EFTel rights issue to raise $1.6m

Stuart Corner
Tuesday, 30 June 2009 02:29

Business IT - Technology

Broadband ISP EFTel (ASX: EFT) has launched a rights issued to raise in excess of $1.6m. Existing shareholders will be offered one new share for ever two held, at 1.95 cents per share, a 45 percent discount on their 15 day volume weighted average price to 26 June.

Eligible shareholders will also be able to apply for up to 400,000 additional ($7,800 worth) at the same price. EFTel says the funds will be used to further the development of its BroadbandNext network and to improve its overall working capital position. The move was foreshadowed in EFTel's 2008 annual report and 2009 half-year report.

EFTel has secured Bell Potter Securities as the sponsoring broker for the offer. The Rights Issue will not be underwritten and is non-renounceable. Closing date is 30 July and normal trading in the new shares is expected to start on 7 August.

BroadbandNext is the name for EFTel's network of Huawei DSLAMs, rollout of which was announced in November 2007. EFTel said at the time that rollout would start from February 2008 at a rate of 15 exchanges per month, with an initial schedule of 70. These were to deliver, VDSL2, ADSL2+ ADSL, SHDSL corporate solutions, PSTN voice, IP video, VoIP, and 'naked' DSL.

However, its VDSL2 plan was hopelessly optimistic. At the time the Australian standard for delivery over Telstra copper had not been finalised by Communications Alliance, and there was no indication that this was imminent. It has still not happened and EFTel has yet to offer VDSL2 over its networks.

CEO, John Lane, told iTWire in March: "The difficulty has been in coming up with an exchange-based protocol. The argument has got caught up in the whole NBN debate. Telstra expects VDSL2 will be only a node-based technology and won't be deployed from the exchanges. Our position is that node deployment is down the track and VDSL2 can be deployed from the exchanges today.

"The politics of it all become very interesting: even some of the companies you think would be on our side are not because their equipment cannot be upgraded to VDSL2. If VDSL2 was possible today from a Telstra exchange we would have a huge advantage over most of our competitors. We could fit VDSL2 cards into our Huawei DSLAMs the moment we get the go ahead." He said EFTel was not expecting this "any time soon".

Last November EFTel became the exclusive provider of retail ADSL services on Nextep's DSLAM network spanning 55 Telstra exchanges. In February 2009 EFTel announced plans to ramp up its wholesale offerings with the launch of an expanded wholesale division headed up by industry veteran Warwick Pye.

In February the company reported a half-year revenue increase of five percent to $19m and a net loss after tax of $1.7m, compared to a net profit of $146k in the previous corresponding period. It said the main contributors to the loss were one-off currency movements, costs associated with the introduction and integration of the BroadbandNext network, ramp-up of the new customer support facility in Malaysia, and transition costs associated with the acquisition of ISPs in the Conceptual Internet group.

Outgoing CEO Simon Ehrenfeld said, "The results are a reflection of the company's determination to expand through our BroadbandNext network. From a low point of profitability last September, the company's trading has improved dramatically and continues to do so."