12/11/2008 - 22:00

EFTel protagonists face off

12/11/2008 - 22:00


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THE combatants are gathering for the next round in the continuing stoush between Perth-based telco EFTel's board and disgruntled shareholders.

THE combatants are gathering for the next round in the continuing stoush between Perth-based telco EFTel's board and disgruntled shareholders.

Matthew Bretherton, who holds 12 per cent of EFTel through his company Thooruna, has called an extraordinary general meeting for November 19 in a bid to oust the company's largest shareholder, MD and CEO Simon Ehrenfeld, from the board.

At the 2007 AGM, Mr Ehrenfeld and his fellow directors, Paul Stevenage, Jurgen Steinert and Jeremy Cousins, narrowly survived a challenge to their board positions by a group of independent shareholders, including three former directors.

Mr Ehrenfeld is the company's largest shareholder, and with his first cousin and fellow board member, Mr Cousins, holds about 20 per cent of EFTel's shares

Mr Bretherton, who became an EFTel shareholder after vending his business into EFTel in 2003, said a number of key shareholders had recently withdrawn their support for the current board and he was confident he had the numbers to remove Mr Ehrenfeld.

Supporters of Mr Bretherton said they believed removing Mr Ehrenfeld from the board would trigger his dismissal as CEO.

In a letter to shareholders accompanying notice of the EGM, Mr Bretherton said he was concerned that, for the second year running, EFTel's auditors had noted the "existence of material uncertainty which may cast doubt on the entity's ability to continue as a going concern".

"This finding should be of extreme concern to shareholders," Mr Bretherton said.

"In 2007, the company's liabilities exceeded its assets by $3.857 million, which has now increased to $6.587 million.

"Given the current financial and capital markets crisis, it appears increasingly unlikely that the company, under the direction of the current CEO, can rectify this situation."

Mr Bretherton said he was also concerned that Mr Ehrenfeld had received salary and bonus increases of more than $100,000 in the past year and that, in July, 12.5 million options, exercisable at 6 cents until December 31 2009, were granted to unnamed executives of the company.

In a formal response to Mr Bretherton's claims, the EFTel board this week called Mr Bretherton a "disgruntled former employee" and apologised to shareholders for his "ongoing behaviour".

In the response, the EFTel board defended Mr Ehrenfeld's performance, saying he had delivered a marked improvement in underlying fundamentals such as net assets and earnings per share for the company.

The response said Mr Ehrenfeld's salary was lower than CEOs in other small telcos and that two reviews of his salary since 2003 had been approved by the remuneration committee, while other increases had been "achieved through Mr Ehrenfeld meeting tough performance targets".

The remuneration committee is comprised of Mr Ehrenfeld and fellow director Paul Stevenage.

The response did not cover where the 12.5 million options had been placed.

Mr Ehrenfeld said he was confident of surviving the challenge and couldn't understand why someone with a vested interest in the company, like Mr Bretherton, would want to "burn their own backyard".

He said he urged shareholders to read the company's response to Mr Bretherton's claims and not to rely on the "propaganda of a disgruntled former employee of the company".

EFTel's shares are currently trading at a five-year low of 4 cents. The company this year announced a maiden dividend of 0.1cents.


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