Accounting Course - One.Tel Telecommunication Company - Essay Example

Finally, by March 2001, One Tel was declared insolvent, after continuous efforts by News Limited and PBL to inject additional cash turned out to be insufficient. In this report, the reasons for the collapse are analyzed, how it could have been prevented and its effect. This paper analyses how the company was mismanaged, its internal control weaknesses, and financial reporting issues. Jodee Rich and Brad Keeling established One Tel. Company (telco), on the 1st of May 1995. James Packer and Lachlan Murdoch were the initial backers, providing an investment worth $995 Million (Cook, 2001).

The company’s business was to provide communication services and networks in Australia and major countries of Asia and Europe. The company launched its GSM services network in 1995 and within few years it became the fourth largest telecommunications company of Australia. Its success was mainly fuelled by its marketing and ability to attract young mobile users. It achieved an early success in Australia and very soon its operations went across international boundaries. The marketing strategy was to focus on the younger generation, using the slogan “You’ll tell your friend about One Tel”.

In its early years, One Tel enjoyed a lot of success due to its growing customer base and its profits grew from $3.7 million in 1997 to $6.9 million in 1999. In November 1999, One Tel. had a market capitalisation of $3.8 billion that made it rank as the 30th largest Australian company (Barry, 2002). Unfortunately, due to gross mismanagement the company’s collapse was inevitable. In 2000, the company’s financial position reported a loss $291.1 million. The shareholders tried to keep the company afloat, but it was not to be and by 28th May 2001 the company was de-listed.

The downfall of One Tel can be largely attributed to its shareholders and