Telstra distie blames reseller "fraud" for closure

Telstra distie ICT123 has ceased trading after more than seven years, partly blaming the "fraudulent actions of one isolated dealer" for the closure.

In a letter sent to customers this morning, the company wrote: "It is with deep regret, that we hereby advise ICT123 Pty Ltd has ceased trading.

"Unfortunately, after more than seven years building our business, a series of events including the fraudulent actions of one isolated dealer has put our business in jeopardy.

"The board of ICT123 are in discussions with legal advisers, and we anticipate a further update within 48 hours.

"Clearly, many unanswered questions remain, however we ask for your patience and understanding in this difficult time. We will notify all dealers as soon as we have further updates. Until further notice, our dealer support centre is now closed and no further connections will be processed."

ICT123 chief executive Ben O'Leary told CRN that the company would be issuing a formal statement in the next 24 hours.

At time of writing, the company had not appointed receivers, according to its ASIC register.

Along with Telstra, ICT123's vendors included Acer, Apple, HTC, LG, Microsoft, NetComm, ZTE and Samsung.

Late last year, it signed up to distribute "cloud-based business presentation solutions" company BrainShark.

Downbeat performance

One ICT123 dealer told CRN that the closure was "like a bolt out of the blue" and that he "didn't have an inkling" this was coming.

ICT123 had only just run its nationwide roadshow across five state capitals in February and March.

However, the closure follows some less-than-stellar performances at ICT123.

The Telstra distributor turned over $6.2 million in the 2013 financial year, according to results for ICT123 Holdings Limited lodged with ASIC. This was a slight 4.6 percent fall from $6.5 million in the 2012 year.

It also reported a $669,000 post-tax loss in the 2013 year. Directors said the company had addressed problems by undergoing cost-cutting measures amounting to $100,000 per month, including "a significant reduction in headcount".

The directors said these measures had been having a positive impact "with the December half of FY2014 approaching break-even – a significant turnaround on the FY2013 loss".

But the directors also wrote that a lack of capital and minimal staff were hampering the turnaround efforts.

One would-be ICT123 reseller contacted CRN to say his company had tried unsuccessfully to sign up as a partner over the past 12 months. "We probably filled out two or three applications for Telstra dealership. They always blamed Telstra. We spent 60-80 hours trying to become a dealer."

The comment chimes with information from ICT123's annual report, in which the company's directors blamed three factors for the subdued performance.

"Average margin on Telstra product sales fell, while, at the same time, Telstra restricted the recruitment of new dealers and withdrew trailing commissions and co-operative marketing payments. The combined effect severely damaged gross profit

"Failure to raise sufficient new capital restricted capacity to respond to issues and made improvements slow and hard won.

"Cost cuts initiated in the September quarter 2012, although necessary to respond to margin decline, slowed sales to existing dealers and exacerbated the medium-term effects of the decrease in margin."

CRN attempted to contact Telstra but had not heard back at time of publication.