Archive for October, 2000


Sunday, October 1st, 2000

When I visited C&W Optus in May 1999 I made two observations.

– I said that the company had changed completely and was well and truly on its way to becoming the leader of competition in the Australian telecommunications market.

– I also alluded to the fact that C&W in the UK had altered its strategy and had announced that it would focus on corporate business only. I saw this as a potential threat to the integrated nature of Optus’s business operation.

While the people at Optus were very pleased with the first part of my analysis they argued strongly that my second assertion was pure nonsense and that the company would remain integrated. However, I still had a nagging feeling that this would not be the case, so I reported my observations accordingly.

Earlier this year I published another analysis and once more questioned the position of the UK head office. But again Chris Anderson denied any plans for a split. He pointed to the company’s operation in Hong Kong as proof that the UK supported the business models which included retail operations. A few months later, with more and more reports coming out of the UK, it became clear that Optus was fighting a losing battle. A bungled sale of C&W Hong Kong ensued, and it was evident that head-office wanted to get out of the residential business at all costs.

Following this I wrote my article Optus for sale?

I realised I was on the right track when neither Chris Anderson nor the company’s media department phoned me to protest. Also I received several anonymous e-mails from people within Optus saying that they agreed with me but were unable to go public, for obvious reasons.

And now I have in front of me a press release entitled: Optus examines options for growth. This is one of the most masterly spins I have ever encountered. They have announced a review of their structural and strategic options, but my interpretation is that the company has finally been forced to rid itself of its residential businesses.

I am sure that the people at Optus would agree with me that the preferred option would be to keep the company rolling as it is. They are going gangbusters at the moment and this reorganisation could not have come at a worse time. It will undoubtedly distract valuable management attention away from the very successful business they are presently running. It may have been appropriate to conduct such a review in 2 or 3 years’ time – but certainly not now when the company is going so well.

While the effects of the Optus break-up on the industry in Australia are yet to be seen, it will undoubtedly distract attention from competition. Who is going to run the new businesses? Who will be the new owners, or will they initially perhaps be only ‘partners’? If we are lucky we will get strong partners with a longer-term business vision than C&W, but it could also transpire that another overseas company will take, for example, the mobile business aboard and run it largely from their overseas head office – in the final analysis Australia constitutes only a small part of any international business. If this were to happen it would further undermine the already weak position that Australian holds in the global IT&T industry.

My favoured solution would be for Optus to turn its broadband and mobile business into a wholesale business. In that way all its customers would be corporate customers and they would not run retail operations. This should satisfy London. And then, on these (open) networks, other companies can operate as virtual operators. Virgin Mobile and dingo blue are, in fact, already doing this. The broadband network should be an open network along the same lines as TransAct in Canberra.

I am sure that C&W’s argument is that such a model would not be in the shareholders’ short-term interest. However, I would be very surprised if Optus could sell these businesses for their present valuation. These valuations rely on the future earnings of the company within the framework of its current successful style of operations and if they decide to relinquish their integrated model I see the businesses in question plummeting in value. Under such circumstances it is highly unlikely that Optus will get the price for its assets, it wants. While these assets might be worth that money to Optus, others will certainly not put that same value on the company.

It is to be hoped that, in an effort to protect shareholders’ value, the company will opt for the middle ground and establish a wholesale model for both its mobile and its broadband business. I am confident this will be in the long-term interest of the company’s shareholders. The last thing we need from London is another bungled sell-off like the Hong Kong deal. However, I have got the nagging feeling that common sense will not prevail and that the various businesses will be sold at significant ‘discounts’.

Paul Budde

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Sunday, October 1st, 2000

The Australian Broadcasting Authority has allocated thirty subscription television broadcasting licences to Access1 Pay Television Pty Ltd (APT) and twenty to TPG TV Pty Ltd (TPG).

APT has indicated that the licences will be used to provide a range of services including finance, commerce, shopping, sport, adult material, education/training, technology, lifestyle, nature documentaries, movies, children’s cartoons, and educational material aimed at pre-teenagers. The services will be provided via satellite directly to home using digital transmission technologies. Dependent upon regulatory and commercial developments, APT also intend to provide their services over third party networks.

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Sunday, October 1st, 2000

In September 2000, South Australia launched an innovative e-mail plan that will make the state the most connected in the country. The plan is known as IE2002.

Internet providers have been invited to tender for a service that will see a Hotmail-style free e-mail service and personal portals which will have to be hosted in SA. Also personalisable local and national content will have to be developed which would allow users to develop their own public content.

The tender requires a system that is scalable up to 1.5 million users — the population of the state. The offering is the first stage of an ambitious plan that includes virtual electorates and government-sponsored cheap PC deals.

People who currently don’t have access to the Internet could in this way have access through the 154 libraries in this state.

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Sunday, October 1st, 2000

Management consulting firm A T Kearney recently released a study showing that emerging ‘Internet clusters’ could draw away Silicon Valley’s high-tech leaders and eventually topple the Valley’s high-tech dominance.

This finding not only applies to Silicon Valley but equally to other business centres around the world, including the CBDs of Australian capital cities.

The study also said that traffic, labour shortage and the high cost of living were reasons why up to 30% of the Internet companies in Silicon Valley said they would consider relocating. Sixty-three percent of the Internet executives who responded to the survey said governments need to work on solving some of the problems that accompany rapid economic growth, whereby improving the situation for business as well as citizens. Governments outside of the US are creating technology parks, implementing workforce development programs, simplifying tax laws, and offering investment incentives, thus making areas outside of the US more appealing as headquarters for Internet companies.


IT WASN’T ME! – October 2000

Sunday, October 1st, 2000

I would like to share this tale with you that I got via the Internet, I have tried to find the source but as you might expect nobody knows. Here is the story:

A shepherd was herding his flocks in a remote pasture when suddenly a brand new Jeep Chero-kee advanced out of a dust cloud towards him. The driver, a young man in a Brioni suit, Gucci shoes, Ray Ban sunglasses and a YSL tie leaned out of the window and asked our shepherd: "If I can tell you exactly how many sheep you have in your flock, will you give me one?"

The shepherd looks at the yuppie, then at his peacefully grazing flock and calmly answers, "sure!"

The yuppie parks the car, whips out his note-book, connects it to a cell-phone, surfs to a NASA page on the Internet where he calls up a GPS satellite navigation system, scans the area, opens up a database and some 60 Excel spread-sheets with complex formulas.

Finally he prints out a 150 page report on his hi-tech miniaturised printer, turns to the shepherd and says: "You have here exactly 1586 sheep!"

"This is correct, take one of the sheep" says the shepherd. He watches the young man select an animal and bundle it into his Cherokee.

Then he says, "If I can tell you exactly what your business is, will you give me my animal back?"

"Okay, why not" answers the young man.

"You are a consultant" says the shepherd.

"That is correct" says the yuppie, "How did you guess that?"

"Easy" answers the shepherd. "You turn up here although nobody called you. You want to be paid for the answer to a question I already knew the solution for. And you don’t know shit about my business because you took my dog."

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