Word around the campfire is that Engin are looking to turn off...

Word around the campfire is that Engin are looking to turn off their costly internal backend and buy minutes & switching services from a leading Australian backend VOIP wholesaler.

Sounds like a familiar plan for retailing VOIP services now doesn't it?

If this is true, and I stress IF, then one can presume that the present Engin business model is simply not working and presumably will not work for some years in it's present state and with recent 4% PA growth rates (reported by ENG EOY FY08 and reinforced in the FY09 1/2 yearly in Jan 09, actually showed 0% growth at that time). Personally, based on my research, I expect a poorer than forecast FY09 yearly, certainly another loss year, IMHO of course.

I noted in a post some months back that Engin internally uses a largely Cisco software/hardware backend and that Cisco had made a public announcement that it was dropping all future development of Cisco VOIP software. Whilst Cisco would continue to maintain it's existing installations (hardware & software) Cisco would not be adding any new features to it's VOIP software for VSP's.

Obviously Engin has had to develop it's own ongoing features and/or buy from 3rd party developers and now perhaps the board considers that the cost is too great to bear for its small user base (just 65000 @ Dec 08, very small compared to US/European customers who are the target of 3rd party VOIP software developers).

I wonder who they might be considering for VOIP backend and what the cost of transition will be? And what the ongoing costs might be in terms of margin sacrifice. Recall that as at Dec 08 ENG reported a 52% operating margin.

Based on chatter on various AU VOIP forums, there appears to be somewhat of an Engin customer exodus going on at present as Engin make unsavoury changes to existing customers VOIP call rates and plans. They have emailed their user base citing increased business costs requiring increased call costs. Further, they have emailed the customer base surveying the actual ATA device they are using and citing the need to ensure compatibility for upcoming, but unspecified, network changes in coming months.

Just in case you think that Freshtel may be a potential wholesale VOIP supplier to Engin, whilst it is technically possible I do not believe that to ever be a possibility for a variety of reasons not least of which relate to liquidity & stability issues at Freshtel. And, nor is Unwired in any position to offer the service given the state of it's presently overloaded network and lack of working capital to implement a suitable solution to the Engin backend VOIP requirement.

So, that is the latest from around the camp fire, no firm facts, just campfire talk. Make of it what you will. I know no more than what you do and what I hear & read around the traps.