rest in peace, page-24

Good evening Pagarsi,

BAD DEBTS - WHAT I SAID (1/11/02):

In my posting of 1 November (17:52), I made the following statements concerning my views of ATC's debt management situation:

"At 30 June 2002, ATC had receivables of $1.8m, and during Q1, announced revenue of USD$2.3m (or $4.14m @.555 conversion rate, rising to $4.26m @.54 conversion rate). Receivables + Q1 revenue, therefore, equated to somewhere between $5.94m and $6.06m. Receipts from customers, however, totalled $2.991m for the quarter. That makes for receivables and billings of $6.0m and collections of $3.0m, leaving $3.0m in receivables outstanding at end Q1. At $3.0m in outstanding receivables, this equates to >2 months (~66 days) in outstanding revenue (at average Q1 revenue rates), and certainly greater than 45 days.....(A)t end Q1(, ATC):
1)
had >2 months Q1 revenue in outstanding receivables; and
2)
for 1) to be achieved, 100% of FY02 receivables had to be collected".

I then concluded my posting by arguing the following proposition:
".....it is open to interpretation that ATC may well be:
1)
experiencing difficulties in collecting its debts (ie: if 100% of FY02 receivables were collected, only $1.2m in Q1 billings were collected (ie: <30% of total Q1 billings);
2)
experiencing customer connection, connectivity, or relationship difficulties (ie: such that Q1 revenues dipped significantly, both on forecast, growth, and Q4 outcomes);
.............
Based on all this, I would submit that the following is currently unfolding at ATC:
1)
customer relationship problems exist;
2)
bad debt problems exist, or if not this, then billing management problems exist....".


BAD DEBTS - WHAT I SAID (5/11/02):

On 5/11/02 (12:09), in reply to Tebley, I then argued the following proposition:

"The ASX release of 7/10 concerning credit worthiness is to be applauded.....Previously, however, this was not being questioned in the market. It was only as a result of the Q1 report last week, that a question of credit worthiness first arose, due to:
a)
declining cash balance;
b)
net cash outflow;
c)
limited in-quarter collections; and
d)
>70% of Q1 revenues being outstanding at end Q1.


BAD DEBTS - THE ANALYSIS:

In both postings, the tenor of my argument was 3-fold:
1)
time delays to billing customers;
2)
time delays to collecting from customers; and
3)
potential billing management problems.

Bad debts may, or may not form part of the equation (they shouldn't with the class of carrier that ATC is connecting to its network).

The way in which those debts are being managed and collected, however, are well and truly an issue for an emerging carriers - carrier business like ATC.

The Company should, therefore, be a little bit more open with the market on this point. After all, it has nothing to hide?

Already, ATC appears to be stuck on a cycle of the average billed revenue being outstanding for 45 -60 days or more which, in the context of providing bassic carriage services and long haul trunks, is a bit rich, in anyone's language.

This is why my arguments at the time were more focused towards (and remain focused on) a potential cashflow crunch coming up for ATC. The most recent ASX releases seem to support his by alluding to the need for additional working capital to be provided.

Far from not backing up any of my arguments in relation to ATC, I have posted my argumnets in depth, and in many respects, drawing from the same sources of information as are generally available to all of us.


THE CHINESE CONNECTION:

As for your assertion that I had posted "that ATC have got it wrong when the Chinese increase will not effect usage".

My comments on this were drawn, in part, from ATC's ASX release of 6th November, where the Company stated the following:

"Advantage Telecommunications Limited (ASX: ATC) announced that it has received confirmation from the Chinese telecommunications authorities that the international base call rate for China has been increased from circa US$0.02 to circa US$0.20 with effect from the 1st November 2002.....AdvanTel carried ~4m minutes of international traffic to China in the month of October 2002. Assuming no growth during November, the same traffic should generate a commensurate increase in revenue at equivalent percentage margins. The company does not anticipate a material change in traffic as a result of the rate increase".


THE CHINESE CONNECTION - THE ANLAYSIS:

The important drawcards from the statement were:
1)
no material change in traffic anticipated due to the rate increase;
2)
October repeated traffic volumes in November would generate a similar increase in revenue and margin results (as also argued by Yanlin in several of his November posts).


YOUR ASSERTIONS:

You then went on to assert the following:
"Then you post that earnings for November have been flat with no growth! You cannot have your cake and eat it too. Surely it would have been more honest to post 'as I predicted it seems that the Chinese price increase has affected income and they seem to have done well to maintain their income after the price rise'."

On this point Pagrasi, you may well be right in that I should have been more circumspect with my language.

But the facts remain that the Company, by its own ASX Release of 6th November stated that this would be the case.


WHAT YOU ARE REALLY SAYING:

So, what you are really saying Pagrasi is that ATC should be more honest and accurate in its own ASX announcements.

These statements whenever they make predictive observations (or the impression of such) amount to to forward looking forecasts /statements no matter which way you look at them.