At 5pm on July 21, 2008 Red Agency was called into a meeting of five directors of Link Communications, Link’s legal team and two managers from insolvency firm PPB.
At 11pm that night, Link, a call centre company and provider of SMS messaging and paging services for emergency services in SA and NSW as well as an estimated 100 of the top 200 ASX-listed companies, was placed into voluntary administration owing millions of dollars to creditors. PPB effectively had control of the company.
At 10am the following day, PPB sacked Link’s 300 employees in Melbourne, Sydney, Brisbane and Adelaide. Link’s sister company, Quantum, immediately re-employed the staff in a complicated legal arrangement. What followed was months of delicate negotiations between a host of stakeholders to stave off bankruptcy.
Red Agency was engaged to deal with the communications issues – internal and external but grew well beyond communications. Any publicity about Link’s financial status and doubts about Quantum’s ability to deliver an uninterrupted service would have dire consequences. Appeasing suppliers and customers involved complex negotiations.
There has been no media coverage of the issue. Unencumbered by Link’s debt, Quantum is now a profitable company with a healthy future.
Paging services may seem to have been replaced by mobile phones, but it remains the technology of choice for many emergency services because of its reliability. Only two companies in Australia provided such a service. Link was one.
Link’s paging service was used by more than 200 doctors, 16 hospitals, 12 ambulance services, 70 city councils, numerous fire and state emergency services, a number of universities and the Telstra SA Government Radio Network (SAGRN). In an industry where seconds matter, it was of utmost importance that the service was not interrupted.
Link also provided SMS messaging to nearly 100 of Australia’s top 200 ASX-listed companies, including ALL of Optus’ Directory Assistance.
There were several stakeholders to take into account, including:
• Employees over their job security (would Quantum be just the same as Link and go into administration?)
• Suppliers who were not going to be paid because Link’s assets had been frozen but for whom Quantum wanted to continue to use their services (transmitter towers, for example)
• Customers, to keep them reassured that there would be no disruption of service and Quantum would not collapse
One of the biggest challenges was to ensure Quantum was seen as a totally different company to Link and without Link’s debt Quantum would be a healthy company.
Additionally, from a legal and regulatory point of view, PPB needed to be seen to be doing the right thing by creditors (getting the best return). Often this was a difficult balancing act but one the legal teams from Quantum and PPB believed would result in the best outcome. If Quantum failed there would be chaos for the emergency services in SA and NSW in addition to the job losses.
The Link directors called in PPB because for several weeks they and their financial advisers PriceWaterhouseCoopers had tried to get a meeting to broker a deal whereby Link could pay back the money ($10.5 million) it owed the ATO. The ATO refused to meet and after director penalty notices had been served – which meant the ATO could come in at any stage and close the business - the only option remaining to the directors was to go into voluntary administration.
Due to the short notice of engagement, no research was conducted by Red Agency.
Those who had the most to lose were:
• Employees: loss of a job
• Customers: loss of a valuable service
• Suppliers: loss of income
• Creditors: for ongoing financial support
• Media: a great story about the possible collapse of the emergency services in SA and NSW
The core team was made up of Red Agency’s Principal Grant Titmus, staff from PPB and the five Quantum/Link directors and their legal team.
It was important to identify all the stakeholders and work out:
• What they were to be told
• When they were to be told
• How they were to be told
The stakeholders were:
• Customers: With nearly 4,000 customers, how were they going to be told as quickly as possible without alarming them?
• Employees: How were they going to be told that the administrator had decided to sack them but Quantum wanted to re-employ them? This was made more difficult because the call centres operate 24/7 with three shifts so at the 10am announcement not everyone could be told at once.
• Media: A holding statement was prepared. Red Agency would be the spokesperson. (See Appendix A for holding statement and Media Q and As)
• Unions: Only a few staff were union members.
• Suppliers: Many would be owed thousands of dollars by Link but Quantum needed them for their ongoing services or product. They needed to be assured that Quantum would not go down the same path as Link.
Part of the strategy was to paint Quantum as the white knight coming to the rescue of Link. This was to show the staff in particular that it was not the running of the company that had got it into this situation but the ATO’s lack of willingness to co-operate so Link could pay off the debt over time.
Regular meetings were held between Red Agency, the Quantum directors and its legal team. (See Appendix A for a typical agenda, this one is dated 24 September 2008)
Once it was decided to put the company into voluntary administration, the relevant stakeholders were identified and a strategy prepared for dealing with each.
Senior managers were the first notified on the evening of July 21. They were an important group to convince as they would have to relay messages to staff.
• Managers: Apart from the phone calls mentioned previously, a conference call between all state managers took place at 8am the next morning to further enunciate what was going to happen and answer any questions.
• Employees: With offices in Melbourne, Sydney, Brisbane and Adelaide it was imperative that staff were told at the same time. At 10am employees at all-staff meetings were told by PPB that they were sacked. Link managers then explained that Quantum was going to come to the rescue and re-employ them. The managers were given a script to read as it was important that all the messages delivered in each state were the same. Shift managers were tasked with phoning employees on other shifts.
For the first week, meetings were held at all offices at 9am and 4pm to allow staff to address any issues with their manager. At 5pm feedback was provided to the core team. If there were any questions that could not be answered they were addressed at this meeting and feedback provided to employees via their manager.
Six days after the announcement, employees were given a letter from Quantum confirming their terms and conditions of employment. (See Appendix A) The letter also asked employees to fill out a form whereby they agreed to stay with the company for at least 60 days. Only three employees did not sign it and left.
After the 60 days expired, only four other staff members left.
Staff were kept informed as often as possible. (See Appendix for a letter dated 13 October 2008 as an example)
Staff were also creditors and were sent a lot of information by the administrators PPB. Letters were often provided to help guide staff through this. (See Appendix A)
• Customers: Managers were encouraged to talk to the larger clients (Optus, Telstra) and were provided with an approved script (See Appendix A). All 4000 customers were sent a letter explaining the situation.
A form was provided for customers to fill out, agreeing to transfer their business to Quantum. Billing changes were also included (See Appendix A).
Despite reassurances and several meetings, the possibility of failure proved too much for Telstra (which ran the SAGRN contract) and its risk management team decided to discontinue using Quantum, the loss of $112,000 a month in revenue. (Quantum has re-pitched for the work but has yet to find out the result). This is the only major client that left. (See Appendix A for letter to reassure Telstra)
• Suppliers: Some suppliers were owed thousands of dollars but were needed by Quantum to run the business. All were sent a letter stating that Quantum wanted to take over the services they provided to Link. Again a form was provided so we could track which suppliers had agreed to stay. Some needed convincing and Red Agency dealt with these on a one-on-one basis.
• Media centre: Red Agency prepared a holding statement. All call centre operators were given Red Agency’s details should the media call as we were the spokespeople.
Red Agency was brought on for communication needs. However, as the company directors are Indonesian and their communication poor, they used Red Agency to negotiate deals and to clarify their position. This included:
• Liaising with the ACMA re transmitter licences.
• Attending meetings with major companies, such as Telstra, to go through the risk management issues.
• Being part of a delegation which negotiated lease agreements for the buildings occupied by Quantum in Adelaide and Brisbane.
• Attending meetings with financial backers.
• Liaising with the ATO re the payment of superannuation guarantee payments.
This initial activity lasted eight months. After this, Red Agency concentrated its efforts on establishing Quantum’s place in the market.
Fortunately Link:Q, a brand operated by Quantum, won an international award for call centre excellence. This has been used the hook to run breakfast functions in Adelaide and Melbourne with the intention of showing customers, and potential customers, that Quantum is doing well. An emergency services person was the guest speaker. He has climbed Mount Everest and his speech revolves around being able to overcome hurdles.
The biggest achievement is that the company is still in business. Red Agency believes it has played a significant role in this – from the communication components as well as the negotiations.
The most effective achievements have been in negotiating successful outcomes with suppliers and customers. Many suppliers have lost thousands of dollars with the payout from Link expected to be just 5.4 cents in the dollar.
Red Agency has done the negotiations with the ATO re Link’s superannuation payments. There had been discrepancies in what Link believed it had paid compared to what the ATO says it has paid. Resolution to this will save Link just over $480,000 in not having to make the payments again.
Red Agency also did the negotiating with the ACMA re the transmitter licences. They were close to expiring and Quantum did not have the finances to pay the annual amount. Red negotiated quarterly payments – which Quantum could afford. The expenditure for these is around $500,000 a year. Without the licences, the business cannot operate.
Quantum has been able to successfully transition and absorb the Link business despite initial poor cash flow. Most importantly, there has been no disruption to any of the emergency services.
Link is still under a Deed of Company Arrangement. Once the issue with the ATO is finalised the administrators will return Link to the directors. This will end a remarkable situation which has involved the five Indonesian directors trusting their legal team, the administrators and entrusting Red Agency to negotiate on its behalf.
In regards to other objectives:
Employees: In an industry where the churn rate is 38%, Quantum’s has been around 3% over the past year.
Customers: Every major corporate client has been successfully moved to Quantum. The only major customer to leave was the SAGRN which Quantum has re-tendered for. The results will be known soon.
Suppliers: Despite many being owed thousands of dollars, no one has refused to transition to Quantum.
Media: The issue has not been reported in the media.