Picking up on your OzeStock posting, I see that you got your figures from regarding AAPT and it's 9-month performance through 31 March from the Results Briefing by Theresa on 9th May (p21).
Revenue in AUD terms was $527m, and EBITDA was $71m. In NZD terms, however, revenue was $599m and EBITDA was $78m.
Why is this relevant?
Page 28 of the Management Commentary of 9th May shows the relevance of questioning the AAPT comparison that you areseeing to draw.
In particular, AAPT's Australian Business and Internet Services segment actually comprised 8 different revenue streams, only some of which are potentially comparative towards UEC.
Those 8 segments comprised local service ($37m), calling ($193m), cellular and other mobile ($23m), interconnection ($29m), internet ($67m), data ($157m), resale ($46m), and "other" ($46m), making for a total of $599m in operating revenue, in NZ$ terms.
For a truer comparison towards UEC, I would have thought that internet, data, and perhaps local service (although this sounds more like Managed Services) qualify. That would have made for NZ$253m.
I do not see how calling, cellular /mobile, or resale could be included for comparative purposes. Similarly, inter-connection revenue.
Resale would have an extremely low gross margin (perhaps as low as 2 -5%, if previously stated commentary by HTA in late 2001 is any guide). At that time, HTA stated that it was exiting from the reseller business as the margins were simply non-existent.
As you have suggested, "(c)learly that segment would have great difficulties ever improving to UEC's margin". But then again, if we were actually comparing like with like, it would then be interesting to know just what EBITDA margin TEL was making on its AAPT Internet Services business. A lot higher than 13.5%, I would suspect.
However, let us return to basics.
In a briefing note (9 May 2003), Merrill Lynch advised clients that "(t)he EBITDA margin (in the Australian Business and Internet Services segment of TEL's business) has increased from 10.9% 3Q02 to 13.5% 2Q03 and 14.9% 3Q03".
Whilst SSB suggested a different EBITDA result (ie: 13.3%), it nonetheless also pointed to a 400 basis point improvement in EBITDA over preceding 12 months.
That's rising EBITDA (up 400 basis points in 12 months) across all revenue segments in the ABIS segment. Not bad for a husiness that "would (otherwise) struggle to reach double-digit organic sales growth", according to your argument.
Elsewhere, analysts and commentators alike have already questioned the ability of Telstra to turn it on in relation to its latest broadband kickstart initiative.
That said, I think that there is no better way to sum things up than to have regard to the observations of UEC's own Peter Shore who also happens to chair UnWired, and, until its demise, also chaired IP1.
In Comms Day (24 June 2003), Peter Shore made the following observation:
"Firms such as IP1, Uecomm, Amcom and PowerTel are largely complementary in network and product reach and could combine to form a "serious 3rd player" to take on the corporate data market with what would be a genuine national network. "The Tier 3 players together have coverage in nearly every corporate building," he told Communications Day yesterday, pointing out that they already generated hundreds of millions of dollars of revenues from their existing operations. "How they come together is unclear as there are always issues about valuation and strategies and so on," he said. "But the economics at face value make sense and the corporate market is a multi-billion dollar segment"."
That supports the consolidation argument, but not on the basis of any apparent pricing premium.
