Nashua Mobile Mark Taylor — Nashua Mobile CEO Mark Taylor

Nashua Mobile will close all of its operations once it has completed the sale of its subscriber base to South Africa’s mobile operators, it said on Monday.

The company has promised its customers that they will continue to receive uninterrupted service after announcing that it had reached an agreement to sell most of its subscriber base to MTN and Vodacom. It has also vowed to try to minimise the impact on its staff.

At the end of September 2013, Nashua Mobile employed 752 people, excluding staff employed by franchises and channel partners.

The Reunert-owned independent cellular service provider has come under pressure from MTN and Vodacom, which are moving to reduce costs in their distribution channels as competition intensifies.

Reunert said in its 2013 annual report that gross profit at Nashua Mobile had come under pressure because of reduced margins received from Vodacom for seven months of the financial year. It said in the report that it expected this pressure to continue and for other mobile operators to follow suit by reducing margins to independent distribution partners wherever possible.

Nashua Mobile, which had 935 000 contract subscribers at the end of September 2013, will receive about R2,3bn before VAT from the sale of its Vodacom and MTN customer bases, which make up the bulk of the company’s total book, to the respective operators. It is also in talks to sell its much smaller Cell C base.

In the last financial year, Nashua Mobile had average revenue per user (Arpu) of R312/month, down from R337 in 2012 and a high R501 back in 2009. Based on the total purchase consideration, it appears that MTN and Vodacom have offered an average of about six months’ worth of revenue per customer.

“The timing of this transaction is subject to the approval of the competition authorities and the successful migration of the Nashua Mobile customer base to each acquiring party,” Reunert said in a statement. “Prior to a final outcome … Nashua Mobile’s operations and customer services will continue uninterrupted in the market and its customers will continue to receive the highest levels of service.”

Reunert explained that Nashua Mobile had been able to renew agreements with MTN and Vodacom on the same terms as before, prompting its decision to sell.

“For the past several years, Nashua Mobile has been trading in a saturated, highly competitive market. It has experienced declining average revenue per user due to lower network tariffs and lower out-of-bundle spend by customers,” Reunert said.

“The decline in the least-cost routing business and competitive pricing in the market have further reduced revenue. Customer financing has increased as more subscribers move to expensive smartphones requiring higher levels of customer funding,” it added.

“These factors have contributed to declining revenue, returns and cash flow. This resulted in a requirement for Nashua Mobile to assess the sustainability of its business model when its service provider and incentive agreements came up for renewal.”

In the same statement, Nashua Mobile CEO Mark Taylor said: “Our priority now is to ensure that we maintain our service levels to our customers and that they are migrated seamlessly. We are also working hard to ensure that we minimise the impact of this transaction on our employees and we will make them a key focus of ours of the next while.”