OPTUS MANAGEMENT
The first CEO was Bob Mansfield from McDonalds. Mansfield resigned in Oct 95 to join Fairfax (only to leave within 5 months to join the Sydney casino.)
On 30th April 96, Optus announced that Dr Zygmunt (Ziggy) Switkowski was the new CEO. He is an Australian, a physicist and was chairman and MD of Kodak (Australia). Ziggy was credited with the rescue of Kodak. Kodak was almost a basket case but the Labor Federal Government offered incentives. Kodak is now a successful exporter of film.
On 13 June 97, Switkowski "resigned". The papers reported that his severance payment was a mere $4.85m. Accounts later showed that it was around $3.5m. (Soon after he joined Telstra) Peter Howell-Davies was appointed CEO. He has a telecommunications background, having worked for Cable & Wireless since 1962. He was also CEO of C&W company Mercury in UK since 1995.
On 29th August 97, Chris Anderson was appointed new CEO, replacing Davies. Anderson resigned from TVNZ. Earlier positions were managing editor of the ABC and CEO of John Fairfax Holdings.
COO
The first Chief Operating Officer was Ian Boatman from C&W. He was replaced in Jan 96 by Phil Jacobs from BellSouth.
CHAIRMAN
The Optus Chairman initially was Brian Inglis AC. In early 1996 he was replaced by Russell Fynmore AO. Fynmore was a Director and spent many years at BHP. He is also Chairman of ADI, Azon Ltd and Eastern Aluminum.
On 13 June 97, Inglis resigned and Bob Dalziel (Managing Director) appointed Deputy Chairman pending a new appointment.
Following Cable & Wireless majority ownership, New Jersey born Dick Brown was appointed Chairman and began in October 98. C&W Optus is still foreign owned with C&W owning over 51% of the shares.
OPTUS VISION
Bob Mansfield was the first chairman. On 31 Mar 95 Geoffrey
Cousins as appointed CEO (formerly George Patterson Advertising).
In April 1997, Optus took over Optus Vision.
In Jan 98, Optus appointed Don Hagans to the Pay TV division,
formerly Optus Vision. He was from UIH, a franchise of Austar.
In Jun98, Hagans leaves and the whole future of vision is being
questioned in the media.
OPTUS SHAREHOLDERS
Following settlement of the Channel 7 litigation in March 1997,
the new shareholding is approximately:
Major shareholders are:
1-3-97 1-4-97 1-7-97 1-4-99*
Cable & Wireless UK 24.4% 22.7% 45.2% 50.1%
Bellsouth US 24.5% 22.7%
Mayne Nickless 25.0% 26.1% 26.1% 26.1%
US West 2.3% 2.3% 2.3%
Channel 7 2.3% 2.3% 0.1%
PBL 1.4% 1.4%
Institutions 26.0% 23.0% 23.0% 23.0%
AMP 10.3% 9.1% 9.1% 9.1%
AIDC 9.6% 8.5% 8.5% 8.5%
National Mutual 6.1% 5.4% 5.4% 5.4%
* estimate onlyJan 2000: C&W are said to own 52.5% of Optus. We note on websites that the names with Optus are for sale. Papers report that Optus might be sold off or broken up.
A float was expected in 1996 of about 10% of company ($550m)
There are some float difficulties with foreign ownership, excessive exposure of institutions (in Optus and Ch 7) and the financial position of Mayne Nickless. See History below.
Feb98: C&W have shown no desire for an early listing of Optus.
They have about 50% of Optus. However Mayne Nickless is pressing
to have Optus float at the earliest opportunity. They may even
have the support of minority shareholders and could force the
issue.
There is also speculation that they may change the name of Optus
to C&W. Recent advertising seems to be moving in that direction,
with C&W being mentioned with Optus.
Oct98: Optus is to float on the stock exchange on 17th Nov 98. The name has been changed to Cable & Wireless Optus Pty Ltd. It will raise $2.5bn from the float. Retail investors are to pay $1.85 per share. Gearing will reduce from 188% to 21%. Predicted profit next year is $65m. They do not expect a dividend for 2 years. Cable and Wireless Plc will increase its shareholding to 52.8%. AMP and National Mutual will reduce their holdings by selling shares.
Nov 98: The Optus float finally took place in November 1998. It was well oversubscribed. Institutional investors paid $2.15 a share whilst retail investors paid $1.85 a share. 275 million shares were offered to institutions, but this was lifted to 375 million. Retail investors were offered 100 million shares. At the close of the opening day the shares were selling at a surprising $2.65.
Apr99: PBL and Channel 7 are selling their stake in C&W Optus.
OPTUS FINANCIAL RESULTS PRE 2001
1992-93 1993-94 1994-95 1995-96 1996-97
Sales $ 300m $ 835m $1,430m $1,938m $2,494m
Depreciation $ $ $ $ 293m $ 441m
EBIT $ $ $ $ 162m $ 152m
Interest $ 57m $ 102m $ 140m
Profit before Tax $ $ $ $ 60m $ 12m
Abnormals $ 0m $ -423m
Tax Paid $ $ $ $ 0.2m $ -0.1m
Profit Net $ -69m $ -98m $ -17m $ 60m $ -411m
Assets $2,146m $2,337m $3,130m $ $
Plant Property $ $1,451m $
Licence Value $ $ 683m $ 683m
Capital Expenditure $ $ $ 623m $ 661m
Operating Costs $ $ $1,237m $1,489m
Payments to Telstra $ $ 390m $ 400m
Long Distance $ 651m $ 810m $ 972m
Business Services $ 151m $ 233m $
Mobiles $ 629m $ 894m $1,130m
Year ends 31 March
96-97 97-98 98-99 99-00
Sales $2510m $2933m $3405m $4200m
Oth Revenue $ 20m $ 13m $ 13m
Depreciation $ 330m $ 446m $ 521m
EBIT $ -81m $ 182m $
Net Interest $-152m $-223m $-124m
Profit pre Tax $-233m $ -41m $
Abnormals $-434m $ -55m $ -92m
Tax $ - - -
Net Profit $-667m $ -95m $ 113m $264m
Payment to
Other Carriers $ $ 904m $
COMMENT ON FINANCIAL RESULTS
Financial results: (informal) Loss in first 3 years $170m.
1995 Result: Optus staff at mid 1995 stood at about 3500. Income contributors were: Long Distance 45%, Mobiles ($630m) 34%, Mobile Equipment 10%, Other 11%. Claimed 30% (600,000) of analogue and 37% (115,000) digital mobile market. Has about 14% ($651m) of STD market. Profit included a $51m payment from Telstra in settlement of dispute.
6m to 31 Dec 95 result: Optus claimed its first profit of $7m for the 6 month period.
Optus claims a market share as follows: Long distance 15%; Digital Mobiles 40% (market leader in digital). Optus say that 66% of mobile sales are now digital.
Optus claims a revenue per employee of $480,000 to be 2.5 times
better than Telstra. They did not mention that the labour
intensive CAN network used by them is maintained fully by Telstra.
Also Optus contracts out the installation of its cable network.
While the revenue per employee may be high, they have not included
the staff of their contractors or their full time equivalents.
1996 Result: Optus reported a loss of $74m from Optus Vision. As this represents 47.5%, the total Optus Vision loss should be $159m Mobile analogue users rose from 609,000 to 795,000 but market share remained at 30%. Digital users rose from 116,000 to 401,000 but market share fell from 37% to 35%. Long distance subscriber numbers rose from 1,229,000 to 1,644,000 and market share rose from 13% to 16%. Payments to Telstra dropped from 40% of revenue to 34% of revenue.
Feb97: Optus reports a profit of $59m for 6 months to Dec 96 on a revenue of $1189m. However this profit was offset by a loss of $170m in Optus Vision, with Optus share of the loss being $78m. Mobile revenue was $530m while long distance was $476m. Optus claims 32% of the mobile market and 18% of the long distance market. Interconnect fees paid to Telstra are about $500m pa.
Jun97: Optus Vision expects a loss of $340m for the year.
Aug97: The Liberal Government has approved foreign ownership of Optus, allowing C&W to take over 50% of the company.
Aug97: Optus has arranged for a further $650m loan over 4 years, taking total loans to $3.05bn.
Aug97: Optus Vision over the year lost $388m, but only 3 months of this is included in the Optus accounts (following the merger). An abnormal writedown (of Optus Vision) of $423m was also included. Without Optus Vision, profit would have nearly doubled to $123m. Local call customers was said to be 12,000. The total Optus Vision loss over 2 years, in write downs and operations, was $939m. The value of Optus Vision was written down from $851m to $460m. Since the merger 600 staff have been retrenched. Dec97: The Mayne Nickless accounts give more details. Optus Vision had sales of $78m for the 96/97 year, costs were $326m, writedowns $416m and losses then totalled $803m. Optus Debt stood at $2.8bn.
Aug98: Optus still talking about a float. Name to change to "Cable &
Wireless Optus Pty Ltd".
Local call market is less than 1% at 57,000 customers. Labor costs fell
by 25% to $340m. Revenue Internet 1%, Pay TV 4%, Business Network 13%,
Mobile 46%, Long Distance 36%.
Pay TV subscribers were up to 195,000 and is still operating at a loss
Programming costs represent 90% of revenue of $109m.
Mobile market Share fell from 31% to 30%. Mobile customers up 158,000.
OPTUS HISTORY
Mar96: Optus is advertising that at the 4th birthday, it had assets of $3134m, larger than Australia Post and Woolworths. It claimed 2 million customers, 14% of long distance telephone and over 30% of mobiles, and a staff of 4,000. Note this is a lead up period to the float.
May96: On 30th April, Optus announced that Dr Zygmunt (Ziggy) Switkowski was the new CEO.
May96: Mayne Nickless announced that it will sell its 25% share of Optus. This will create some problems. Foreign ownership arises. Bell South and C&W would probably like to increase their shares but foreign ownership is already at the limit of 50%. The timing has not been determined. It may sell prior to the float or sell at float time. If sold at float time, the Optus float could be the largest in our history. The float is now likely to be delayed again. May96: Optus claims 1m residential customers (STD, IDD only available) almost 20% of the STD IDD residential market. The long awaited float is still planned for later this year with $600m now the possible capital to be sought.
Jun96: Optus gained a new $2bn loan facility. The 5 year facility was provided by a number of banks including ABN AMRO, Commonwealth and ANZ. This will allow it to delay the float following the decision of Mayne Nickless to sell out.
Jul96: Mayne is considering bids from TCNZ, BT, Malaysia Telecom
and Channel 7. The bids were vetoed by Bell South and C&W. Now
Mayne shares will be included in the bid. After all deals, about
$1bn is expected to be raised in the float. This is expected Oct.
Oct96: The Optus float party is being ruined by the Courts. Optus
has had a dream run with pre Optus float publicity particularly
from the Optus Vision launch of limited local calls at 20 cents,
ARL and cash flow positive results.
Now Channel 7 has launched action challenging the secret deal
between PBL, Optus and Continental Cablevision. Foxtel is also
challenging the terms of the Australis deal. Foxtel and Optus
will run rival rugby league competitions in 1997. The SMH points
out that Optus has been forced to commit $210m or about 25% of its
entire set up costs to maintain ARL rugby league. The Supreme Ct
delivered another blow by not listing the Channel 7 hearing till
1997.
The float is almost certain to be delayed. Worse still, the
delay prevents a debt increase, stopping funding of ARL and the
cable roll-out. Kerry Stokes of Ch 7 has a good bargaining
position!
Mar97: Reports are emerging that Optus may wish to get out of
Optus Vision. Consider its problems:
Pay TV is certain to be a loss product while so many players
exist (Foxtel, Austar etc).
The ARL/Superleague case has hurt Optus, with both sides paying
too much for just one sport.
The phone on cable is not working properly.
The litigation problems are continuous.
Competition begins in July 97, forcing Optus to lower prices.
Shareholders are not united.
News Ltd has deep pockets.
News Ltd can sell its products worldwide.
DBS satellite services are certain to dominate Pay TV in the
future.
Maybe the best thing that can happen to Optus is that Channel 7
win its claim to buy the whole of Optus Vision.
Apr97: A settlement has been reported in the dispute between the
various shareholders. The Good Friday settlement has many elements
and some are considered the first step in a bigger plan.
The reported elements are:
- Optus Communications will take over Optus Vision, buying all the
shares. This will bring the local call access network and Pay TV
into Optus Communications
- Channel 7 will get the right to buy 50m shares at $1.25 each and
the right to buy a further 50m shares during the float.
- PBL will get the right to buy 30m shares at $1.25 each and the
right to buy 25m shares during the float.
- US West also has a deal - undisclosed at this stage. US West
has the obligation to get the phone working on cable. It is
supposed to get a $100m if it can get it to work and if it can get
a certain number of customers by Dec 2000.
- Mayne Nickless will pay the $100m to US West. Optus
Communications will sell 30m shares to Mayne Nickless for $1.00
each.
Optus is now looking for $2bn from the float and will work hard to
beat Telstra to listing on the market.
May97: Optus problems continue. The cable phone is not yet fully operational. Rumours of various mergers abound. All Pay Tv operators are losing millions of dollars each week. Optus predicts a loss of $320m from the newly acquired Optus Vision. Optus has reduced the Vision staff by 12% - over 300 staff were made redundant. These predicted losses will not help the proposed $1bn float. Jun97: Peter Howell-Davis replaced Switkowski as CEO. The Chairman also resigns. The float is now certain to be delayed. Pay-TV and the cable roll-out problems need to be addressed. Losses will cause bottom line to be a loss for a number of years yet. While this remains the position, a float is out of the question. Jun97: Cable & Wireless are reported to have bought out Bell South for about $1bn. C&W now own about 45% of the shares. Jul97: C&W pay $980m for Bell South share. 299m more share options will be issued to C&W at $1.75 each. This will bring C&W to 52% ownership. Mayne has been released from its $100m incentive to be paid to US West. Government approval is awaited. Jul97: Optus will limit its cable roll-out to 2.3m homes. The original plan was 3m homes. Optus has said it will back the ARL with funding, an announcement designed merely to boost the negotiating position of the ARL in its talks with Super League. Optus also opposes the Foxtel/Australis merger as it lessens competition. Certainly competition is lessened some (both have almost identical content) but Australis was expected to collapse in any case.
Mar98: Optus appears to be winding back pay TV, with numbers dropping to 170,000 subscribers. Foxtel is close to 300,000. The phones on cable are still not a success and Optus is pressing for cheap resale rights from Telstra.
Mar98: Optus is sacking staff again with another 150 from the residential business area. These door-to-door sales staff were selling phone and TV products. Optus had lost $84m in the 6 months to Dec 97. Since the merger with Optus Vision, Optus has sacked 1500 staff or 20% of staff.
Jun98: Sports Vision Australia, which supplied the sporting channels
for Optus, was put into liquidation. Channel 7 has signed an agreement
with Optus to provide sports channels
OPTUS VISION
Optus Vision is Pay-TV vehicle for Optus and partners.
Bob Mansfield was chairman. On 31 Mar 95 appointed Geoffrey Cousins as CEO (formerly George Patterson Advertising).
Optus Vision is Joint Venture:
Optus 47.5%
Continental Cablevision 47.5% (now US West)
Publishing & Broadcasting Ch9 5.0% (with option till Jul 97
to increase to 20%).
Channel 7 announced on 28/4/95 that it will join Optus Vision.
Ch 7 will get $10m sign on fee and a money back guarantee.
Ch 7 buys 2% of Optus Vision with option of 15%.
(Optus and Continental to reduce to 46.5%).Optus 46.5% Continental Cablevision 46.5% (Now US West) Publishing & Broadcasting Ch9 5.0% (option till Jul 97 20%) Channel 7 2.0% (option till ? 15%)Signed Disney and Warner Bros for content. Ch 9 (Packer) has ARL League and cricket.
Continental is being bought by US West for about US$11bn.
Plan to spend $3bn on cable services over next 4 years passing 100,000 homes by end 1995 and 3 million by end 1997. Optus Vision buying cable amplifiers from Scientific Atlanta Australia (CEO Steve Dean) for $200m. Amplifiers modified to allow telephony on network. Scientific Atlanta is second largest set top box supplier in world. Optus starting with analogue mode but box will be capable of conversion to digital later.
Optus Vision owns the cables. An agreement with Optus Communications requires Optus Communications to use Optus Vision for all local calls. Optus Vision collects all local call phone income but pays an interconnect fee to Optus Communications. The exchanges are owned by Optus communications.
OPTUS VISION HISTORY
In August 95, Optus Vision announced that it would start with 12
channels on 20 Sep 95 and expects to pass 250,000 homes by the end
of 1995. Also announced start up price $29.95 for connection fee &
$25/m for basic channels, $35/m for basic sport & movies, $39.95/m
for premium subscription. The estimate was that Optus had only
only passed 200,000 homes in Melbourne and Sydney at startup.
Sep95: Optus Vision announced that it would dramatically accelerate its roll out by bringing forward $531m in investment. It is now planning to pass 2.3m homes by end 1996 (was 1.1m). It acknowledges that audience penetration is critical to success. The investment will be funded by debt. Optus also believed that there is only room for one pay TV operator in Australia.
Mar96: The estimate of Optus Vision customers was 15,000. It was delivering 18 channels, including 5 news and 1 children's channels.
Jun96: Optus Vision to launch its local phone on Jun 27. See article below.
Jul96: Optus Vision advises that it has offered local councils the sum of $8.00 per pole per year for 5 years. This is to overcome the environmental objections to their cables on poles.
Jul96: The Trade Practices Commission is investigating complaints about the lack of availability of local phone connections. This follows "almost saturation" advertising of the product. Many believe that it is not unrelated to the float later this year.
Aug96: Critics are questioning the reliability and difficulties of the new telephone-on-cable technology. Also that it is only available to a negligible number of subscribers - making the big launch a sham. Optus deny any problems. Optus Vision says it will pass 2.3m homes by Dec 96.
Sep96: Optus announced that it had 100,000 pay TV customers. The CEO G Cousins was to resign as CEO and become chairman of the Board of Optus Vision.
Oct96: Optus venture with Australis approved by ACCC. NSW Supreme Court overturned the decision of the lower court, where Optus had blocked Super League. Foxtel backed Super League can now commence in 1997.
Oct96: Optus Vision loss for 95/96 was $159m.
Nov96: Geoffrey Cousins has resigned from Optus Vision completely. Service costs increased from $24.95 to $29.95 for basic service and 39.95 to $44.95 for deluxe. Sports package up from $34 to $37.95. The additional outlet up from $10 to $12. From Dec 96, there will be 27 channels.
Feb97: The float is stalled as Channel 7 commences litigation which may force all Optus Vision shareholders to sell to Ch 7 at a discount. CH 7 claims breach of a shareholders agreement. Various valuations of Optus Vision have been developed ranging from $3.00 to $1.4bn.
Mar97: Optus Vision announced a loss of $170m in the 6 months to Dec 96. The loss for 12m to Jun 96 was $159m.
Nov97: Optus claims about 200,000 pay TV subscribers and about 24,000 phone subscribers. Phone connections are at about 1200 per week.
OPTUS PHONE NETWORK
Jun96: Optus launched local phone service. Extent of service was
not disclosed. Local Calls were set at 20 cents, and 15c on some
special days (Anzac, Fathers, Mothers). Phones by Nortel can be
purchased at $95 or rented at $2.50/month. Services available are
call waiting, voicemail, 3 way call, call divert and speed
dialing. The phone service uses the same coax cable as is used
for pay TV. Only those areas with access to pay TV can access the
Optus phone network.
Optus Vision owns the phone network and revenue. Currently a new connection with Optus Vision will mean a change in phone number. Telstra has not responded, pointing out that the free Callsaver 15 flexiplan gives a 15% discount or 21c per call. This is subject to a minimum of about 2 calls per day.
Line rental will be the same as Telstra at $11.65 per month.
Feb97: Technical problems still plague the phone system. Optus expects the problems to be resolved in a few months
Oct97: Optus reported to have connected 12,000 local phone customers by end of June 97 and 15,000 by end of Sept 97. They are evenly spread between Sydney and Melbourne. Connection rate is 800 per week.
Apr98: Optus has accepted an offer from Telstra to resell local
calls. Optus pay between 20-22 cents for the local call. Optus is
still seeking regulator (ACCC) intervention. Optus claims 42,000
of its own customers on cable.
OPTUS PHONE TECHNICAL INFO
Optus is providing a telephone over the hybrid fibre coax
network. Two systems are being used provided by ADC
Telecommunications and Motorola. This is still prototype
technology and has yet to be proven. The telephone is the plain
old system of 64kbs. Optus uses fibre to 20km from the exchange.
Two exchanges are used in Sydney (Belrose & Blacktown) and
Melbourne (Rochedale & Sunshine).
Optus uses 16mm coax as the main cable and 7mm drop wires. The telephone uses the 500mhz band for downstream signals and the 5-65mhz band for upstream signals.
A current problem is privacy. As a single cable is used for
several hundred customers, the signals could be received in every
home. Encryption will be needed in the future to ensure privacy.
OPTUS SATELLITES
Optus originally paid $800m to buy Aussat, the domestic satellite
system in Australia. In 1996 it had 4 satellites called A2, A3,
B1 & B2. A2 and A3 will end their commercial life in 1997. B1 &
B2 will last to about 2003 and 2003.
Optus has not released any strategy for the future.
OPTUS VISION BACKGROUND FIRST PLANS
Original shareholding proposed was Optus 35%, Continental 30%, Nine Network 20% and Channel 7 15%.
The proposal was for a closed network of 64 channels. Optus was to spend $4bn over 4 years to pass 50% of Australian homes.
The closed network proposal was refused by the Government. Packer then proposed local monopolies (franchises) for either Optus or Telecom. This was also refused by the Government.
The proposal did not proceed. A new structure emerged.
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