VTL - Vital Telecommunications (formerly Team Talk)

[percy]

Snoops check out this version ....and it was only the Sound check !!
https://www.youtube.com/watch?v=BIsZXx2AoL8

It would have to be my all time favourite Kiwi song.
Loved the sound check,.Never seen it before.

[nztx]

Now who might be a likely interested party to pick up a stressed VTL lock stock & barrel ?

Any one of the other 3 big telcos - if the price is right - perhaps even IFT ?

SPK & Voda in past have had a little fun with VTL & Teamtalk .. with the upgraded Welly Loop
which VTL have sunk an arm & leg into in place - could this be of interest ?

[Snoopy]

https://www.youtube.com/watch?v=d08Cnyzi_iw

Snoops check out this version ....and it was only the Sound check !!
https://www.youtube.com/watch?v=BIsZXx2AoL8

Sorrry, I have gone a bit off topic here but I thought I would do a 'bit on the side review', since this song seems to have generated some interest.
Ferg has signed off on his music check list, but I was having some withdrawal symptoms so here is my own superficial research on this song.

Max Merritt (active 1956-2020) was a New Zealand-born singer-songwriter and guitarist. He is best known for his association with the group "Max Merritt & The Meteors", which performed as a group from 1959 to 1980. Naming a line up however is more difficult because 33 different individuals, including our own Bruno Lawrence, performed with the group over that time.

By 1975 the then current incarnation of 'Max Merritt and the Meteors' were an old guard act playing the pub circuit in London against the emerging punk scene. After 16 years on the road 'Slipping Away' became the groups biggest hit single making it to number 2 in the charts in Australia and number 5 in New Zealand over 1975/1976. 'Slipping Away' was released from the "A Little Easier" Album on the Aritsa label. The original video for Slipping Away was filmed at The White Hart in Harlesdon in London.

In a 2011 interview by Johnny Kempt, Max had this to say about the song
"l wrote Slipping Away at the time I had that band but I knew it wouldn’t suit the band. When I was writing that song I was trying to write a Phil Spector song, something like 'Be My Baby'. I wrote the thing in about five minutes, I really did. I played some drums on a pillow and all that sort of s?!t. I’m of the belief that if you write a song and you can’t remember it, then it ain’t worth keeping. That’s my working rule."

"I borrowed Dave Russell's bass and Stewie Speer’s drums and went into Command Studios, a little studio in London and did a demo of Slipping Away, with me playing drums and bass, as well as guitar and singing it. But it wasn’t until the band had actually broken up. Dave [Russell] picked up his bass from the studio, after I’d finished doing the demo, and went to the airport and back to NZ!"

"I took that demo to Andrew Bailey, who was at that time editor of Rolling Stone, and Slipping Away was the basis of getting that deal with Arista."

"It’s been covered maybe 20 or 30 times, but they all f?!k up, by trying to make it more than it is. It’s a nursery rhyme! We went in to mix it and I said we couldn’t cos we didn’t have a return phrase. Richard Dodd was the engineer and he took just the last words of the line and bounced them to another track to echo the line."

After 'Slipping Away' the group never reached such chart heights again.

After Max died on September 25th 2020, five fellow Australian musicians (Max was claimed by the Aussies as he left our shores to play there as early as 1965), -these being Marcia Hines, Andy Bull, Didirri, Russell Morris and Mia Wray- produced this montage tribute version of the song dedicated to Max.

https://www.facebook.com/TheMarciaHi...2675494192136/


SNOOPY

[percy]

1956–1962: Early career in Christchurch
Born in Christchurch, New Zealand, Merritt was interested in music from an early age and started guitar lessons at 12.[3][6] By 1955 he encountered the rock and roll of Bill Haley and Elvis Presley. After leaving school in 1956, aged 15, Merritt formed the Meteors with friends Ross Clancy (sax), Peter Patonai (piano), Ian Glass (bass) and Pete Sowden (drums).[3][5] Initially a part-time group, they played dances and local charity concerts, Merritt continuing his day job as an apprentice bricklayer in his father's business.[3][14] When his parents, together with local Odeon theatre manager Trevor King, developed the Christchurch Railway Hall into a music venue, The Teenage Club, they hired Merritt and the Meteors.[3][14] The Teenage Club drew hundreds of locals and increased their popularity in the city when most businesses and public venues closed until late on Sunday afternoon.[8][14]

Clancy was replaced by Willi Schneider during 1958, the band released their debut single, "Get a Haircut", in June on HMV Records.[3][14] By 1959, the Meteors had become a top youth attraction, regularly pulling crowds of 500 or more.[14] Merritt borrowed players from other bands if a Meteors' member was unavailable, one such band was Ray Columbus & the Invaders fronted by vocalist Columbus.[3][14] From this band Merritt recruited guitarist Dave Russell and bass guitarist / keyboardist Billy Karaitiana (a.k.a. Billy Kristian).[3][14] In January 1959, New Zealand's top rocker, Johnny Devlin, played in Christchurch. Devlin later saw Merritt at a "Rock'n'Roll Jamboree" charity concert where Devlin's manager Graham Dent was impressed enough to praise their performance to Auckland promoter Harry M. Miller.[3][8] Miller added the Meteors to Australian rocker Johnny O'Keefe's 1959 tour of New Zealand.[3][8]

Christchurch had been chosen as the site for a United States paramilitary base to access Antarctica. Code-named "Operation Deep Freeze", it had the only airfield large enough to handle the huge transport planes.[3][8] The US presence provided a greater influence of rock and roll music – young servicemen discovered The Teenage Club and the gravel-voiced young Kiwi singer, Merritt.[8] More rock and roll and R&B records entered local jukeboxes and were on radio.[8] From their US connections, both the Meteors and the Invaders were able to equip themselves with Fender guitars and basses, which were still rare in Australia and the UK due to import restrictions.[3] By 1959 the line-up for the Meteors had become Rod Gibson (saxophone), Ian Glass (bass guitar), Bernie Jones (drums) and Billy Kristian (piano). Early in 1960, HMV released their debut album, C'mon Let's Go.[3][8] Follow up singles were "Kiss Curl" and "C'Mon Let's Go" in 1960 and "Mr Loneliness" in 1961. They had local support but were almost unknown beyond the South Island.[3][8] In an effort to break into the more lucrative North Island market, both Max Merritt & The Meteors and Ray Columbus & the Invaders relocated to Auckland in November 1962.[3][5][

I am sure I older brother used to go to a hall in Spencer Street,Addington ,and not only Max played there,but later or other times so did Ray Columbus.

[nztx]

A very good read there - Snoopy & Percy - thanks for that & I do remember Max back
in past years

[Snoopy]

At 38 cents this company was in a shambles, a badly managed business that failed to generate appropriate return on assets for the past few years. Not to mention the heavy debt burden of $35 million played on the minds of investors. Through my time as an investor and watching companies fall apart nothing quite does it like massive debt on the balance sheet and secondly failing to even generate appropriate profits to service that debt. So yes at that time a terrible company in the view of everyone, with an uncertain business direction, uncertain debt management given earning power and just generally bad sentiment all round.

What changed? All recent developments show signs of progress.

Firstly we have a new CEO in Andrew Millar, which means a new direction.

The current business forecast $2 million in profit and next year to be $4-5 million, with the reduction in debt $2 million generated isn't too bad at present times and given improving business on their fibre network and possible cut in expenses it looks very good going into the future. Fibre is still making progress, but as we can witness with Chorus the profit is in Fibre and once everyone in Wellington converts to Fibre its only going to improve TTKs revenue and possibly profits (I hope). I'd expect their radio network business to decline slowly overtime unless tech is improved.

All these developments are quite recent, so yes you have share price jumping all of a sudden thanks to Spark's well you know spark on their share price (see what I did there^^). You have new management looking to change things up and focus on the core business, a road out of debt, better business focus with better profits on its way, a large asset base with a strong moat and good confirmation by Spark and Vodafone that TTK is still a competent business with assets still worth acquiring.

Sensational news! CEO - gone! Very pertinent observation from Silverblizzard that I have highlighted in the quoted text in bold.

Interesting to reflect on this quoted post from Silverblizzard888 in 2017. Today the company's name is changed to 'Vital', which may be appropriate, considering the Vital signs of the company need watching. Share price is now 29c, up 1c on the day with the announcement of CEO Andrew Millar's sacking today.

Debt is in the half year report listed at $14.850m. But over Andrew's reign:

1/ The Farmside business was sold ($13m of cash in),
2/ An $8.7m capital raising was conducted in 2018

If we add the capital raised to the company debt today I get $36.550m. IOW the only way the company was able to reduce debt since 2017 was to sell assets and tap shareholders for capital. Operationally the capital position of the company has gone backwards over 5 years, and the company expects to make a loss for the year. It is good to see the board chair act decisively to sack the CEO. But replacing the driver doesn't get you off the troubled road. The new 'fill in' driver, James Bull, will need to keep his eye on the road in this current storm. There are some steep hillsides in Wellington. One moment the road is there. Next, just like the emergency services radio contract, that road is 'slipping away'.

SNOOPY

[DarkHorse]

Brings to mind another of my favourite kiwi tracks
https://www.youtube.com/watch?v=qF2PxSQo3k4

[winner69]

Another exec bites the dust …Head of Sales leaving

Only been with Vital a few months

Chair says not fired or anything like that …was head hunted

https://www.nzx.com/announcements/393714

Share price up today …must be good news

[Snoopy]

Something a little odd going on here to justify the valuation of goodwill on the books. I am looking at note 14 in the FY2021 accounts, and have tabulated the equivalent figures from the previous two years.

	Discount rate of Future Earnings	Terminal Growth Rate	Goodwill on Books EOFY
FY2019	7.37%-7.71%	0%	$17.038m
FY2020	9.69%-9.84%	1%	$17.038m
FY2021	10.23%-10.28%	1%	$17.038m

The actual goodwill on the books hasn't changed. But to justify the goodwill valuation, the discount rate keeps going up! That could mean a couple of things (?).

1/ The modelled earnings power of the assets that contain the goodwill have not changed. But the modelled time needed to achieve the implied earnings power of those assets has been pushed further out into the future - hence the rise in the discount rate.
2/ The modelled earnings power of the assets that contain the goodwill have not changed and neither has the modelled time needed to achieve the implied earnings power of those assets. But in the interim profits are down more than expected. So this means from an 'annual growth ' perspective, the business will have to grow faster than last year to meet the book valuation goal. And because the business will have to grow faster, that introduces more uncertainty into the business model. Hence the increase in discount rate.

Is there any other way to interpret the changes in these figures? Is this confirmation of a 'hope the business improves' strategy? Is hope even a strategy?

	Discount rate of Future Earnings	Terminal Growth Rate	Goodwill on Books EOFY
FY2019	7.37%-7.71%	0%	$17.038m
FY2020	9.69%-9.84%	1%	$17.038m
FY2021	10.23%-10.28%	1%	$17.038m
FY2022	11.80%-13.60%	1%-2%	$0.0m

AR2022 p27 on goodwill
"The base case recoverable amount approximately equals the carrying value of the net assets post impairment."

Chairman - gone. CEO - gone. It has been a tumultuous year, with the devastating blow of losing the new St John Ambulance contract, even if the old one has 3 years or so still to run. But to answer my last question first, hope isn't a strategy. The huge $17m of goodwill on the balance sheet has been carefully groomed through by the auditors and has formally been judged/confirmed to be worthless. I guess that represents a big thumbs down from the auditors about the company's fantastical future growth claims. Management makes brave talk in the Annual Report for FY2022. Talk that is based around how much more it would cost to roll out an equivalent radio network, -or indeed a central city broadband network in Wellington or Auckland today-, and how the whole company is now trading at well below network hardware replacement value. The important caveat being that these networks only have value if Vital can find the customers. But can they? Ah well, at least we have certainty on the goodwill issue.

SNOOPY

[Snoopy]

'Vital', as this company was rebranded in 2019, is a small niche overlooked share (you can tell that because since the company name changed from Teamtalk a couple of years ago, no-one has bothered to update the thread title). This indicates to me it might be 'worth a snoop'. So let me introduce them to you as a provider of infrastructure and communication services.

Vital has two divisions:

1/ 'Wired Networks' that principally consists of two wholesale fibre communication networks, one around the CBD in Wellington (acquired) and the other around the CBD in Auckland (built in house). Originally branded as 'Citylink', the Wellington network in particular, 32km of the 250km total, has been extensively rebuilt in the last few years. The 'old overhead cables' - that piggy backed on the now retired trolley bus line network - have migrated underground. They now goes through the old Powerco subterranean gas ducting. Of course the electronics on the end of the fibre have concurrently been updated to produce a more flexible product package range that tops out for maximum speed at 10Gbps (slightly higher than the maximum 8Gbps offered by top line Chorus hyperfibre). 'Citylink' serves business (including Dimension Data and Datacom) and the telecommunications industry (including Spark, Vodaphone and 2 degrees). Vital have a TAAS (Telecommunications as a service) contract with the Department of Internal Affairs to deliver telecommunications services for all government agencies. Further, 'Citylink' are contracted to operate Wellington's free Wi Fi service throughout the CBD. They also offer cloud based data storage capability to customers in Wellington and Auckland, and provide peering exchanges for ISPs to share data.

The original 'Citylink' Network was sold by the Wellington City Council in 1999 to investment firm 'Active Equities'. It was subsequently acquired by Teamtalk (as Vital was named then) in 2006.

2/ 'Wireless Networks' is New Zealand's only nationwide wholesale radio network for voice and data traffic, and it operates in the microwave spectrum. This division operates three networks, (1) 'ActionNet' the legacy network that is in the process of being replaced by a (2) new digital radio network equivalent (engineered by Tait Electronics of Christchurch). Customers may be found in the Civil Defence, Emergency Services, Health, Utilities, Public Transport Education and Logistics and Freight sectors. 'Wellington Electricity' and "Auckland Airport' are two of the more high profile customers. There is a dedicated network for emergency services too, with a new contract just signed for St Johns. In 2016, Vital launched (3) 'RT max' as an affordable entry level digital radio service based on Motorola's 'Linked Capacity Plus' technology.

A significant capital raise of $8.2m was made in FY2019 to go towards funding these upgrades, and a new computerised management system to support them. The current company policy (AR2019 p2) is to pay out 50-70% of NPAT as dividends to ensure enough cash is retained to keep investing in the networks.

For those students of history, there was a third division 'Farmside' that concentrated on selling satellite and fixed wireless internet in rural areas. However this division was sold to Vodaphone in two tranches of 1/ 70% on 1st June 2017, and 2/ 30% on 31st May 2018.

Conclusion: As (1) the only nationwide wholesale provider of a digital radio service and as (2) one of the top three in the fibre Wellington market (with Vodaphone and Chorus) and Auckland (with Vector and Chorus) , Vital PASSes this first test.

New management, and there has been a subtle repositioning of the 'market presence statement'. Fundamentally the story remains the same:

VTL operates in the communications networks market, across different network technologies:
• Wired: provides fibre networks in Auckland and Wellington; and
• Wireless: mobile radio technology. (Note: The legacy 'Action Net' network which started the company in 1994, and has now been replaced by the new digital network, was closed down in June 2021).

From the director and CEO commentary in AR2022
"Recurring revenue also declined, more so on the Wired,(i.e. fibre) network.(-12.1%),"
"The degree of work-from-home activity has likely played some part in soft demand for CBD fibre capacity in Auckland and Wellington."

Ouch! This is the part of the business that will have to carry Vital forward, once they lose the St John Ambulance Wireless contract. So not only did Vital Wireless get a huge sucker punch over FY2022. The rest of the business is bleeding profusely as well! The 'customers work from home' explanation is a worry, because that indicates to me there are less Vital Ltd connections, rather than just less data being shared over the network. IOW the reduction in business is permanent.

"The Company was unsuccessful with its tender for the PSN (Public Safety Network) contract, "
"Commenced remedial action during the year, including moving to change the sales model for the Wireless division."

What is interesting is that the successful PSN contract tenderer, a company called Silverstripe -which is also headquartered in Wellington and is a similar sized company to Vital-, does not appear to have a wireless radio network of their own. So Silverstripe will either have to build an equivalent (a very expensive exercise), or negotiate a contract to run across an existing operational network.

From Vital AR2022
"Mobile radio is utilised by organisations that supply critical services (e.g. electricity network providers) that require “always available” reliability, or have remote work in areas outside cellular coverage."
"Vital provides the only commercial nationwide mobile radio infrastructure across New Zealand."

Hmmm, I wonder who Silverstripe will have at the top of their network negotiation list?

Here is what AR2022 says about Vital's change in market presence emphasis:
"A key strategy change in Wireless during FY2022 has been the move to utilise channel partners."
"Wholesale agreements have been put in place with a number of regional mobile radio operators with the intent they will take over the servicing and support of a long tail of smaller clients that currently contract directly with VTL."

I read that to say that "it is expensive to deal with a plethora of rag tag retail customers" and "it makes more sense for Vital to 'concentrate on running the network' " and transition towards being a wholesale company only.

From the October 2021 market release on their emergency services tender failure:
"Vital remains open to partnering with the down selected parties along with NGCC (Next Generation Critical Communications) (NGCC is the government agency overseeing this project) to assist in delivering the outcomes that PSN (Public Safety Network) and emergency services require."

From the June 2022 newsletter:
"We are excellent at delivering fibre and radio networks while our partners – who are our customers– are best placed to build and maintain the end consumer relationships. This not only shows we understand where we fit within the development of our clients’ communications ecosystems, but it also mitigates the risk of being seen as a direct competitor by those we need to be working with more."

"This could see Vital step back from what could be described as a hybrid wholesale/retail model, placing a greater emphasis on our core position as a specialist utility network operator with both our niche radio and fibre network assets."

This sounds to me as though Vital are positioning themselves to offer their services to Silverstripe as a PSN system sub-contractor. So maybe not all is lost on the PSN job?

In conclusion, nothing has happened to upset the strong hardware position of both Vital's 'nationwide wireless network' and the 'CBD fibre networks'. Particularly so when Vital have redefined their business in a way that says losing end line retail customers does not matter. So as far as Buffett would be concerned, 'Vital' has PASSED this first test.

SNOOPY