Telemedia joins the tech-wreck

By RICHARD BRADDELL utilities writer

The "tech-wreck" has caught up with Auckland businessman Chris Jones' Telemedia, which has crashed into receivership 20 months after listing on the Australian Stock Exchange.

The company, which made its living selling speciality cellphone network and call-centre systems, once boasted a market capitalisation of $A550 million ($683 million), temporarily making its 73 per cent owner, Mr Jones, one of New Zealand's richest men.

But on Tuesday night, the Sydney-headquartered Telemedia gave up the struggle and asked debenture-holder Westpac to appoint receiver Ferrier Hodgson, after failing to resolve a cashflow crisis brought on by bad debtors and slow payers.

"Whilst good progress has been made on a possible sale of the company and the substantial majority in value of creditors have offered support, the cash position of the company has led the board to conclude that it cannot continue trading," said chairman Rod Olsen.

The fate of Telemedia's 150 staff, 50 of whom are in Auckland, has yet to be determined.

Late in April, the company gave no sign of problems when it appointed two high-profile United States executives from Sun Microsystems and Qwest Communications to its board ahead of a planned migration from Sydney to the US and a Nasdaq listing.

At that time, its share price tripled, prompting a query from the ASX.

Telemedia told the exchange its shares were more realistically priced at the higher level, following its board appointments.

Sydney-based receiver Andrew Love, of Ferrier Hodgson, said the short-term objective was to arrange a sale.

The next 48 hours would be used to determine Telemedia's financial position, but it was possible there would be positive shareholders' funds, depending on the terms of any sale.

Mr Love said there was nothing to suggest the company had traded recklessly.

The collapse comes as a surprise. Telemedia appeared to have a secure niche supplying billing and switching equipment to third-party virtual mobile network operators, including The Warehouse and Australia's Virgin Mobile.

However, it has been expanding rapidly.

While the largest part of the business is in Auckland, staff are spread across Australia, the US, Japan, Asia and Europe.

The company's problems seem to parallel those that have destabilised telecommunications equipment giant Lucent Technologies, which is owed a fortune by companies that bought equipment on soft terms.

Telemedia's shares were suspended from trading on the Australian exchange on May 18 and the company subsequently said its board had become aware that certain debts owed to it, previously considered receivable, were unlikely to be paid or would be delayed.

Telemedia spokeswoman Sarah Mace said Mr Jones was devastated.

The management team had worked 24 hours a day, seven days a week over the last three weeks trying to save the company, she said.

Telemedia floated 27 per cent of the company at $A1 a share in November 1999, raising $A15 million.

Mr Jones, who also sold shares worth $A1 million, said the money raised would pay for "road warriors" - super salespeople capable of increasing the firm's market share.