new fnt update, page-3

Just to focus on the language of the ASX Release.


RE-CONFIRMING THE XGM:

I really do not understand why ATC needed to "reconfirm" the proposed XGM. It's ASX Release said that negotiations regarding FNT had been concluded and that an XGM would be called. It's ASX update of 4/12 said that the Notice of Meeting and associated documentation (presumably, the independent expert's report) had been completed, but that the need for further information from FNT would necessitate a delay of the XGM into January.

INDEPENDENT EXPERT'S REPORT:

Now, ATC has advised that the IER has been prepared and that "this will be circulated to shareholders together
with a Notice of Meeting. This report has been produced with the involvement and assistance of FNT management".

So far, so good.

However, all IER's are prepared with the involvement and assistance of management (and others). Again, why the need for this point to be made. Other companies do not do it.

Even so, it is good to hear that there is an IER in existence.

E&Y's involvement is also positive, as at least they come with some IT&T experience.


BUT, WHAT OF AEGIS?:

Why no mention of Aegis?

According to the ASX update of 28/11:
"The Company has commissioned E&Y in the UK and Australia to prepare the IER in relation to the FNT transaction. That IER will be made available via the impending Notice of Meeting to convene a meeting of shareholders on or before 31 December 2002.....E&Y are working closely with Aegis Research, who will assist E&Y in the preparation of the IER. The Company has
commissioned Aegis to undertake an independent review of AdvanTel and FNT".

On the basis of the 28/11 ASX Release, the Aegis Research report should have rated a mention in yesterday's update. It's absence suggests either:
1)
no independent report (ie: folded into the E&Y report), in which case why the boldness of the 28/11 statement;
2)
an independent report still in progress, in which case why not just say so; or
3)
no independent report from Aegis, in which case have they declined the work, or what?

CAPITAL RAISING UPDATE:

As for the capital raising statement, this leaves open even more questions:
"AdvanTel continues to pursue its fund raising activities in accordance with the terms and conditions of the agreement".

Since 12/9, nothing further has been heard of Griffin Capital, or their involvement in the FNT transaction, going forward.

To refresh memories, on 12/9, ATC announced to the ASX that they had engaged "Griffin Capital
Investment Bank to advise on financing arrangements....
Robert M T Jutson Jr, Managing Director at Griffin Capital said, "We have been active raising funds for telecom operators since 1992, working with top tier clients including Cable & Wireless and Hughes
Communications. We found the AdvanTel story among the most compelling businesses we have seen in recent years and welcome the opportunity to contribute to their success.".....He continued, "We have identified several suitable investors and believe it possible to conclude funding arrangements within the near
future".

FNT TRAFFIC TRANSFER UPDATE:

Finally, the following statement from yesterday's update, also bears some mention:

"In the interim AdvanTel is working closely with FNT with the practical operational plan to transfer traffic from the latter's incumbent supplier on to the AdvanTel network".

In particular, this statement seems to be at odds with the ASX update of 4/12 (to announce the Pulse Telecom acquisition - on which yesterday's announcement advised nothing more):

"AdvanTel is already starting to carry FNT traffic under the revised arrangements today and the combined AdvanTel group expects to record A$230m in
revenues following 1 year of combined operations, excluding any Pulse contribution".

MANY QUESTIONS REMAIN:

So, the questions remain:
1)
What is the status of the FNT acquisition (has it hit any difficulties, and if so, why is it that things have changed so much since the 12/9/02 ASX Release advising of improved terms, and since the 7/11/02 ASX Release advising of concluded negotiations?).
2)
What has happened to the capital acquisition initiatives which Griffin Capital was meant to assisit with (and, according to the 12/9 ASX Release, was at an advanced stage of preparedness)?
3)
What is the current business and financial status of ATC, particularly given that ATC has previously been quick to update the market on achieving its milestone forecasts, etc?
4)
What is the status of the Hong Kong operations, particularly given that no-one of an executive management capability will be hosted in Hong Kong? The CEO, COO, Business Development, etc will all be hosted from London.
5)
What is the status of the Pulse transaction, given that this is now in play and should similarly be updated at the same time as other company initiatives are being updated?
6)
For a company with as few as 28 employees (AR02), ATC is now becoming quite top heavy with the number of managers (executive and otherwise) that it is appointing to different roles in the Company.
7)
If ATC's CEO (etc) are being based in London, why the need for an Eastern seaboard investor relations office in Australia? Practically, I can understand the reasons for this, but not when the Company will be operating from 5 -6 separate premises (in Hong Kong -1x2, in Shanghai, in London, in Perth, in Sydney, etc).
8)
If going forward, the composition of the Board needs to be "reviewed to best address the needs of the
businessgoing forward", then what is the likely status (and continuing suitability) of Biddle (appointed 09/02), Stewart (03/02), Palermo (Chair), and Mittens (03/02)?.
9)
Just what has happened to the China traffic call patterns since the OFTA rate increase on 1/11/02, and on which ATC commeneted the following on 6/11:
----------
"AdvanTel carried approximately 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".

INVESTOR RELATIONS:

Clearly, the proposed investor relations' appointments are important, as the Company's handling of its investor relations' activities to date has been very poor.

SOME CONCERNS:

The Company's handling of the FNT acquisition /closure has been equally as poor, given the time and effort involved, the number of stop /starts experienced, and the number of twisted encounters detailed to the ASX.

It could still be that ATC will close on FNT and produce a success story in due course, but unless or until the E&Y IER is released so that we can all understand exactly what is going on (including where AEGIS stands in all this), the Company's credibility, and management performance (particularly in M&A execution behaviour) will continue to be called into question.

As Tebley has pointed out, yesterday's update opens up more questions, than the number that it closes out on.

For now, the most important thing that ATC needs to do is close out on FNT and demonstrate to the market (and shareholders, alike) that it has the depth of ability, management experience (even if they are all old C&W hands, or previously associated with Stewart), and business plan capabilities to turn ATC into all that has been promised to date to shareholders.

Until then, credility and execution risk remains highly leveraged so far as ATC is concerned.