being revalued..., page-8

re: for grant 62- for pin striped suits only.. Hi extralite,

No bias against smaller telcos. Just a bite on reality.

For prespective, why not check out all my postings over the last 18 months and you will see what I have said on Telstra (calling it down to $4.20 when it was still above $5.00, for instance - the famous Nickoo debates), as well as on a number of other telcos.

For good measure, look also at what I was saying about the US economy back in early 2002 (when most others were predicting the next recession, depression, and DOW to 5,000).

My views on Telstra are now being driven because finally they are implementing Sigma 6 (I was agruing for this back in mid-2002), and are concentrating on building up TelstraClear (again, I was arguing for this back in 2002).

I have also long argued for Telstra to be considered as a utility stock (ex-growth). The dividend yield makes it worth holding, particularly if you bought nearer to $4.20.

But, I have also had a stronger belief in SGT (calling it down below $1.30 and back up again).

The point about smaller telcos is all the same - they are small and need to gain traction. By and large, this will occur because of further consolidation within the third tier sector ( I have been arguing for this since early 2002). But, what I do not like is the suggestion that someone has grown by 248% (etc) and that this is going to set the world on fire.

Yes, its good for business, and perhaps for the share price, but how is it that they will become the next "big" thing.

HTA has been trying to do this and its costing them a fortune.

Vodafone have already spent 10 years doing this and its costing them a fortune.

So, how is it that the smaller players are going to be able to do it on a shoe string? In this regard, reality bites.

Regarding ARPU values, you are quite right, I do not know the mix split, but nor does anyone else. This information has not been published, so I have resorted to reasonable approximations.

But, by the same token, you cannot argue that DFT is a 100,000 subscriber company, when its annualised revenue is <$15.0M and most of its customers are now being acquired (ie: in recent times).

Similarly, you cannot claim that 100% of its customer (or SWT's customer base, or PTL's customer base, for that matter) will either go to broadband, to higher based pricing plans, or the like.

Reality says that DFT now has 100,000 customers (going forward). Their challenge now is to convert all those customers to its broadband offerings.

But, be careful now, because DFT's communications' costs are rising, both in total amount, and as a proportion of revenue. If true scale were there, this would not be occurring (up in total terms, but flat to down in proportional terms). This, you need to think about, because it was also the undoing of Advantage Telecom (a stock on which I posted some concerns about in 2002).

As for using cash to buy up the ISPs, this is simply not true.

The EZ Web acquisition added 4,000 customers. Terms were not disclosed, but were likely - cash.

The Impaq Australia acquisition added 2,000 customers. Terms were not disclosed, but were likely - cash.

The Keypoint acquisition added 25,000 customers. Terms included 285 MILLION shares being issued (>30% of the then issued capital), for an effective price of $7.1M (assuming 2.5c issue price), or $284 per customer. This suggests primarily a dial-up customer base.

On a comparative basis, PTL's customers /billing units are valued at $790 (3x that of DFT's acquisitions).

The Planet Network acquisition (also, 25,000+) will be funded through a mixture of cash, more shares and options. This will likely require another 200 - 300 MILLION shares being issued.

Added to the existing base, this will take DFT to ~1.5 BILLION shares, and > 460 MILLION options.

In other words, a 2.0 BILLION+ COMPANY.

By all means, however, enjoy DFT's share price, but don't let it get to 4c because then it would be capped at $50M (or 40% of UEC's MC) in circumstances where its forward EBITDA is likely to be 1/10 that of UEC.

A share consolidation will clearly be required sooner rather than later.

I'm not against smaller telcos, but I hate it when 1.0 BILLION + shares are on issue, with more to come.