........try again re previous post incomplete etc.
As follows:
ASX has Fone Zone's number
Michael Sainsbury
JANUARY 09, 2007
TELSTRA'S biggest mobile phone retailer, Fone Zone, has attracted the attention of regulators after its surprise 40 per cent profit downgrade on December 18, only 12 days before the end of its first trading half.
Fone Zone has been queried by the Australian Securities Exchange on the timing of the announcement, which caused the stock price to crash 30 per cent in one day.
In response, Fone Zone cited discussions with Telstra that continued until December 15.
"Prior to this the company had been in extensive confidential discussions with Telstra on a number of issues and was reviewing its performance," Fone Zone told the ASX.
"The company had reasonable expectations that the confidential discussions with Telstra would result in financial performance consistent with budgets and with the guidance at the company's AGM in October."
The downgrade came 13 months after the company listed on the ASX and less than three months after its second-largest shareholder, investment bank Investec, sold down its shares.
Another investor, HGL Investments, ceased to be a substantial shareholder in Fone Zone only days before the profit warning.
Fone Zone had also missed sales targets set by Telstra, revealed on December 11 in a report in The Australian citing internal Telstra documents.
Fone Zone and Telstra claimed the reported figures were not accurate but declined to provide alternative figures.
Fone Zone chief executive David McMahon and his wife, chief operating officer Maxine Horne, who between them control 40 per cent of the group, were on holidays. Fone Zone general manager Darren Gaunt did not return calls. The group's shares lost 6 per cent yesterday, falling 5c to 82c, only 2c above its all-time low, recorded on the day of the downgrade.
Explaining the downgrade, Fone Zone blamed the limited range and a short supply of handsets for Telstra's new NextG network, as well as Telstra's decision to focus on less profitable handset subsidies for its mobile phone plans.
Telstra has only a handful of phones available for its new network. The telco does not have phones from market leader Nokia, or from Sony Ericsson, and only received limited stock from Motorola about a month before Christmas.
Nokia holds market share of about 50 per cent in Australia.
Market analysts who declined to be named queried how such a large downgrade could be made so close to the end of a trading period.
Fone Zone floated on the ASX on November 1, 2005, after considering the move for several years. It was only able to make the move after inking a new contract with Telstra.
The new contracts, designed by Telstra consumer chief David Moffatt to reduce the amount of money the company pays its dealers, have proved problematic for Telstra dealers.
Another issue affecting Fone Zone is understood to be Telstra's deal last year to give Miami-based Brightstar a wholesale and distribution monopoly on phones for the NextG network. The new arrangement strips margins and profits from third-party retailers.
If the ASX is not satisfied with Fone Zone's response last week, it may refer the issue to the Australian Securities and Investments Commission.
A spokeswoman for the ASX would not say whether it had taken such action, and ASIC declined to comment.
For more technology news, reviews and columns, visit australianit.com.au
wrxsti
FZN
fone zone group limited
