Intagr8 had 'unsustainable business model', couldn't pay debts, liquidator says
Intagr8 Ltd, which was placed in liquidation this month after failing to pay creditors, ran an "unsustainable business model" with upfront sales revenue too meager to cover the cost of inducements for new customers to its bundled telephone and equipment deals, the liquidator says.
The collapse before Christmas left thousands of small and medium-sized businesses without telecommunications and internet services.
Steven Khov and Damien Grant of Waterstone Insolvency were unable to estimate the total assets of the company or its liabilities in their first report as liquidators. A creditors meeting has been called tentatively for Jan. 16 where the liquidators expect to give an update.
The liquidators didn't immediately return calls. Grant was quoted in media reports this month saying the business had monthly turnover of about $1 million and staff were being kept on pending the sale. Vodafone made up about 70 percent of Intagr8's creditors by dollar value, reports said.
The liquidator's report, while short on financial details, says Intagr8 "ran an unsustainable business model with the upfront sales revenue insufficient to cover the cost of the credits offered to induce sign ups."
"The liquidators are also aware that the failure of the business can also be attributed to a major supplier withdrawing telco services affecting the ability of the company to provide on-going services to customers," it said. "The ability of the company and the liquidators to limit the damage to the business as a result of the withdrawal and subsequent media statement regarding the withdrawal has severely diminished the value of the business in the hours following liquidation."
Making matters worse for the company, several suppliers had withdrawn services to the company and "began to actively convert customers of the company, further diminishing the viability and value of the business."
The liquidators said they would investigate the affairs of the company to determine if any insolvent transactions had occurred or if any company officers had been in breach of their duties.
Intagr8's sole shareholder and director is listed as Murray Taylor, according to the Companies Office. Taylor, who has reportedly left the country, blamed bad publicity after Vodafone severed ties with the company for its demise. Vodafone is owed about $1 million and is listed among 20 known creditors in the liquidators report, along with UDC Finance, ANZ Bank, Westpac New Zealand, the Inland Revenue Department and financing company Advaro, ultimately owned by a Maui Capital fund.
The liquidators have already sold Intagr8's business and remaining customer database to a new company reportedly called RS Comms, although that name is showing only as an approved name on the Companies Office. 2degrees corporate affairs director Mathew Bolland said the new owner had contracted with 2degrees to be a wholesale supplier for the business, although billing and other services were Intagr8's responsibility.
Intagr8 has been investigated by the Commerce Commission over complaints about its sales practices and confusion among customers about who they have contracted with. Earlier this month, Advaro said it was in talks with the new owner and that "those Intagr8 customers with hardware rental agreements with Advaro continue on the same terms and the rentals remain payable to Advaro."
Advaro defended its existing customer contracts, saying they had "always been clear about how the funding works".
"This includes information about who is the owner (the finance company) and who is the renter (the customer)," Advaro chief executive Joe Duncan said in a statement. "As a result, we received very few complaints from Intagr8 customers before the newspaper publicity - under 2 percent of our total Intagr8 customer base."
In a statement last year titled How Intagr8 Works, the company said it "combines telecommunication hardware alongside telecommunication billing, offering rental agreements to a market of small to medium-sized businesses applying the funds already being spent with current telecommunication providers."