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WiFi Operator Freshtel In Trouble

The Company claims its difficulties are not insurmountable and has announced the results of a strategic review that will see expenditure cut significantly.

The moves come as financial observers raised doubts about whether the measures would be enough, given the company’s cash reserves.

Freshtel offers a number of VoIP and Wi-Fi devices in the UK through the Tesco supermarket giant and in Australia through various retail chains, including JB Hi-Fi. It also offers downloads of Firefly, a free Internet softphone; and a servie for making Internet calls via mobile phones. The company lost $4.8 million in the six months to December 31, on revenue of
$1.5 million. It put the blame largely on call centre costs.

CEO Rhonda O’Donnell says the latest cost-cutting measures include cutting staff, with the exception of techies, and moving customer service to e-mail and video help support.

She says while a small core of business development staff has been retained to pursue revenue and licensing opportunities, all non-core contractors have been terminated. Other contractors have had their hours reduced and some have voluntarily restructured their remuneration.

O’Donnell said the measures taken are critical. “Freshtel is cognisant that the company needs to improve its current cash position and is making immediate changes to conserve cash in the short term and deliver sustained cost savings,” she said.


“This is about securing the future of the company and, as such, cost containment and operational restructures will not be to the detriment of our existing partners and customers, nor will it prevent us from continuing to advance the opportunities that are currently within our sights,” she says.

“We are vigorously pursuing new opportunities and business continuity has not been affected by the measures we have taken.”

However, communication industry journalist Stuart Corner noted that the company’s measures might not be enough to conserve its dwindling cash reserves.

The restructure “will give the company only limited breathing space, based on its latest results,” says Corner in his ExchangeDaily newsletter.
“Cashflow in the half year to December 31 was a negative $4.19 million and the company had cash reserves of les than this, $3.97 million at December 31.”

Freshtel spokeswoman Rebecca Wilson at PR company Buchan, told CDN that O’Donnell would be involved in a meeting of the board until late last night and would make an announcement on Friday.

“It is worth noting that Freshtel is confident it is a going concern and while we acknowledge that the cash position is low, we expect receivables to improve significantly over the coming weeks,” Wilson told CDN.

“This is in parallel with yesterday’s announcement regarding significant cost cutting to sustain cash.” ­ Kate Castellari