Australia's dot-com and telecommunications sector endured a grisly week with the failures of three high-profile companies towards the end of last week -- software company Open Telecommunications Ltd., Web designer Spike Australia Pty. Ltd., and share trader eStar Online Trading Ltd.
Open Telecommunications went into voluntary administration Friday when an attempt to sell a key part of its business failed.
"As a result, the directors have resolved that in their opinion the company is insolvent or likely to become insolvent within the foreseeable future," the company said in a statement to the Australian Stock Exchange (ASX).
The loss-making company once boasted a market valuation of A$2 billion (US$1.12 billion), but is regarded as almost worthless now, with its shares having dived to A$0.05 each when trading was suspended in April. The company's 200 staff have been stood down until a creditors' meeting on Friday.
Also on Friday, Spike closed its doors and made most of its 75 staff redundant after failing to get additional funding from investors. The company went into voluntary administration on July 4, but was hoping for A$5.8 million emergency funding from a single investor. That deal has now fallen through, according to the administrators.
The company is owed A$27 million by overseas subsidiaries in Japan, Hong Kong and Singapore. The voluntary administrators said the company is probably insolvent and return to creditors would be nominal. Local media estimated the company was valued at A$300 million at its peak.
EStar decided to close down because of an inability to sustain losses running at over A$85,000 per month, the company said in a statement Friday.
"The company's directors and management cannot see any dramatic improvement to the level of losses in the next 12 months due to high fixed operating costs and expected increase in fees from service providers," eStar Chief executive Albert Wong said in a statement. "Management will be working closely over the next few weeks with all existing eStar clients and suppliers to ensure that there is an orderly wind down of its current operations."
The weak industry environment has been steadily thinning the ranks of Australia's dot-com and telecommunications sector -- second-tier carrier One.Tel failed spectacularly last year, and Dingo Blue Pty. Ltd. followed in March this year.
Still waiting to know its future direction is the country's second-largest ISP (Internet service provider) OzEmail Pty. Ltd., a wholly owned subsidiary of embattled WorldCom Inc.