Accounting for Managers: Analysis of One Tel Limited's Failure

This essay critically evaluates the financial crisis and subsequent collapse of One Tel Limited, an Australian telecommunications company founded in 1995. It explores the company's initial success, key achievements such as becoming the second-largest telecommunications company in Australia and a major ISP provider, and significant changes in its structure, including substantial investments from media companies. The essay delves into the generally accepted reasons for One Tel's failure, highlighting issues such as IT system failures, inefficient management, poor corporate governance, a flawed billing system exacerbated by the introduction of GST, and manipulative financial reporting practices. It also examines the social impact of the company's collapse on staff, the wider business community, and society, and summarizes the lessons learned, emphasizing the importance of robust corporate governance, risk management, and ethical business practices. The analysis concludes that the absence of these critical elements contributed significantly to One Tel Limited's insolvency.

Accounting for Managers
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Contents
Introduction................................................................................................................................4
Company background................................................................................................................5
Achievements.............................................................................................................................6
Management and governance structure......................................................................................7
Corporate governance................................................................................................................8
Collapse of One Tel Limited......................................................................................................9
Conclusion................................................................................................................................11
Bibliography.............................................................................................................................12
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Executive summary
In the current environment, it has been noticed that many companies and organizations are
trying to improvise their management and corporate governance practices in relation to the
risk management tasks. The main reason behind this improvisation is that most of the
companies are facing downfall if they are considering the management measures in their day
to day work. Also, the main reason behind the collapse of such companies is the increase that
is observed in their liabilities which may restrict the company from fulfilling its debt
obligations. The above report will clearly analyze the milestones that have been achieved by
the company and also the reasons that have caused its failure.
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Introduction
The company One Tel Limited was founded in the year 1995 and was restricted from trading
in 2001. During this period, the organization has achieved many positions in the Australian
telecommunication industries which have helped it to earn a reputable position in the market.
The company gained a lot of media influence at the time of the liquidation in which most of
them stated that the collapse of One Tel Limited was majorly caused because of the IT
system failure. (Boyd, 2013)The use of IT system for a large scale telecommunication
company should have a high degree of professionalism and long-term planning to meet the
rapid growth that has been observed by the organization.
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Company background
The company One Tel limited was established in the year 1995 in Sydney. The two major
businessmen Jodee Rich and Bradley Keeling were the founders of this company and verbal
accustomed to the fast-growing Technology based industries because of their previous
experiences. In the early years, it was clear that the company was growing at a substantial
rate and was accomplishing great tasks and objectives in a short time (Cochran, 2017). Also,
this substantial growth rate made it necessary for the company to provide returns to the
shareholders with the profit that have been retained by them. Based on the research that has
been made for the final 18 months, it was noticed that the company only achieved huge losses
on a grand scale while trading. On 17th may, 2001 a crisis board meeting was held in which
Jodee Rich addressed the board and the major shareholders about the insolvency that is being
faced by the organization (Dash, 2016). The history of this company clearly states that the
firm was expanding at an extremely fast rate and also that the chief executive officers of the
organization were not having proper information about the financial state of the company as
the growth was substantially exceeding the income revenue.
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Achievements
The company One Tel Limited have achieved a lot of successful obligations at the time when
it practiced business. It was also stated to be the second largest telecommunication company
in Australia. The company was also able to attract many customers towards their telephone
carriers. It has been mentioned in many articles that the customers of One Tel Limited were
mainly single mothers, pensioners, and teenagers. Between the years 1995 and 1996, the
customer base of the company reach from zero to 100,000. (Dayananda, Irons, Harrison,
Herbohn, & Rowland, 2008)The organization also had a very huge internet service providing
capacity and was once the largest ISP provider in Australia with more than 150,000 active
customers. The company has also tried to provide mobile call services which have helped
them to gain over 250,000 mobile users with the help of appropriate marketing skills that they
have directed towards the consumers. (Fridson & Alvarez, 2012)The company also dealt in
the fixed wire services which have improvised the demand for a long distance and overseas
telephone calls. The next generation of mobile phones services was also transmitted by the
company to the customers. The company was also a very powerful marketing and brand
builder as it attracted the youth towards it and often had substantial disposable income.
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Management and governance structure
It was in the middle of 1999 that the influential media companies took huge shareholdings in
the business of One Tel Limited. The registry of the shares was having a very different
profile and the organization was also able to expand its origins to a whole new level. A total
of $900 million was invested by the News and PBL for the business of One Tel Limited
during the year 1999 (Ittelson, 2009). Also, the companies had appointed very high profile
non-executive directors to the board of the organization in order to represent themselves. The
management of the company was smart enough to deliver worldwide content to the public
using the electronic services. These companies have not only invested a huge sum of money
but also they have motivated the One Tel limited to expand worldwide and deliver advanced
mobile services at a global level. The organization has faced many problems in order to
establish mobile network infrastructure within the country. This led to a strategic partnership
that was established with the American Communications vendor named as Lucent
Technologies under the agreement that the Lucent will help in building the mobile
infrastructure. (Johnstone, 2014)The ultimate cost of this whole operation was approximately
$1.2 billion and the payout was said to be paid in the instalments from the revenue that will
be generated with the help of the mobile network. (Kusano, 2018)
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Corporate governance
It is the sole duty of the directors and the board of the company in order to be responsible for
the management of the business. Management not only means to look after the day-to-day
business of the company but also to implement a long-term strategy which will help the
company to achieve objectives and earn the interest of its shareholders (Loughran, 2010).
There are major corporate governance principles that should be kept in mind at the time of
Management of a business:
• Developing foundations for management and oversight which will help to improve the
accountability of the system.
• To develop a structured board this will help the business to operate.
• Improvising the responsible decision making and ethical nature of the management.
• Safeguarding the integrity of the financial reporting system of an organization.
• Making timely and balance disclosures.
• Work in accordance with the rights of shareholders. (Menifield, 2014)
• Recognition and management of risk that may help the day to day business.
All these duties were not fulfilled by the management of the One Tel Limited which was very
inefficient in nature. The breach in the contracts and the inefficient management of the billing
system was one of the major reasons for the collapse of One Tel Limited. The management
was inefficient in the task of making decisions and executing the tasks which have made it
vulnerable for the organization to work in such an environment. (Ramírez, 2018)
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Collapse of One Tel Limited
There were many financial statements like the debtors aging report, trial balance and many
other accounting reports that was neglected by the management while analyzing the structure
of business which may have led to the collapse of One Tel Limited. No attention was given to
these cases which caused the whole Company to deal with a major threat of liquidation. The
value of aggression and faith is very necessary for an organization in order to survive in the
market of the telecommunication industry which was observed to be absent in the case of
One Tel Limited (Robert Parrino, 2013). Two major decisions were taken by the organization
towards it foundations policy which was that no accountant is allowed to go against the
company's intangible assets and the deferred expenditure policy of the organization was also
changed in every two years. There was manipulation observed in every part of the
management structure and also the illegal methods were used by the organization to represent
fake report with the help of auditors. The small situations added up and became a very huge
point or fact which resulted in the liquidation of the company. The company's downfall was
greatly caused because of the low moral code that existed in the management structure which
clearly shows that inadequate corporate governance and management will only lead to
insolvency. (Seitz & Ellison, 2009)
The failure of its strategy that has been used by the company has also been a major reason for
the insolvency experienced by it. The billing system that was developed by the company was
also not appropriately designed. There was a lack of checks and balances in this system
which has led to the lack of prioritization and forward planning in the management structure
of the organization. The introduction of GST in July 2000 increased a lot of problems in the
billing strategy that was used by the organization to operate (Siciliano, 2015). The cycle of
the billing system exceeded more than 3 days because of which the bills were produced
inevitably late. After the application of GST, it was observed that more than 6 to 7 days were
required in order to complete the billing cycle. While the management was trying to rectify
this problem, to more complications of data replication and three months backlog with the
schedule was made known to the organization. (Strathern, 2010)
The problem of the bills became intolerable for the customers and the partners which needed
them to decline the payment. The correspondence, process, interaction and the expectation
failure was observed by the management other organisation. The inability of the billing
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system to meet the business and regulatory requirements led to the fall of One Tel Limited.
The organization was to be offered a sum of money amounting to $132 million for rescue by
its investors. Later it was observed that the investors also no longer wish to be associated
with the organization because of the tarnish reputation of One Tel Limited.
Several impacts were noticed on the telecommunication industry during the year 2001
because of the collapse of one of the leading companies in the industry. New companies in
the telecommunication industry took place of One Tel Limited as soon as it left the market.
Because of the vigorous improvement and demand of the telecommunication devices, the
public didn't notice the absence of One Tel Limited. The management structure and the board
of the company were only responsible for its liquidation. (Taillard, 2013) The partners of the
organization also lost faith because of the unfair and manipulative techniques used by it in
order to become the market leader. Overall, it has been observed that the practice of
safeguarding the company has led them to the downfall but the major reason was the
ineffective management structure which improved their difficulties.
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Conclusion
After the above analysis, it can be clearly stated that if a company or an organization does not
work in compliance with the corporate governance practices, then the chances of its failure
increases. The absence of the risk management strategies in the management structure of a
company makes it really tough to withstand the changes in the environment. The absence of
disciplined board and management structure restricted the organization from taking corrective
actions at the earliest. In the case of One Tel Limited, the major reason for the downfall was
the ineffective management structure and corporate governance strategies that have been used
by the organization. Also, the use of demoralized and false methods should be avoided in
order to gain the respect and fate of the shareholders and customers. Therefore, it is very
important for the management structure of an organization to be updated about the legislative
and the regulatory matters. The changes in the environment and also the business
performance of an organization should be looked after in an organized and planned way so
that effective decision making can be achieved.
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Bibliography
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