The pre-IPO years: 1995 to 1997
Jodee Rich and Brad Keeling decided to start a telephone company in August 1994. Jodee Rich developed a business plan for the company in September 1994. The ownership structure of the company in February 1995 was: Optus 28.5%; FAI 18%; James Packer 5%; Kalara Investments 50% (approximately). Kalara Investments was owned by Jodee Rich and Brad Keeling. The total initial seed capital for One.Tel was approximately $5 million. One.Tel was officially launched by Rodney Adler on 1 May 1995.
In its annual report for the year ended 30 June 1997, One.Tel reported revenue of $148 million and a before tax profit of $7.5 million. At that time the company had almost 300 staff.
From IPO to the onset of problems: 1997 to 2000
One.Tel floated on the Australian Securities Exchange at $2 per share in November 1997. Initial market capitalization was $208 million. On paper, FAI had turned a $950,000 investment into $51 million; Packer had turned $250,000 into $17 million and Rich and Keeling had a combined stake worth well over $100 million.
In addition, the company had paid out $4 million in dividends and $2.85 million in consulting fees to Rich, Keeling, FAI and Packer.
The original shareholders also received $16.9 million for the sale of two businesses, One.Net and One.Card to One.Tel in July 1998.
In the financial year ended 30 June 1998 One.Tel reported a before tax profit of $8.8 million. During the year the company had commenced a 'Global Strategy', opening offices in Los Angeles, London, Paris, Frankfurt, Hong Kong, Amsterdam and Zürich.
In September 1998 the company purchased mobile spectrum in each of the Australian capital cities at a cost of $9.5 million with a view to establishing its own mobile network. The company was unable to secure bank finance for the deal, and James Packer and David Lowy provided $5 million each to fund the purchase.
In December 1998 the Packer-controlled Consolidated Press Holdings purchased FAI's 16 million shares for $43 million. In February 1999 the Packer-controlled Publishing & Broadcasting Limited, in conjunction with News Corp Australia agree to provide $710 million in return for a 40% stake in the company. The One.Tel share price hits a high of $13.55 in the days leading up to the announcement of the deal, prompting an insider-trading probe by the Australian Securities & Investments Commission. The News/PBL deal allowed the original shareholders to take more money from the company.
In the financial year ended 30 June 1999 One.Tel reported a before tax profit of $9.8 million.
The most remarkable day in the history of One.Tel was 23 November 1999. Lucent Technologies announced that it would build and finance a European GSM mobile network for One.Tel at a cost of up to US$10 billion. The company's market capitalisation reaches a high of A$5.3 billion on 26 November 1999, making it one of Australia's largest 30 companies.
The emergence of problems: the year 2000
In March 2000 One.Tel spent $523 million on purchasing additional Australian spectrum licenses. The Packer and Murdoch families provided a further $280 million in funding. Australian investors provided $340 million in funding.
In the financial year ended 30 June 2000 One.Tel reported a loss of $291 million. The share price plummeted to below $1. The annual report included details of the remuneration of Rich and Keeling; both received a $560,000 basic salary and a $6.9 million bonus.
The end: 2001
In January 2001, Jodee met with Kerry Packer who told him, "You ran out of money with Imagineering, and you're going to do it again". A Macquarie Bank report stated that the company was worth $3.5 billion, and the share price doubled within days. Merrill Lynch predicted that the company would run out of money by April.
In February, director Rodney Adler sold five million shares for $2.5 million.
During April and May the company's problems became increasingly apparent. In a final attempt to give the company a chance to survive, News Corp and PBL agreed to subscribe to a rights issue at 5 cents per share to supply another $132 million in much needed cash. News Corp and PBL reneged upon the agreement later in May when further evidence of One.Tel's financial problems emerged.
The directors appointed Ferrier Hodgson as administrator on 29 May 2001. The administrator's report states that the company was insolvent by March 2001. The administrator began laying off the 1,400 employees of One.Tel from 8 June 2001.[6]
Litigation
On 14 October 2005 the Sydney Morning Herald reported that the personal diaries of James Packer would be made available to the Australian Securities & Investments Commission (ASIC) to assist in its case against Jodee Rich. The Supreme Court of New South Wales ruled that the diaries should be made available to ASIC but warned that the material should not be used "in a manner that simply raises prurient or titillatory interest that is not directly relevant to the case". ASIC is reportedly seeking compensation of $92 million from Jodee Rich and the former One.Tel finance director, Mark Silbermann on the basis that they did not exercise their powers with respect to the company with due care and diligence.[7][8][9]
On 18 November 2009 Justice Austin dismissed ASIC's civil proceedings against One.Tel's Jodee Rich and the company's Finance Director, Mark Silbermann.[10]
Following a four-year trial lasting 232 hearing days Justice Austin found that ASIC had failed to prove its case against the defendant directors. The evidence presented by ASIC did not establish on the balance of probabilities that the defendants had failed to disclose or withhold financial information from One.Tel's board regarding the company's true financial position.
