Service provider Nashua Mobile has agreed to sell its MTN and Vodacom subscriber bases to the two mobile operators and is in talks to sell its Cell C subscriber base, too, parent Reunert told shareholders on Monday.
Nashua Mobile will receive almost R2,3bn from the sale, before VAT.
It appears that the two big mobile operators forced the decision to sell, a move that will raise immediate questions about whether other cellular service providers are coming under similar pressure. The country’s largest independent mobile service provider is Altech Autopage Cellular, which is owned by JSE-listed Altron.
The development comes just a month after MTN South Africa CEO Zunaid Bulbulia told TechCentral that “no options are off the table” as the operator took an axe to high channel distribution costs. Bulbulia said acquiring independent cellular service providers and cutting margins offered to the channel were among the options under consideration.
South Africa’s cellular operators are putting pressure on their channel partners as mobile termination rates — the fees they charge each other to carry calls between their networks — come down and as competition intensifies, crimping profit margins.
Reunert said on Monday: “Following the expiry of the service provider agreement between Nashua Mobile and Vodacom and the expiry of the incentive agreement between MTN and Nashua Mobile under the MTN service provider agreement, the boards of Reunert and Nashua Mobile were required to consider the long-term prospects for Nashua Mobile. After careful consideration, the boards concluded that it is unlikely that this business would generate acceptable returns.”
The purchase price is subject to a formula-based adjustment in the event that the revenue associated with the subscriber bases differs from that attributed to it by MTN and Vodacom. “Based on the current Nashua Mobile subscriber base performance, it is unlikely that the gross consideration will be adjusted by more than 10%,” Reunert said.
Among other things, the deal’s conclusion is subject to approval from competition authorities and the successful sale by Nashua Mobile of its Cell C subscriber base.
“Nashua Mobile is pursuing various alternatives for the disposal by Nashua Mobile of its Cell C subscriber base,” Reunert said.
Reunert will use the cash to settle Nashua Mobile’s debt, after which it will be used to support the group’s growth strategy. Lastly, a dividend may be declared or the money could be used to repurchase Reunert shares.