Consistent problems with its customer billing system and other IT troubles have caused dingo blue problems for several months, but reasons for the telco's demise are larger than that says company spokesperson Geoff Donohue.

Commenting on the closure of dingo blue, announced yesterday, Donohue said its IT problems are "immaterial now".

"These issues are more of an operational issue. Realistically, the trading issues are more macro than that," Donohue said.

An anonymous staff member 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 an internal memo in January that the project was going well, the source said.

In the memo 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.

Parent company AGL announced its decision to close dingo blue yesterday, citing losses of more than $45 million on the Internet and telephony provider since it bought the company from Optus some 15 months ago. In its half yearly results, AGL suffered a trading loss of $12 million in the six-month period ending December 31.

"It doesn't take a genius to work out it was trading at a $2 million a month loss," Donohue said, but he would not speculate further on why the business had traded poorly.

AGL says it will cover the costs of meeting staff entitlements and all outstanding contracts with suppliers in its write-down for dingo blue. The energy company 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. dingo 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.