Woosh in peril after $38 million loss

[UPDATE: Read Woosh's rebuttal and NBR's counterpoint here.]

Woosh Wireless has posted accounts with the Companies Office recording a $38 million loss for its financial year ending June 30, 2009.

In a statement accompanying the long-delayed filing, the internet service provider’s chairman, Rod Inglis, said “the directors believe that the value of the network assets could be increased in future with a WiMax or 4G wireless deployment, which could mean the underlying assets could be very valuable.”

However, right now, Woosh has decided its existing wireless network, based on proprietary IP Wireless technology, is worth less.

The company took an impairment charge of $22.3 million, giving it negative equity of $12.4 million.

Woosh carries no debt, said Mr Inglis, but has borrowed $25 million from shareholders - which to many will look and smell like the same thing.

Cash has dwindled to $834,000.

With cornerstone investor Kuwait Finance House having run out of patience, Mr Inglis is now looking for fresh sources of equity.

Mr Inglis said Woosh Wireless was "modestly cashflow positive"for its current financial year. Around 20% of the ISP's 26,000 customers are now in fact land-lubbing, serviced by DSL connections provided by Telecom Wholesale following Woosh's 2006 purchase of QuickSilver.

Familiar spiel
Woosh has been looking to make the move to WiMax of 4G for more than two years (it was a refrain of former marketing manager/COO Kristen Dunne-Powell), but has been unable to find a backer willing to pick up the tab, which would run to hundreds of millions for a nationwide roll-out.

Certainly, it’s a tough sell.

Telecom and Vodafone NZ, which collectively have spend more than $1 billion on their respective upgrades to 3G, both have medium term plans to upgrade to 4G (aka LTE); Vodafone has already demo’d the technology.

Do others want what Woosh has got?
Kordia has dabbled with WiMax in Auckland but, for the time being, has deemed it far from economic to rollout a national network.

Woosh does own some 2.3GHz spectrum rights, suitable for WiMax, but not in continuous blocks, meaning it would need a partner with complementary radio rights as well as deep pockets.

Mr Inglis seems to now be implying that Woosh now represents an attractive buy for another 4G or WiMax ambition.

But Telecom and Vodafone are sorted for cellsites. And with the impending analogue TV switch-off, a motherlode of new 4G-friendly spectrum will be freed up for government auction.

There have been whispers that 2degrees has been sniffing around Woosh, with an interest in co-locating in some sites. But with Woosh sites concentrated in Auckland, where 2degrees has already gone to great pains to secure its own sites, even this option seems limited.

And if 2degrees does covet Woosh's spectrum (or other assets), it may wish to wait until the company goes to the wall - the Black Knight rather than White Knight scenario.

Those who could lose out
Woosh has 338 million private equity shares.

The biggest holder, with 124 million shares, is Endeavour Capital's New Zealand Australia Private Equity Fund.

US venture capital company Clarity Partners - a long time investor that staunch backer of IP Wireless (with the benefit of hindsight, a duff technology bet) - holds 73 million.

Original investor Todd Wireless still holds 53 million.

Kuwait House holds 36 million; Walker Wireless Holdings 21 million and Stephen Tindall's Norwood Investments 17 million.

Noteable smaller investors include Craig Heatly (4.3 million), Woosh's original launch partner Vodafone (1 million) and ACC (600,000).