Johannesburg - Nashua Mobile, a subsidiary of listed technology company Reunert, will dispose of its MTN and Vodacom subscriber businesses for R2.26 billion to the cellphone network operators, which have agreed to buy back the corporate and consumer clients.
It was also in discussions to sell its Cell C subscriber base to a third party, the company announced yesterday.
The disposal eradicates what has become an onerous business for Nashua Mobile in a highly competitive and saturated voice telephony market.
It has also highlighted the pressure on revenue margins from, among other things, regulatory intervention to reduce call prices.
The decision to wind down Nashua Mobile, which acted as the middleman selling phones, upgrades and billing between its clients and the operators, also removed the historic anomaly from the market, an analyst said.
Dave Rawlinson, Reunert’s chief executive, said the firm had constantly reviewed the future of Nashua Mobile and opted to negotiate an exit price last week when the contracts with Vodacom and MTN, who were increasingly becoming its largest competitors, expired.
“The returns were not commensurate with the investment required,” Rawlinson said, adding that ongoing investment was necessary to update billing systems, deals and retail outlets. Competition among the operators also became aggressive, leading to lower revenues for operators.
The winding down will result in some job losses and the redeployment of some employees. Leases for the retail outlets are also under scrutiny but the firm could not reach conclusions until it had received approval from the competition authorities.
“At the moment, it’s business as usual,” Rawlinson said.
About 60 percent of the Nashua Mobile customer base are large businesses. The balance comprises small businesses and individuals.
Nashua Mobile has more than 897 000 contract subscribers and about 700 employees. About 400 000 of those users are signed to Vodacom, according to spokesman Richard Boorman.
Arthur Goldstuck, the managing director of World Wide Worx, a technology consulting firm, said the reseller relationships had been positive for the network operators.
But worldwide few countries have a service provider layer between the consumer and the operator. “The move is one towards normalisation of the market rather than an imbalance,” Goldstuck said.
Mark Taylor, the chief executive of Nashua Mobile, said: “Every retailer is selling mobile at the moment and there just aren’t enough customers to support the distribution.
“The handset got so expensive and subsidies have come down over the years that we’re having to provide funding for customers and that was eating up a lot of our cash.”
South Africa had about 130 cellular subscribers for every 100 people as of the end of last year, according to data compiled by Bloomberg.
Reunert also provides electrical engineering and computer services. Its shares rose 2.5 percent to R68.90 by late morning, the highest on an intraday basis since January 20. The shares closed 1.90 percent higher at R68.50.
After the deals with MTN and Vodacom were complete, the next step would be the “winding up of the business and the brand”, Taylor said.
The company would use the proceeds to settle liabilities for Nashua Mobile, support Reunert’s growth strategy and pay for a dividend or share buy-back programme.