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Westel small cap golden child

THE Perth-founded telecommunications company Westel was the golden child of small-cap stocks on the All Ordinaries Index this month.

The shares climbed more than 40 per cent in one week to close at 28.5 cents.

Stock performance was boosted by a recent announcement the company had signed a deal with US company Transaction Network Services to provide the platform for Westel’s phone number portability solution.

Westel hit a low in 1996 when shares in the company, capitalised at $15 million, dropped to less than 50 cents a share.

Westel was subsequently bought by AT&T equipment manufacturing company Lucent Technologies for $115 million.

Westel CEO Scott Frayne said this was a reflection on the small relative market size in Australia.

“The substantial investment required to build high-end technology products could not be amortised over sales in Australia – it’s just not big enough,” Mr Frayne said.

He said phone number portability, which allows phone users to change carriers without needing to change their phone number,would greatly stimulate competition in the deregulated telecommunications industry.

“In 1996, Austel, the precursor to the Australian Telecommunications Users Group, delivered a report that attempted to quantify the savings to subscribers based

on the deployment of a number of portable solutions,” he said.

“It’s something that is very hard to quantify, but they concluded $2.1 billion per annum was a roughly accurate figure.

“On a level playing field, it will be interesting to see how aggressively carriers are going to offer the consumer better quality services at lower prices.

“If a carrier does not deliver those two criteria, the consumer should have few

inhibitions about going to a competitor down the road.

“As we all know, a telephone number is something in which consumers have invested considerable equity.

“At present, the consumer has to go through an inordinate amount of hassle in order to get a better deal.

“Shoddy service is also a key problem,” he said.

Mr Frayne said, in the mobile market, the alternating of consumers between the three main carriers was currently around 20 per cent.

“This means 20 per cent of mobile users have to forgo their telephone number every year,” he said.

Mr Frayne said phone number portability would force carriers to deliver on what has until now been empty promises.

“After eight years of deregulation and hearing reports of increased revenues from Telstra, the time has come for real benefits to reach the consumer,” he said.

“The regulators have legislated for local numbers to be portable by the end of this year – but that date has slipped four or five times over the past four years.

“Of course, for the incumbent carriers, there are technical challenges to deliver true number portability.

“Carriers don’t see phone number portability as a main priority because they’re too busy getting market share.

“The regulators are frustrated at this as their aim is to deliver improved benefits to the subscribers.”

This month, Westel moved their head office from Perth to Sydney.

“We are now focusing on doing business with the twenty-nine member carrier fraternity in Australia including Optus, Primus, AT&T, Telstra, Hutchison Telecom, Vodafone, AAPT and OneTel,” he said.

“They are all headed up on the eastern seaboard and these clients cannot be serviced remotely – hence the move.”

Westel will act as an independent link to telecommunications carriers operating in Australia when phone number portability is introduced around March next year.

It will generate revenue by charging a small fee each time a carrier enters its database of telephone numbers.

Westel recently negotiated a deal to deliver wireless, secure communcations for emergency services in Kazikstan.

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