Rejected technology companies count cost

By PETER GRIFFIN, Telecoms Writer


Listed technology companies GDC Communications and Cabletalk yesterday faced the reality of depending on a single powerful customer to supply most of their revenue.

The two companies have been carved from the list of contractors that Telecom uses to maintain its massive national networks - and will lose tens of millions of dollars in revenue as a result.

Existing contractors Downer Connect and Alstom will pick up the service contracts as they are phased out with GDC and Cabletalk over the next 18 months.

GDC's share price plummeted 60 per cent to 30c a share on news that it had failed to make the cut. The company will dip into the red to the tune of $250,000 for the full year to December as it bears the cost of fruitless tender negotiations with Telecom. About 70 per cent of its revenue, or $40 million a year, is attributable to the Telecom contracts.

The share slump will be a bitter pill to swallow for sharemarket speculators who followed the advice of ABN Amro Craig broker Mark Etheridge. In an email to clients, Etheridge tipped GDC and Downers to pick up the lucrative contracts.

He had advised clients to consider "selling out of Cabletalk and putting the money into GDC". Yesterday he was unavailable for comment.

GDC's managing director, Geoff Lawrie, said he was "disappointed" at Telecom's decision and their choice to settle on two multi-nationals.

"We've the most efficient cost structure, of that I'm certain," he said.

GDC employs about 450 people, a large portion of whom work on the "patch" contracts in technical roles.

But Lawrie hoped to keep the contracting business going and would continue to pursue business with Telecom. The focus will shift to GDC's voice communications and iVASP software divisions.

Cabletalk shares closed down 19 per cent at 22c each. The company, which turned a profit of $710,000 for the six months to September 30, will lose $37 million per year in revenue. That will be offset by between $20 million and $30 million from a contracting deal its subsidiary Astute Networks recently won with TelstraClear. It will also look to its voice and data networking business to make up some of the shortfall.

General manager Peter Wilson was philosophical about the outcome. "That's business. The feedback was that the price was lower than we would have wanted to go."

The jobs of up to 280 staff would be affected by the contract loss.

"A lot of these people will be picked up by the other service companies. They still need the technicians in the patches we've got," said Wilson.

Most of the staff do not have redundancy clauses in their contracts.

Telecom spokesman John Goulter said negotiations would continue with Downer and Alstom to hammer down pricing. But he said there might be scope for Cabletalk and GDC to keep some of Telecom's business.

"It could take an unexpected turn and we may go back to the people we haven't selected at this stage."