate the revenue we planned from our investments in promoting wireless broadband (entirely my fault for being so stupid) and our ADSL new orders have begun to slow though the churn away rate which had been climbing in the first four months has fallen significantly since November 1st. We had spectacular growth in our business Ethernet sales in October and November which helped keep the overall growth of the company on track so far this quarter and we will try and maintain that level of 'over achievement' for that part of our business over the "Christmas Break" and then build it to double in the new year and then double again. Of all the 'opportunities' we currently see the business markets seem to us to be the most likely to produce the best 'return for effort'.
Of course most aspects of providing data communications services to both residential and business marketplaces are quite volatile at the moment and there is no way for us, with our extremely limited 'research resources', to really fully understand what is currently happening let alone what will happen over the coming months. We will complete the revisions of the ADSL1 plans later today or tomorrow and that will be the end of ADSL plan changes until late in the first quarter next year as we have already put in place the bulk of the changes we had planned to make and reduced end user costs quite substantially. We will try and solve our wireless broadband and wire line broadband pricing issues with Optus but I hold out little hope of doing that in any reasonable time frame (the last 'offer' we had from Optus was to INCREASE our ADSL2 buying price!) and will have to 'dust off' our Plan B and see if it still makes sense after all this time.
It will be an interesting couple of weeks and I can genuinely say I really have no idea as to what changes we will make to the second six months of the FY2010 business plan which will be a first in the coming up to six years of Exetel's existence.....in the past I seemed to have a much better idea of what was going on than I do now.