The entry of Onetel into the Australian telecommunications industry was high-flying as the company was financially backed by two famous heirs James Packer and Lachlan Murdoch. The company was established in May, 1995 by two entrepreneurs Jodee Rich and Brad Keeling, with an initial investment capital of 995 million USD (Cook, 2001). The company initially started its operations in Australia with a slogan “You’ll tell your friend about Onetel” and then extended their base to USA and Europe, with a low pricing and end user driven strategies. The customer base for the company increased from one thousand to one hundred thousand in a gap of a year ( Accounting and Finance Association of Australia and New Zealand, n.d.). Although in the…show more content… In accordance to its annual report, in the year 1997, the company booked a profit of approximately 3.5 million USD after tax, 5.91 million USD and 6.96 million USD in the years 1998 and 1999 respectively. The company was seen as one of the highest mounting company and was among the top four telecommunications companies in Australia ( Accounting and Finance Association of Australia and New Zealand, n.d.).In the progressing years, the company has shown a precipitous dive and could not maintain its profit margins. The company recorded a huge loss of nearly two hundred ninety million acting as foreteller of the future of the Company. Regardless of the enormous efforts from the directors and shareholders to revive the company by injecting more funds, the company ceased its operation on 28th May 2001.
Reasons of Onetel debacle
There are a number of factors behind the debacle of Onetel Telecommunication Company. The main reasons behind the collapse were unfulfilled duties of directors and management, unsatisfactory role of auditors, inadequacy in internal controls of directors and inappropriate management of compensations.
Failures of management and directors duties
The Company’s managing directors; Jodee Rich and Richard Keeling made wrong strategies and failed to exercise their duties properly, in accordance to the section 180 of Corporation Act 2001. They failed to manage company effectively and thus did not succeed