Australian telcos are plowing on with their original strategies despite their share prices following the market down to numbers some might consider to be a right bargain.
Share prices: Telcos hit (Credit:Suzanne Tindal/ZDNet.com.au )
"I don't see the pricing of the market as an issue," Ian Martin, ABN Amro telecommunications equities analyst told ZDNet.com.au. Consolidation of the telco industry, driven by the costs of providing high speed broadband, has been happening for some time, he said, and will not be sped by the market prices.
Instead, the spur for further market consolidation would be the national broadband network, Martin said. "Once we know the form and structure of the NBN, that's going to be a catalyst for change," he said.
Until then, the market conditions, including a lack of available equity, will stop any action, not increase it, Martin said. "I think for the moment it's heads down, consolidate your cash."
Martin's view that the market price wouldn't drive acquisitions was shared by industry players.
Internode was always looking to acquire companies which would slot well into its make-up, according to a spokesperson for the company. "Friday's share price changes don't change [Internode's] interest, don't make it any more acute," they said.
In addition, the spokesperson said that price wasn't the deciding factor for Internode, with some companies having bought others and realised the integration would "cost and arm and a leg". More important was that the acquired company complemented Internode and was relatively straight forward to integrate.
We have no money to buy anybody and we're not thinking of selling to anybody
iiNet chief technology officer Greg Bader said that the company had mentioned publicly in the past that it was looking for acquisitions, but would not elaborate.
"We have no money to buy anybody and we're not thinking of selling to anybody," Exetel chief executive John Linton said. "We make a profit and we're run very conservatively, so I don't think we'll be screaming for the exits."
Soul Telecommunications, which has recently bought TPG Internet, always has an appetite for more, according to a spokesperson, and wouldn't be a target for others.
"We're not looking to be eaten up or gobbled up by anyone at this stage," the spokesperson told ZDNet.com.au. He said that although the company filed a loss in the last financial year due to bad debt write-offs, things were going well, and the company believed the pricing of its products would appeal to customers in a recession mindset.
Mobile provider 3 said its business model was based on four market players, but would not comment further on any speculation. Optus said it did not comment on merger and acquisition activity.
Telstra, AAPT, Amcom, Adam Internet, Engin, iPrimus, Netspace, and People Telecom did not reply in time for publication.
The industry has already seen a lot of consolidation, according to Kate McKenzie group managing director of Telstra's wholesale division, speaking last week at the Ovum Future of Wholesale Telecoms event, a phenomenon she blamed for a contraction of Telstra wholesale customer numbers.
"We've got 282 customers and shrinking," McKenzie said. "If you'd asked me that question a couple of years ago it would have been more like 400 customers."