JSE-listed technology group Altech is considering big changes at its largest subsidiary, Altech Autopage Cellular. Options on the table include launching a mobile virtual network operator and bidding for radio frequency spectrum to build its own fourth-generation (4G) mobile network.

Altech CEO Craig Venter emphasises that no firm decisions have been made yet but says a number of options are being considered to leverage the more than 1m cellphone subscribers — most of them post-paid users — on Autopage Cellular’s books.

Cellular service providers are coming under increasing margin pressure from upstream network providers that are keen to cut their costs as competition intensifies and as termination rates — the fees they charge each other to carry calls between their networks — come down through regulatory intervention.

One of the options under consideration is launching a mobile virtual network operator, or MVNO. SA currently has only one MVNO in the form of Virgin Mobile, which piggybacks off Cell C’s network.

Autopage is SA’s largest independent cellular service provider and has resale agreements with Vodacom, MTN, Cell C and 8ta. It also operates about 140 retail stores around the country.

Venter says launching an MVNO is “one of the options we have going forward”. But, he says, it would have to make sense for the bottom line.

“There’s no specific plan on the table right now to launch an MVNO,” he adds. “As the market progresses, we will look at our options.”

Another opportunity that is being considered is bidding for radio frequency spectrum so that Altech can build its own network. “We have 4G potentially coming and a lot of expertise in Jeffrey Hedberg who knows how to build and run networks,” Venter says. “I mean, he’s done that for 30 years, so I think we will keep our options open.”

Hedberg, who recently joined Altech as chief operating officer, was previously acting group CEO at Telkom. Before that, he was CEO at Cell C and is credited with helping turn around the cellular operator’s fortunes.

In the six months to the end of August 2011, Autopage Cellular generated almost R3bn in revenue, up 6,3% over last year, and operating profit of R123m, up 18,3%.

Hedberg says as prices come down and there’s more margin squeeze from the upstream operators, it’s important to grow Autopage Cellular in new areas. One of these is ensuring it works closely with sister company, Altech Technology Concepts, to offer data services. Another is selling more products through its retail channels.

“Down the road, we’ll see what happens with local-loop unbundling and 4G,” Hedberg says, adding that Altech will review its options in spectrum. “Whether we do it or not will be a function of many things.”

Venter adds that in a liberalised telecoms market, Autopage Cellular is able to do many things it couldn’t before. “We are having those discussions at strategic level but the … playing field has not yet been set, so it’s difficult to say whether we will participate. Can we participate? Yes, we can, and there are a number of international players that would like to play in the SA market and would love to partner with a company like Altech.” — Duncan McLeod, TechCentral