Independent cellular service provider Altech Autopage is likely to be closed down as soon as February next year, with its million or so subscribers sold to the network operators for about R1,5bn.
CEO Boyd Chislett has now sought to deflect criticism that the company took too long to decide to emulate its rival, the Reunert subsidiary Nashua Mobile, and sell its subscriber base to the mobile operators and shut down the business as pressures mounted.
“There’s been commentary in investment circles and in the media that we missed a trick, that we sold too late. No, we did not miss a trick,” Chislett insists.
The Altron-owned Autopage had various “strategic levers” it intended using to reinvent its business, which was being squeezed by the network operators, themselves under pressure as communications regulator Icasa slashed mobile call termination rates and as retail competition intensified in recent years. But those opportunities failed to materialise, says Chislett
“For us, it was about protecting shareholder value. Some of the opportunities started dissipating and, as the decline in GSM margins and effective [retail] rates hit us, we realised the fixed and mobile data markets would probably fall to the same fate, and they did. We walked away from one or two opportunities in the early stages,” he says.
The cuts in mobile termination rates – the fees the operators charge each other to carry calls between their networks – ended up being much steeper than Autopage had hoped. Retail rates came down sharply, too. Although consumers took advantage of the lower rates by making more calls, this was not sufficient to make up for the decline in prices, says Chislett. The pressure intensified.
It was then that the decision was taken, by the Altron group board, to sell the subscriber base to the mobile operators and shut down the business.
“We didn’t get the timing wrong. If some of the opportunities had come to the fore, we’d be a different organisation today. But those were very limited and started dissipating very quickly,” says Chislett. “We would have continued to operate in the telco space, but under a different guise.”
He admits that the acquisition of Internet service provider Technology Concepts, which was meant to broaden Autopage’s business away from legacy GSM voice and into fixed and mobile data services, did not have the outcome that had been hoped for. “The problem was it didn’t have the scale, and you need massive scale in this industry.”
Scale, he says, means building one’s own network infrastructure. And Altech and its parent Altron had been badly burnt in East Africa, where Altech’s acquisition of Kenya Data Networks had proved to be an expensive mistake.
“We didn’t have an appetite [to build a network]. It was too capital intensive,” says Chislett. Altron’s balance sheet was also weighed down by debt (and still is), making it difficult for the group to commit to a big capital investment in network infrastructure to take on the incumbent mobile providers.
Launching a mobile virtual network operator (MVNO), similar to Virgin Mobile, was an option that was also considered, Chislett says, but ultimately the group rejected this route. “The MVNO model is too niche for us to leverage appropriately,” he says.
Even before Icasa started cutting mobile termination rates, Autopage had investigated the MVNO opportunity. It decided it didn’t make sense, in part because MTN and Vodacom were not enamoured of the model and it needed their help if it was to succeed.
“We’d had to have had a far more cooperative MTN or Vodacom. And we also had to consider the power of the network brands. For us to try to put those brands into the background and introduce a new MVNO brand was a huge risk to us. It would have almost have been like creating a new greenfield operation.
“Also, at a shareholder return level, if the service provider model is under pressure, trust me when I say the MVNO model was going to be under increasing pressure.” — © 2015 NewsCentral Media
