One.Tel was a group of Australian based telecommunications companies, including principally the publicly listed One.Tel Limited (ACN 068 193 153) established in 1995 soon after deregulation of the Australian telecommunications industry, most of which are currently under external administration by court appointed liquidators.
One.Tel attempted to create a youth-oriented image to sell their mobile phones and One.Net internet services. It became Australia's fourth largest telecommunications company before collapsing in 2001. Rich and Keeling continued to receive $7m in payments shortly before the company entered administration. The Packer and Murdoch families were embarrassed by the failure of the company, especially after it was reported that both James Packer and Lachlan Murdoch had persuaded their fathers to back the company and invest.
The company's slogan was You'll tell your friends about One.Tel, to draw the connection between the brand and personal communication. The company also had a cartoon mascot known as "The Dude". The Dude was a cartoon-like depiction of a man in his early twenties, drawn by Adam Long, Jodee Rich's brother-in-law.
One.Tel began operations in May 1995. In 1999 One.Tel's Next Generation 3GSM 1800 network was launched by joint CEO's of the mobile business, Stephen Moore and David Wright in Sydney, Australia.
The original thought process began with a simple initiative: they wanted to start a new telephone company, one that the average person would understand. The company was very people focused and focused on the residential market, as opposed to corporate business. They wanted the consumer, or everyday person in the street, to have access to the entire suite of telephony products, which is why the company was marketed with the catch phrase “100% Telephone Company”.
At that time, the Company was firmly established in the telecommunications market, with operations in Australia, London, Paris, Amsterdam, Zurich, Frankfurt and Hong Kong.
One.Tel had three core product offerings: fixed wire long distance, Internet service provision and mobile telephony.
From 1998 through to 2000, One.Tel’s customer base more than tripled to 2.2 million and revenues doubled to $653 million. The business grew rapidly in Europe.
In December 1998 Project GSM was developed by Jodee Rich, Bradley Keeling, Kevin Beck, Stephen Moore and Alicia Crisp. This initial concept became the foundation for the One.Tel Next Gen 3GSM cellular network in Australia and spawned the international hybrid MVNO concept developed by One.Tel CTO Stephen Moore.
In February 1999, News Corporation (News) and Publishing and Broadcasting Limited (PBL) injected $709 million over three years.
In March 2000 One.Tel was successful in acquiring 15 MHz spectrum across all major capital cities. The One.Tel Next Generation Network was launched nationally six months ahead of schedule. It was the most technologically advanced network in Australia and offered differentiating features via a Smart SIM including ‘Voicemail with Reply Now’, ‘Megaphone’ and location based information on demand services – features that are now commonplace today.
At its peak, One.Tel’s strengths were recognised in consumer marketing and information systems, intuitive platforms and resources based on R&D in the Australian Next Generation Network, One.Tel continued to build quality, value for money telephony products and services while remaining a low cost producer for a time.
By May 2000 One.Tel had Operations in seven countries (Australia, UK, HK, Netherlands, France, Switzerland, Germany), over 1,900,000 active customers and was connecting over 250,000/month globally.
The pre-IPO years - 1995 to 1997
Jodee Rich and Brad Keeling decided to start a telephone company in August 1994. Jodee Rich developed a business plan for the company in September 1994. The ownership structure of the company in February 1995 was: Optus 28.5%; FAI 18%; James Packer 5%; Kalara Investments 50% (approximately). Kalara Investments was owned by Jodee Rich and Brad Keeling. The total initial seed capital for One.Tel was approximately $5 million. One.Tel was officially launched by Rodney Adler on 1 May 1995.
The link with Australia's second largest telecommunications company, Optus, proved crucial to the company's early success. One.Tel initially operated largely as a reseller of Optus services, receiving $120 for each mobile telephone customer that it attracted. The Optus contract was a wonderful deal for One.Tel and a terrible deal for Optus. One.Tel did not even need to sign up a customer to a long-term contract, it merely needed to have a customer accept a SIM card in order to receive $120 from Optus. This reportedly led to some unusual business practices, such as paying customers $10 to accept a new SIM card. Many SIM cards were never used. It also had an adverse impact on the credit-worthiness of One.Tel's customers, as One.Tel signed up many people who would not have been accepted as customers by other telephone carriers. It has been reported that One.Tel's customers were mainly "single mothers, pensioners and teenagers". This aspect of the business has led some commentators to speculate that the business was initially conceived as a pump and dump operation - a business that had no long-term future, but was being built up for a quick sale via an Initial Public Offering (IPO).
Between May 1995 and September 1996 One.Tel increased its customer base from zero to over 100,000. Optus decided to end its dealings with the company in September 1996, selling its shareholding back to the company for $4 million and paying compensation of $19.75 million for ending the $120 million deal early.
In its annual report for the year ended 30 June 1997, One.Tel reported revenue of $148 million and a before tax profit of $7.5 million. At that time the company had almost 300 staff.
From IPO to the onset of problems - 1997 to 2000
One.Tel floated on the Australian Stock Exchange at $2 per share in November 1997. Initial market capitalization was $208 million. On paper, FAI had turned a $950,000 investment into $51 million; Packer had turned $250,000 into $17 million and Rich and Keeling had a combined stake worth well over $100 million.
In addition, the company had paid out $4 million in dividends and $2.85 million in consulting fees to Rich, Keeling, FAI and Packer.
The original shareholders also received $16.9 million for the sale of two businesses, One.Net and One.Card to One.Tel in July 1998.
In the financial year ended 30 June 1998 One.Tel reported a before tax profit of $8.8 million. During the year the company had commenced a 'Global Strategy', opening offices in Los Angeles, London, Paris, Frankfurt, Hong Kong, Amsterdam and Zurich.
In September 1998 the company purchased mobile spectrum in each of the Australian capital cities at a cost of $9.5 million with a view to establishing its own mobile network. The company was unable to secure bank finance for the deal, and James Packer and David Lowy provided $5 million each to fund the purchase.
In December 1998 the Packer-controlled Consolidated Press Holdings purchased FAI's 16 million shares for $43 million. In February 1999 the Packer-controlled Publishing & Broadcasting Limited, in conjunction with News Limited agree to provide $710 million in return for a 40% stake in the company. The One.Tel share price hits a high of $13.55 in the days leading up to the announcement of the deal, prompting an insider-trading probe by the Australian Securities and Investments Commission. The News/PBL deal allowed the original shareholders to take more money from the company. Rich and Keeling received $62 million between them and James Packer received $20.5 million.
In the financial year ended 30 June 1999 One.Tel reported a before tax profit of $9.8 million.
The most remarkable day in the history of One.Tel was 23 November 1999. Lucent Technologies announced that it would build and finance a European GSM mobile network for One.Tel at a cost of up to US$10 billion. The company's market capitalization reaches a high of A$5.3 billion on 26 November 1999, making it one of Australia's largest 30 companies.
The emergence of problems - the year 2000
In March 2000 One.Tel spent $523 million on purchasing additional Australian spectrum licenses. The Packer and Murdoch families provided a further $280 million in funding. Australian investors provided $340 million in funding.
In the financial year ended 30 June 2000 One.Tel reported a loss of $291 million. The share price plummeted to below $1. The annual report included details of the remuneration of Rich and Keeling; both received a $560,000 basic salary and a $6.9 million bonus.
In a statement that would later prove ironic, James Packer told the Sydney Morning Herald in September that Rich was a visionary, that Brad and Jodee were excellent managers and that the share price would recover.
The end - 2001
In January 2001, Jodee met with Kerry Packer who told him, "You ran out of money with Imagineering, and you're going to do it again". A Macquarie Bank report states that the company was worth $3.5 billion, and the share price doubled within days. Merrill Lynch predicted that the company would run out of money by April.
In February, director Rodney Adler sold 5 million shares for $2.5 million.
During April and May the company's problems became increasingly apparent. In a final attempt to give the company a chance to survive, News Limited and PBL agreed to subscribe to a rights issue at 5 cents per share to supply another $132 million in much needed cash. News Limited and PBL reneged upon the agreement later in May when further evidence of One.Tel's financial problems emerged.
The directors appointed Ferrier Hodgson as administrator on 29 May 2001. The administrator's report states that the company was insolvent by March 2001. The administrator began laying off the 1,400 employees of One.Tel from 8 June 2001.
On 14 October 2005 the Sydney Morning Herald reported that the personal diaries of James Packer would be made available to ASIC to assist in its case against Jodee Rich. The Supreme Court of New South Wales ruled that the diaries should be made available to ASIC but warned that the material should not be used "in a manner that simply raises prurient or titillatory interest that is not directly relevant to the case". ASIC is reportedly seeking compensation of $92 million from Jodee Rich and the former One.Tel finance director, Mark Silbermann on the basis that they did not exercise their powers with respect to the company with due care and diligence.
On 18 November 2009 Justice Austin of the New South Wales Supreme Court dismissed ASIC's civil proceedings against One.Tel’s former joint Managing Director, Mr Jodee Rich and the company’s Finance Director, Mr Mark Silbermann.
Following a four-year trial lasting 232 hearing days Justice Austin found that ASIC had failed to prove its case against the defendant directors. The evidence presented by ASIC did not establish on the balance of probabilities that the defendants had failed to disclose or withhold financial information from One.Tel’s board regarding the company’s true financial position.
In the decision Justice Austin was critical of the way that ASIC managed the case. In particular:
- ASIC’s evidentiary case was too big. The core of ASIC’s claim required it to prove the true financial position of the large multinational One.Tel group over a period of four months in order to establish not one but many breaches of the defendant directors’ statutory duty of care and diligence. The ambitious evidentiary case in ASIC v Rich should be contrasted with ASIC’s more recent litigation against directors and officers which has aimed to target specific conduct
- ASIC made final submissions that were outside its pleaded case and the defendant directors were not given a proper opportunity to respond to them
- ASIC failed to call witnesses who would have been able to explain ambiguous documentary evidence
- ASIC used a forensic accountant as an expert witness when that person had assisted ASIC decide what course of action to take against the defendants, and
- ASIC’s argument that One.Tel’s liquidity should be assessed solely on its Australian operations was unsound because its treasury activities were conducted on a consolidated multinational basis.
These criticisms led Justice Austin to observe that “there is a real question whether ASIC should ever bring civil proceedings seeking to prove so many things over such a period of time as in this case.”
Centrica acquired the UK business of One.Tel in 2001 and ran it successfully for some years. On 15 October 2005, Centrica stated that it wished to sell the UK One.Tel to concentrate on its oil and gas businesses. Ironically, a mooted purchaser was News Corporation. However, on 19 December 2005 The Carphone Warehouse announced it was buying the company to merge its customers with its TalkTalk telecommunications offering. The One.Tel UK business was retained as a separate operating company, and not merged into the main TalkTalk Group business. In late 2007 the One.Tel name was abolished and merged with TalkTalk.
However One.Tel still exists and has existing customers under http://www.onetel.co.uk/
- Drew Cratchley (20 November 2009). "One.Tel saga not over for James Packer and Lachlan Murdoch". The Daily Telegraph.
- "Murdoch heir defends One.Tel fiasco". BBC News Online. 7 August 2002.
- "One.Tel collapse angers magnates". BBC News Online. 30 May 2001.
- Paul Barry (8 April 2002). "The great One.Tel giveaway". The Age.
- "Pressure piles on One.Tel media heirs". BBC News Online. 11 June 2001.
- "Packer ordered to give diaries to watchdog". Sydney Morning Herald. 14 October 2005.
- Anne Lampe (15 October 2005). "One.Tel quiz looms for Packer". Sydney Morning Herald.
- "One.Tel auditor was linked to Packer". Sydney Morning Herald. 26 October 2005.
- "Moguls face $232m claim after OneTel ruling". ABC News (Australia). 19 November 2009.
- Andrew Main (17 December 2009). "ASIC to appeal OneTel ruling". The Australian.
- Richard Wray (20 December 2005). "TalkTalk doubles in size as it buys up rivals for £142m". The Guardian.
- Richard Wray (19 December 2005). "It pays to TalkTalk to Carphone Warehouse". Yorkshire Evening Post.
- Total Telecom staff (14 August 2001). "Scarlet buys One.Tel's Dutch subsidiary". Total Telecom.