Friday, October 14, 2011

Telstra signals $11 billion deal with NBN could hold future of ailing share price.

Telstra's chief executive David Thodey has signalled that next week's shareholder vote on the $11 billion compensation deal with the National Broadband Network will be critical to reviving the company's ailing share price.

In an interview with the ABC's "PM" program, Mr Thodey told me that in addition to providing greater investor and regulatory certainty, a successful vote at Telstra's annual general meeting would improve the telco's all important fixed-line revenue.

While Mr Thodey is confident of approval, he says there are shareholder concerns about regulation and what could happen with a change of government.

Mr Thodey also said progress was being made with Telstra's poor customer service record, and that complaints to the telecommunications ombudsman had halved over the past year.

Telstra shares closed slightly weaker today at $3.07 a share.

Read my story on ABC News Online.

Wall Street hedge fund tycoon Rajaratnam sentenced to 11 years prison

A Wall Street tycoon at the centre of America's biggest insider trading scandal in a generation has been sentenced to eleven years in prison.

The billionaire hedge fund manager Raj Rajaratnam was also fined US$10 million for using inside information to reel in 64 million dollars over seven years.

Prosecutors had argued for an even tougher sentence of 19 and a half years while others say corporate greed will always be hard to deter.

But will this make a difference to temptations and greed on Wall Street?

Here's my take from this morning's edition of AM.

Thursday, October 13, 2011

Unemployment in surprise fall; doubts raised over Melbourne Cup Day rate cut

There's been a surprise fall in Australia's unemployment rate, casting doubt on forecasts for an interest rate cut on Melbourne Cup Day.

The jobless rate dipped slightly to 5.2 percent last month as employers took on twice as many new workers than anticipated. Economists has forecast a steady jobless rate of 5.3 percent.

Job creation beat expectations to 20,400 new job in September - 10,800 of them full time.

Listen to my analysis broadcast on The World Today.

The likelihood of a rate cut in November is now dependent on the next official inflation reading due in a fortnight's time.

Here's the official outcome from the Australian Bureau of Statistics.

Tourism Australia steps up campaign to repair image problem with India after damage from student bashings

By Business editor Peter Ryan
Tourism Australia will today step up its campaign to target and attract high spending visitors from India.

The move is designed to capture the subcontinent's lucrative tourism market which has been damaged by violent attacks on Indian students in recent years.

Repairing Australia's image problem with India is just one challenge on top of concerns about outdated properties in and an advertising strategy that is failing to make an impact in booming Asia.

Tourism Australia's managing director Andrew McEvoy has told AM the Indian image problem needed to be countered to achieve the aim of tripling the number of visitors by 2020.

Here's my interview with Andrew McEvoy broadcast on this morning's edition of AM.

"It's worth about $800-$820 million to the Australian economy now. There's probably around 145,000 Indians who are coming - that's including students and holidays, visiting friends and relatives, and business," Mr McEvoy said.

"We think by 2020 that could almost triple to about $2.4 billion at its best and that would mean there'd be 400,000 Indians coming to our country and high-yielding businesses and a mix again of education, holiday, business and visiting friends and relatives."

Mr McEvoy said he was working with Australia's High Commission in India to rebuild confidence and to attract "high yield" tourists.

"We took a view that we should look at India through the eyes of Indians whom we market over them. So we've used an MTV Bollywood couple who had their honeymoon in Australia as sort of the front people of our advertising. We've done a lot of work to rebuild the image and I think the High Commission has done a great job over there. So we're certainly back on track and there are big opportunities to come."

Mr McEvoy and Tourism Australia's chairman Geoff Dixon will use the Australian Tourism Directions conference in Canberra today to counter recent claims that Australia is viewed as the "world's dumb blonde" of tourism - attractive, but shallow and one dimensional.

" I think people like Geoff and I do take offence at that because Australia's reputation and image is outstanding and one thing that is not broken is probably the appeal of the destination.

The thing we've got to work harder on is, have we got to the right product mix in Australia, are we good enough in terms of quality of service and have we got the access to the products through aviation, cruise shipping and that sort of stuff," Mr McEvoy said.

Today's conference will also deal with criticisms that Tourism Australia's advertising and marketing message needs more clarity, given campaigns by state and territory bodies on top of the national agency.

Mr McEvoy concedes there is a communication problem.

"We are a bit inconsistent in the way we market our country offshore. We do often speak with too many voices and there are plenty of people representing our interests and we've just got to get that a bit more united, a bit more consistent."

Tourism Australia is also working to counter feedback about out-dated properties in Austraia, poor customer service and in some cases unexciting shopping.

Mr McEvoy refutes the criticisms but believes there is room for improvement.

"Look, I think as an industry we're pretty good at talking ourselves down. I would argue that products and experiences in Australia are massively appealing to a global consumer. Can we improve? Always. But I think that's happening and I think that the Australian industry is growing. Capital cities are going strong and I think our experience does stack up really, really well."

Wednesday, October 12, 2011

Insolvencies spike as companies feel pressure from debt defaulting clients

By Business editor Peter Ryan

The deepening global economic uncertainty and the potential fallout in Australia is pushing some businesses to the brink of financial ruin, according to research out today.

The credit reference agency Veda  has revealed a twenty percent spike in the number of companies going into administration since the global financial crisis hit three years ago.

However, the financial distress is not being caused by factors directly linked to Australia's two speed economy or instabliity fuelled by the sovereign debt crisis in Europe.

Instead, the Veda research shows more companies of becoming insolvent because their clients are defaulting on their bills as they struggle to preserve their own cash flows.

Veda's head of commercial risk Moses Samaha says the number of companies entering external administration has risen by 19.6 percent since the June quarter of 2008 when the global financial crisis took hold.

"Concern over a possible global credit crisis, reduced consumer sentiment and delays in customer payments are no doubt adding strain to business cash flow. Tighter financial and credit management practices will now prove vital for SMEs to avoid the risk of insolvency over the coming 12 months," Mr Samaha said.

Listen to my interview with Moses Samaha broadcast on "The World Today".

Mr Samaha said assessing the credit risk of customers and clients should now be a priority for any business given the current environment.

"This is necessary to help minimise business exposure to bad debtors and to help safeguard against risky business relationships. Organisations should also undertake a thorough background check on company owners and directors and not just the business entity itself."

The construction industry accounts for the largest proportion of external adminstration (18 percent), followed by manufacturing (13.9 pecent), retail (8.8 percent) and professional, scientific and tech services (8.3 percent).

Mining, information and media, and education and training accounted for the least amount of external administrations at 0.7 percent.

The Veda research also reveals that companies with 10 to 99 employees were over-represented in companies going into administration.

Mr Samaha said some customers were holding back on payments to companies in a bid to hold on to cash, as part of a vicious cycle of default.

"Cash flow is the "lifeblood" of any business. Poor credit control will greatly affect cash flow and the ability to pay debts on time, so it pays to develop an understanding of the financial situation of the business to which you are extending credit," he said

"This will give you an indication of how swiftly they may pay you for your products or services and the likely impact on your company finances."

Tuesday, October 11, 2011

Payday lenders fight "loan shark" image as government moves to cap excessive interest rates

The payday lending sector has stepped up it's campaign to thwart federal government plans to cap annual interest rates on loans which can sometimes exceed 500 percent.

While the government concedes payday loans are necessary for some people, it wants a cap of 48 percent on loans above $2,000 to protect consumers who are often on social security benefits.

But payday lenders warn that would limit credit for many and make some resort to loan sharks to make ends meet.

The National Financial Services Federation, which represents Australia's payday lender sector, is being advised by John Lamidey of the Consumer Finance Association in Britain.

In an interview with AM, he defended the payday lending business model and likened the applicable interest rate to a pint of beer on a 25 pound loan over a week.

Not surprisingly the "pint of beer" defence has been ridiculed by the Consumer Action Law Centre's media and communications officer Dan Simpson who writes:

"The reality is these loans are typically between $200 and $500 and the overall cost of the loan is particularly onerous for someone on a limited and fixed income (and research suggests most borrowers are).

"The reason lenders don’t have a problem with people paying back their loans isn’t because they only lend to those who can afford it -  it’s because repayments are secured through direct debits which take the repayments out of the borrows account on payday or pension day. Many borrowers can’t afford the loans but it isn’t the lender who goes without, it’s the borrowers who are often left without enough to live on after the repayments have been direct debited "