Woosh annual sales fall on dwindling customer numbers, parent accounts show

Woosh Wireless, the local internet service provider, reported a 14 percent drop in annual sales as it shed customers, while clamping down on costs to limit losses, according to its parent company's financial statements.

The Auckland-based Woosh had revenue of C$11.3 million in the 12 months ended Aug. 31, down from C$13.2 million a year earlier, according to the financial statements of parent Craig Wireless System, which is based in California and listed on Canada's TSX. Woosh's gross margin narrowed to 32 percent of revenue from 38 percent a year earlier.

The New Zealand business narrowed its loss to C$5.1 million, from C$5.4 million in 2013, helped by a C$170,543 gain on the sale of a lattice tower to a competitor. Expenses fell to C$7.9 million from C$9.1 million, with fewer staff and salary costs and other cost containment measures, it said.

"Management has implemented several margin and cost improvement programmes to improve the financial performance of these operations," Craig Wireless said in its report. "Revenue erosion related to the wireless broadband operations is due largely to the loss of subscribers caused by the performance limitations of the legacy 3G (WCDMA) network. The company is pursuing options to potentially migrate to a competitive 4G technology."

In August, Woosh started upgrading its sites to cater for 4G technology, completing the first site last month, and anticipates the roll-out will be completed in 18 months. This month the Ministry of Business, Innovation and Employment granted the telecommunications company a two-year extension to meet compliance requirements related to its 2.3 Gigahertz spectrum rights, giving it until December 2016.

Craig Wireless bought 51 percent of Woosh for US$5.5 million in 2011 in a deal to satisfy $20.6 million of debt owed to then-investor Kuwait Finance House. The following year it lifted its stake to 75 percent with an equity injection of US$1 million.

Woosh accounted for the bulk of Craig Wireless's annual revenue of C$11.7 million in the year, and the group reported a net loss of C$10.8 million in the 12 months ended Aug. 31 compared to a loss of C$10.7 million a year earlier, which stemmed from the telecommunications company's share of losses of join ventures through the writedown in value of Norway spectrum, an impairment on the value of its Greek network assets, and the recording of a convertible debenture in the last quarter of the year, it said.

The group had an operational cash outflow of C$5.7 million in the year, leading to a net decline in cash and equivalents of C$2.5 million, and Craig Wireless's accounts were tagged by auditor MNP without qualifying its opinion.

"We draw attention to Note 1 to the consolidated financial statements which indicates that the company has incurred ongoing operating losses from operations and does not have sufficient current working capital to settle its current obligations," the audit report said in an emphasis of matter note. "These conditions, along with other matters as set forth in Note 1, indicate the existence of material uncertainties that may cast significant doubt about the Company's ability to continue as a going concern."

Craig Wireless said the company's continuing operations are dependent on its ability to roll-out a 4G network, generate revenue from its subscribers and receive either equity or debt financing. It is also in negotiations with a strategic operating partner.

"The company is currently in discussions with certain related parties in respect of the provision of additional financing to the company in support of its operations and has received expressions of interest in that regard," Craig Wireless said in a statement. "The company will make further announcements upon any developments as they occur."

After the Aug. 31 balance date, the company was loaned US$2 million by shareholders J. Drew Craig and S. Miles Craig, and later received a further US$150,000 loan from chief executive T. Boyd Craig.

The TSX-listed shares last traded at 4 Canadian cents, and have dropped 20 percent this year.