News - Thursday, May 26, 2011 9:39 - 8 Comments

Freshtel shuts up shop after seven years

More than seven years after it was founded during a wave of national interest in internet telephony, and after burning through millions of dollars in investment, Australian company Freshtel has revealed it will finally get out of the Voice over IP market and go into mining instead.

When the company first launched in Australia in January 2004, most of the nation’s consumers still used traditional telephones connected to Telstra’s public switched telephony network, and Freshtel and rivals like Engin (which has since been largely snapped up by the Seven Network) saw huge potential in being able to offer consumers a more flexible solution based on internet telephony which could also allow them to cut costs.

More than half a decade later, that premise has partially been realised — with millions of Australians having used VoIP in some manner, whether it be through the primarily free software of global player Skype, through a solution provided by their ISP, or even through their corporate IP telephony rollout.

However, along the way, startups like Freshtel have foundered as they have struggled to build scale.

In a statement issued this week to the Australian Stock Exchange, Freshtel said it intended “to sell its main technology undertaking for $150,000 and payout remaining debt”, following the execution of its plans to acquire a company named Australian Tin Resources, which operates the Ardlethan Tin Mine located between Wagga Wagga and Griffith in NSW. Freshtel will change its name to ‘Australian Tin Resources’.

It is believed the acquisition constitutes a chance for the mining company to list on the ASX through what is known as a ‘back door listing’ — rather than a realistic path for Freshtel as a company to move forward as a technology company.

Over the years Freshtel has pursued a number of initiatives to try and stem its losses. It has had several new chief executives over the past few years and has been forced to cut its staff numbers. However, it has also continued to develop new technology — with a particular focus on diversifying into mobile VoIP and providing services to call centres.

In addition, the company had signed several large distribution deals with companies like Tesco in the UK, in an attempt to bulk on mass-market scale.

However, Freshtel’s latest set of financial results, filed for the half-year to 31 December 2010, show a woeful financial picture for the company. In the period, it made $136,100 in revenue — down from $726,657 in the same period 12 months prior, and it lost $226,403. In the same period 12 months before it had lost almost $2 million. Its reserves of cash were dwindling — it had just $179,838 on hand, and its share price was just 3c — down from a high of almost $1 at the company’s peak in 2006.

News of the sale comes as earlier this year Freshtel had revealed that things had gotten so bad that it had leased its VoIP business to a company named Vixtel for a period of 12 months from December last year for a monthly payment of just $2,500 — which Freshtel said at the time would enable it to isolate the company from further losses and focus on new investment opportunities.

Image credit: Hans Thoursie, royalty free