Sydney view: Tech stars fall to earth with One.Tel crash

By GILES PARKINSON*

For the past three years, Jodee Rich and Brad Keeling have been synonymous with the trappings of success from the new economy.

They were entrepreneurs who won the confidence of Australia's richest families, attacked Telstra's monopoly to create the country's fifth-biggest mobile phone network, and built up fortunes worth hundreds of millions of dollars.

At their peak at the start of last year, One.Tel was worth nearly $5 billion and Rich, a former whiz-kid best known for the collapse of his Imagineering business in the early 1990s, had transformed himself into one of Australia's six billionaires.

The two richest families in Australia - the Packers and the Murdochs - were among his greatest fans.

"This is a strategic investment for News Ltd in an important growth industry," said Lachlan Murdoch after announcing a joint investment in the company with James Packer, who had travelled to New York to help sell the investment to Rupert Murdoch.

"News is confident that One.Tel has the quality and depth of management, and a full suite of telephony services to position the company as a major player in global telecommunications."

For most of the past three years, One.Tel looked like fulfilling its dream of becoming a serious player. The winning-over of Packer and Murdoch derailed the scepticism of the markets and One.Tel talked confidently of investing $5 billion in Europe.

Rich enjoyed every moment of it. In 1999 he and his wife shelled out $14 million - an Australian record - for a house on Sydney Harbour that they never quite got round to living in.

And Rich and Keeling became so sure of their importance and invincibility that last year they awarded themselves bonuses of $15 million because of their contribution to One.Tel's share price.

It was the beginning of the end for both of them.

The investment community was outraged and One.Tel's shares, already struck down by the weak tech and telco market, slumped sharply again. By the time Rich and Keeling had promised that they wouldn't do it again, they had already lost the confidence of many in the market.

Yesterday morning, they lost everything.

A lifeline that had been thrown to One.Tel by the Packers and Murdochs just 11 days ago was pulled yesterday after an inspection of One.Tel's accounts revealed a bigger cash deficiency than anyone had expected.

The company that Rich had predicted this year was on track financially, was in the hands of an administrator.

The Murdoch and the Packer families are furious and took the extraordinary step of sharing their anger with the public. In a joint statement, James Packer and Lachlan Murdoch said: "Like all shareholders, we are angry.

"We have been profoundly misled as to the true financial position of the company."

The cause of their anger is the billion dollars they have lost on the investment. The implications of their statement is that there is more than just the contraction in the mobile phone market in the failure of One.Tel. The investigations have begun.

* Giles Parkinson is editor of AFR.com