Stuart Corner
Friday, 25 January 2008 10:06
IT Industry -
Strategy
Page 1 of 2
Faced with poor subscriber growth, despite blowing millions on its sales and marketing efforts, the company is slashing costs, postponing its plans for ADLS2+ services and relinquishing its exclusive right to offer the TiVo personal video recorder in Australia.
Engin commenced the implementation of a new customer relationship and billing system in the final quarter of calendar 2007, but says: "through this period the company's high customer growth aspirations were unfortunately not met, despite achieving growth in subscriptions of 11.4 percent to 85,000."
As a result, it says, "a strategic review of the business was undertaken in October and November 2007 to reduce the ongoing working capital requirements of the business, and bring forward cash flow breakeven. A revised strategy was determined and implemented which, to date, is succeeding with remuneration, marketing and services related costs having been significantly reduced and are now more closely aligned with cash flow being generated from operating activities."
A further outcome of the strategic review was to put on hold the company's ADSL2+ project (it plans to resell Optus services) until its strategy to "provide a nearer-term path to profitability for the company's core telephony business" has been successful. Engin says this strategy is working and that the ADSL2+ project "will recommence later this financial year...The intention remains for Engin to be able to offer a combined broadband access and telephony solution."
Engin's 33 percent shareholder, Seven, holds the rights to the TiVo in Australia and Engin announced in June 2007 that it was
aiming to become a leading provider of triple play services by signing up as a primary distributor of the TiVo -
to be introduced to Australia early in 2008 - and as a reseller of Optus ADSL2+ services.
It now says that, to reduce funding demands, it has decided to relinquish its exclusive TiVo distribution rights and in doing so, has "significantly reduced the performance-related risk and demands on working capital carried by Engin under the TiVo distribution contract." It is also in discussion with Unwired, now owned by Seven "in regard to examining prospective operational synergies between the two companies' complementary product and service offerings."
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