VoIP provider Freshtel bleeds cash in an "extremely difficult year"

Stuart Corner
Monday, 31 August 2009 10:39

IT Industry - Strategy

Struggling VoIP service and technology provider Freshtel (ASX: FRE) has posted a very poor result for FY09 and despite a number of initiatives announced during the year with high expectations, has given no real indication of any light at the end of the tunnel.

Revenue was down 34 percent on FY098 to $3.2m and net loss up 30 percent to $10.2m. The company started the year with $8.2m in cash and ended it with just $2.4m, despite a rights issue that netted $1.7m.

Chairman Allan Sullivan said: "This has been an extremely difficult year for Freshtel with revenues shrinking significantly from the previous year and with costs running at a high monthly rate which, together have caused large cash losses.

"Consequently, costs have been significantly reduced from January 2009 but cash burn still exceeds some $300,000 a month as at July 2009... Since finalising the entitlement issue the company has focused on achieving [a] restructuring, lowering our costs, protecting our capital base and focusing on improvement of our global Voicedot Network services."

To reduce costs, CEO, Rhonda O'Donnell tendered her resignation and leaves today, 31st August 2009. O'Sullivan will replace her as executive chairman. He added: "The board is examining the potential for the company to delist. This will not only save hundreds of thousands of dollars in listing fees, audit and support infrastructure and staff costs but will give the company a profile more in accordance with its current financial performance."

He said the company strategy had been revisited "to ensure a simple, clear set of actions for the coming 12 months, and plans to further significantly reduce costs in this 12 month period are in place. We are not limiting ourselves, however, to only improving what we have – we are also looking at some merger opportunities that will assist in broadening our market offering in the wholesale SME sector and consequently global sales, and we will continue to develop key applications for mobile VoIP, calling card applications and an API interface that will enable 'white label' customers to develop their own business models with their own billing systems that integrate with the Voicedot Network using its call termination capabilities."


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