Part C: Financial results

The collection of financial data from Supernet enabled the whole business to be modeled using real information.  This was an essential component in determining the viability of the Supernet business.

Access to accounts

Supernet had just been trading for 6 months when the research visit occurred. The accounts had also just been through an independent audit from a reputable international auditing company. The author was given access to monthly Profit and Loss statements (P&L) for this period.

Discussions with accountant

Noting that a number of items were apparently absent from the P&Ls, discussions were held with Supernet ‘s accountant.  It was important to understand the policy and practice of Supernet in respect of depreciation, interest paid on loans and taxation.  These items are significant costs in any business.  Without this data, the viability of the Supernet business against the criteria established earlier could not be established.

Manipulation of data

The purpose of collecting the P&L data was to determine if the Supernet business is profitable or not in financial terms.  To get an overall picture, the

Supernet data was entered into a business plan spreadsheet built by the author, designed to test the viability of Internet business models based on a number of assumptions (see below).  Specifically, the Supernet data was used to explore the viability of this business model deployed at different scales and achieving different levels of utilization in the Internet cafés .  The effect of scale and utilization levels were calculated as follows:

• Scale of internet café : 20 users, 40 users, 80 users
• Utilization of Internet cafés: 40%, 50%, 60%  (Measured in billable time compared to total time.)

Assumptions

Based on previous experience and on the viability criteria established earlier,

the assumptions that were made were:

• Approximately half of the bandwidth bought would be re-sold to local businesses, irrespective of the scale. (i.e. if a 20 user Internet café is established, the equivalent bandwidth would be re-sold.)
• For Internet café use, connections were sized using an average 12kbps download and 4kbps upload per concurrent user.  Due to the “bursty” nature of Internet browsing, this typically delivers fast response across a group of users.
• The business would be established using borrowed money, on which an interest rate of 10% per annum is payable.  Repayment of the loan within 36 months is required.
• Depreciation was not calculated, but the replacement of equipment and refurbishment of premises on an appropriate cycle was calculated on an item by item level (i.e. some items have an expected life of two years; others may be expected to last seven years.  For some items this is based on durability, other items may be replaced or refurbished  to retain competitiveness and customer appeal.)  A residual (disposal) value of 10% was assumed on all equipment.  A replacement/refurbishment fund was accrued monthly.
• Equipment prices were real values based on Supernet data.  Actual shipping costs for equipment from suppliers and import duties are also included.
• The estimated costs of VSAT and business licenses are included. The licensing situation in the post-tsunami period has been unclear, but licenses would typically be payable in the developing world. (See notes below)
• All the costs and revenues have been scaled according to the business size. The cash flow forecast assumes that revenues take 3 months to get up to their full levels.
• Re-sold bandwidth is sold at current market rates.
• Internet café usage is charged at the current rate of approximately 65 U.S. cents per hour.

References:

- no references on this page.

Notes (not in the original dissertation):

The Global VSAT Forum (GVF) maintains a regulatory database, giving regulator contacts and licensing information for many countries. In disaster situations, the Tampere Convention allows for the normal licensing requirements to be waived, where communications technology is being used for disaster mitigation.(See also the ReliefWeb website.)