Internet and telephony provider, dingo blue will close its doors in eight weeks, leaving 68,000 customers looking for a provider.
Parent company AGL lost more than $45 million on the Internet and telephony provider since it bought the company from Optus some 15 months ago. dingo blue spokesman Geoff Donohue said AGL lost $12 million in the six months period ending December 31.
"It doesn't take a genius to work out it was trading at a $2 million a month loss," he said.
An anonymous staff member of the telco revealed that the staff were informed this morning, after an announcement on the Australian Stock Exchange.
The source also said dingo blue was in the middle of a belt-tightening initiative called 'Bite the Bullet', which aimed to reduce operational costs and fix faults with its billing system. Staff were told in January that the project was going well, the source said.
In an internal memo to staff COO Graham Horn outlines an initiative to rectify "billing issues" and correct design flaws contributing to process failures within the Customer Information System (CIS) platform, as part of the Bite the Bullet project.
The memo reads, in part: "It appears that in the main, most processes centred around the CIS platform have some occasional or systematic failure.
"The late billing of customer accounts, numerous POP outages and the cancellation notices being issued to thousands of dingo mobile customers has meant unseasonable, and unpredictable traffic coming into the Customer Solutions' centre.
"The Bite the Bullet project has therefore been commenced with the aim of correcting as many of the design flaws as possible in the areas of billing, invoicing and processing, by the end of January 2002," the internal memo reads.
Donohue said these billing issues did not contribute to the company's demise and that the company had faced a number of challenges in terms of its IT systems, but this was "immaterial now".
"These issues are more of an operational issue. The trading losses are more the macro picture," he said.
Donohue would not speculate on why the business had traded poorly.
AGL announced its decision to write off the telecomms retailer and exit the business, in a statement to the ASX this morning.
The energy company has include the costs of meeting staff entitlements and all outstanding contracts with suppliers in its write-down for dingo blue. AGL recorded a less than expected profit of $82.9 million for the half year to December 2001, partly due to the company's write-down.
John Phillips, AGL chairman, said: "The objective of the past year was to clean out activities which were not fully consistent with the company's skills and strategies and were unlikely to add to Proprietors' returns in the medium term. [D]ingo blue has failed to meet these tests despite earlier, more hopeful assessments."
Donohue said negotiations have commenced with other parties and the company is working at ensuring a smooth transition for customers and staff.
The company is providing updates on the closure via e-mail and letters, and has also set up an information line: 1300 301 455.