A$4.10 trading - very disappointing start to the week, page-61

A few for thought

1. Lack of success in TLS Cloud / Hosted services play
despite massive spending to develop and staff nationally

2. Market share in Complex data / Networking continues to decline despite heavy discounting and recruitment of specialist staff.

3. Fixed services revenue continues to decline and about to get worse (see below note)

4. Cost cutting continues to be needed yet TLS capability is already very low (Outsourcing of Help Desk, Professional services for support and faults etc). How much further can they cut before they need to actually be successful in the marketplace to show growth? They are now cutting back commercial leases on office space, what next.

5. TLS have invested heavily in a mobile applications team to stave off mobile losses which has failed dismally hence their declining mobile revenues and restructure of business mobile sales and technical services teams. Rural is safe and consumer will come and go however Business mobility is where the major revenues lie and that is where TLS are losing badly.


Notes:

1. Fixed services to Business Customers is around $500 million per annum and the entire client list is at major risk. TLS cannot leave the client list on copper that they have sold to NBN so need to migrate. Currently if an average business client spends $500 per month on line rental and calls, that $500 will go to around $800 if they use current TLS fibre Ethernet Lite products to deliver. don't know about you but i would look to TPG etc for a better priced solution for less than they are paying today.

SO what is TLS doing? Trialing IP trunking over ADSL/NBN in Sydney and Melbourne with an alarming failure rate. They better get it right or a lot more revenue will walk out the door. clock is ticking/ Imagine if they do not get it working over ADSL/NBN? Paying NBN to rent their own copper back?

Getting voice to work over ADSL/NBN will be challenging and i suspect they will have to give away an un-contended connection or risk losing the client. More lost revenue but at least they don't lose the customer and buy some time.

They wont be going away however these are challenging times so expect volatility in the short to medium term in my opinion. TLS are the best and will find their way however for now my money isn't for their shares.