John Linton
As this is the end of the 'reporting season' for publicly listed companies to provide their FY2007 results to the ASX there are a raft of small companies posting their, universally awful, financial results. I say "universally awful" because, no matter how they try and put positive spin on them, they all lost money in FY2007 just as they have done every year they have been in business. Why do they bother to do it - or for that matter - why does anyone think that there is money to be made in the communications industry by a small public company? (As I alluded to in one of my previous ramblings I think many people still suffer from 'OzEmail Syndrome' and I guess those people also believe there's a pot of gold at the end of the rainbow).
I made some comments on what the results for Engin and MyNetPhone meant to me yesterday before reading later in the day that Engin had borrowed even more money to buy a 10% share of another massive money loser - Unwired! Yesterday I also read the published results for PeopleTelecom and Eftel - same story - spin attempting to cover up yet another loss and the fact there remain no reasons to think there'll ever be profits. Why never in my opinion:
1) PeopleTelecom have been around in one form or another for half a dozen years and have lost money every year - if they cant make money at a revenue of $A100 million why do they think they'll ever make money?
2) Eftel are a cobbled together agglomeration of previously failed ISPs (ie ISPs who had lost all their shareholder's funds and owed their creditors far more than the creditors were prepared to accept) that lost $A750,000 on a turnover of $A34 million. Sort of a breakeven you would say? Pity that a cursory reading of their briefly stated annual accounts show that their current liabilities exceed their current assets and they have personnel expenses of over $7 million in FY2007 which is around 15% of revenue which is more than double what any ISP could afford to pay and remain in business in the medium term.
Now I well remember that both Optus and Vodafone each lost huge amounts of money for up to 11 years before the first black ink appeared on their annual P and L and I'm well aware that Hutchisons are over $A3 mill in the hole and continuing to lose money - but those companies had mega wealthy shareholders and actually planned their $A3 billion investments in infrastructure knowing their return was a decade away and they would have to endure massive losses and wrong turnings before they made money.
Taking in to consideration the 100+ small start up ISP/Comms companies that went broke in 2007 and reading the reports of the publicly listed companies it's very difficult to escape the fact that there is no money to be made in the Australian communications market for any new investor/start up and all but half a dozen or so of the current companies will be gone in the short/medium term. Except they won't.
I could have written that previous paragraph in any August for the past 15 years and all that would have changed is the date (and the names of the companies in the preceding paragraphs). I think all it shows is that the communications industry is like the mining industry - every new hopeful thinks they will find Lasseter's Reef (this being Australia and El Dorado belongs in some other nationality's dreams of wealth and fortune) but they all end up digging holes in the ground that have nothing in them except their shareholder's money.Yet with such a clear cut track record of publicly listed ISP/Comms company only ever losing money (as opposed to private ISPs/comms companies like TPG and Internode who stay in business so, presumably, make money) there are still shareholders, year after year, putting up money to start up yet another "but we will be different" public company hopeful.
Oh well.....yesterday was a depressing day of financial analysis....I must look at something different today.