Ann: MEETING: TTK: Managing Director's Addres

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TTK
24/10/2012 17:01
MEETING

REL: 1701 HRS TeamTalk Limited

MEETING: TTK: Managing Director's Address to Annual Meeting

Following is the transcript of the address made by TeamTalk Managing
Director, David Ware, to this afternoon's Annual Meeting.

Welcome. This is our ninth public AGM. TeamTalk has been going for 18 years
now - the last nine listed.  It's hard to believe.

Where has all the time gone?

Here's one thing about all of this time that I find interesting.  One of our
ethos statements, one of the slogans that we run TeamTalk by, is "turning
prospects into customers and customers into friends".

Customers into friends - its something that we find happens almost naturally
over time.  I've got to say the same thing is happening with you guys. We're
turning shareholders into friends.  It's great when Miss Kylie or whoever
comes into the office and says I just bumped into Mr. such and such, one of
our shareholders down at the waterfront.  It really does add another
dimension to running a business.  Most businesses have suppliers and
customers, we've got suppliers, customers and shareholders, and it's great.

And of course its one of the reasons why we always invite a bunch of the team
down here.  So please have a beer with the guys once we've got the formal bit
out of the way.  One person you should talk to is Jamie Baddeley.  Jamie is
our new Chief Technology guy - he's not on the payroll yet but that hasn't
stopped us getting him working.  He will be responsible for pulling all our
technology together, developing new stuff and for making sure that we've got
the right products in the right places for our customers.

I'm going to talk a little bit about where the industry is at, then we'll
have a quick look at what we achieved since our last AGM and finally I'll
tell you where we are going.

So where is the industry at?  Over the last couple of years I've been banging
on about the changes that were about to happen.  Well now they've all
happened, the government has done its stuff and the new order has arrived.
The telecommunications world really has changed.

Let's quickly recap; the government has pledged 1.3 billion to build a fibre
network.  Telecom grabbed most of that but was forced to split itself in two,
into Telecom and Chorus.  Next, the government grabbed $300M off of the
Telecommunications industry (think of it as a tax on us) and gave it to
Chorus and Vodafone to help them with their rural plans.

The other very significant government move was to go to single sourcing for
all of their own telecommunications needs to force down prices.  Rather than
deal with every government department separately, we now deal with one
agency.  Think of it as the old government stores board revisited.  It's
significant 'cause government is the biggest telecommunications customer.

So what does all this mean?  Well the government has pledged the best part of
$1.6 billion to the two big guys so it's not hard to see which way the
playing field has been tilted. Big is in and small is out.  And that's the
trend that's likely to continue.  This is a government that helps big
telecommunications companies and not small innovative ones.

So how has the industry reacted?  Get big, get niche or get out.  That's all
I hear and all I see.  Get big, get niche or get out.  You've seen it with
Telstra Clear and Vodafone - Telstra's getting out.  But what you won't have
seen is the same thing happening with a bunch of the smaller guys - if they
can't find a well defined niche they're bolting for the door - or at least
trying to.

And there's an up-side to all of this. That is there are a bunch of assets
for sale, more than I have ever seen in my 30 something years in the
industry.  I have to admit that a lot of these are junk - but in amongst them
all there are some real gems. More on that later.

So where does all this leave TeamTalk? Well, fortunately we've got some
pretty good niche business, a strong balance sheet and we've got a great
reputation so we're pretty well placed.  We are also inside the tent when it
comes to some of this government procurement stuff.

So what has TeamTalk been up to since we spoke last?  Well the last 12 months
have really been about dealing with this new environment and about
implementing the plans we've developed to deal with it.

At CityLink that's meant taking a bit of a hit on our government business
because of this single sourcing thing. That said I'm not too concerned
because it's only a short term dip.  The government is putting more and more
services on line so this is part of our business that will grow back over
time.  It's also meant working out how to use Chorus's fibre.  Up until now
we've always dug our own fibre in - now we have the opportunity to lease
fibre from Chorus.  So in total we are selling more services than ever
before.

At Araneo it's about accepting that the original business model is finished
and focusing on its two strong niches - rural businesses and back-up
services.

Talking of back-up services did I tell you we've popped a couple of dishes on
the top of the Beehive so that the Civil Defence and anyone else who works in
that building can keep on working in the event that the fibre breaks!  Next
time you're in Hill St take a look at those dishes- they're just peeking over
the top - they're your investment.

I'd like to tell you about another project we're doing.  It's not the biggest
nor is it the most profitable but it's the project that I'm personally
getting the most satisfaction out of.  We're putting broadband into 24 of the
most remote schools.  Broadcasting Minister Craig Foss and I went off state
highway 50 near Napier to turn on the first school.  To talk to the teachers
and share their enthusiasm and to watch these kids experience real broadband
for the first time, it was just fantastic.  I had no idea how important the
internet was to modern education.  This is a project that will really change
these kids' lives.

The mobile radio side of the business is doing very nicely.  It's all about
going digital and its all about apps.  Just as you have apps on your smart
phone that world has now come to mobile radio. These are serious apps -
there are apps for security companies and forestry companies and transport
outfits.  They're all about health and safety and making mobile workforces
more effective.

So overall and not withstanding the patchy economic recovery we're having a
good, solid year.  We are making budget and we will continue to reduce debt a
bit and we'll continue paying dividends at at least the same rate as we
always have done.

Looking to the future we're really happy with our core businesses and we are
confident that overall we will continue to grow, albeit modestly.  Equally
importantly we are confident that we will continue to throw off cash.

On the acquisition front I can tell you that we have moved past the tyre
kicking stage and we have lifted the hood and had a serious look at a couple
of opportunities.  Right now we are in active dialogue over a potential
acquisition.  If we're successful I would expect to announce something before
Christmas.

So there you have it that's pretty much the industry and TeamTalk from top to
bottom.

All that remains is for me to thank you for taking the time; we really do
appreciate you coming down to see us and thank you again for your continued
support.
End CA:00228813 For:TTK    Type:MEETING    Time:2012-10-24 17:01:30