Altron is keeping mum about the future of subsidiary Altech Autopage Cellular in the wake of news this week that the cellular service provider’s most direct rival, Reunert’s Nashua Mobile, has decided to sell off its customer base and close up shop.
All Altron will say when contacted by TechCentral is that the JSE-listed group is in a closed period. “As such, we cannot make any comments at this time with regard to Altech Autopage’s performance,” it says. “Our results will be published on 14 May 2014.”
Reunert told shareholders on Monday that Nashua Mobile had agreed to sell its MTN and Vodacom subscriber bases to the two mobile operators for a combined R2,3bn (before VAT) and that it was in talks to sell its Cell C subscriber base, too.
As mobile tariffs have plummeted in recent years, MTN and Vodacom have begun slashing costs in an effort to offset margin squeeze. MTN South Africa let go of a thousand staff in the second half of last year, with CEO Zunaid Bulbulia telling TechCentral in an interview last month that “no options are off the table” as the company looks to take an axe to high channel distribution costs.
He said that there were “probably a few hundred million rand” in costs that could still be removed from MTN’s distribution chain. “We removed some margin in 2013, but not on a massive scale.”
Bulbulia said, too, that when the cellular industry was established in South Africa in the mid-1990s, operators leant heavily on third-party distributors to take their products to market. He said they were now “paying the price” for that approach. “We were always reliant on dealers or wholesalers to get product as widely distributed as possible. The cost of distribution was inordinately high.”
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.”
Irnest Kaplan, MD of Kaplan Equity Analysts, says he’s surprised that Nashua Mobile and Autopage Cellular have stood as independent entities for so long. “For many years, analysts and investors were wondering why there were independent service providers still around.”
He says there is now “such pressure on margins” that when the mobile operators renegotiate service provider agreements with the independents, they are slashing the incentives they offer.
It is likely that the two big mobile operators have the appetite to buy Autopage’s subscriber as well, Kaplan says. Whatever the case, they’re likely to continue cutting incentives when contracts are renegotiated.
The mobile operators have also become better at dealing directly with customers by improving their channels. In the past, they relied to some extent on independent service providers to serve especially higher value customers, but this is no longer the case, says Kaplan. — (c) 2014 NewsCentral Media