After the service provider, Nashua Mobile deemed its business model unsustainable, it has agreed to sell its mobile phone subscribers to MTN and Vodacom for 2.26 billion rand ($215 million). The country’s biggest wireless operators will take on customers who signed up to their networks and services through Nashua Mobile.
The development comes just a month after MTN South Africa CEO Zunaid Bulbilia told TechCentral that “no options are off the table” as the operator took an axe to high channel distribution costs. Bulbulia said acquiring independent cellular service providers and cutting margins offered to the channel were among the options under consideration.
Nashua’s Johannesburg-based owner Reunert said following an 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”
In the event that the revenue associated with the subscriber bases differs from that attributed to it by MTN and Vodacom, the purchase price is subject to a formula-based adjustment. “Based on the current Nashua Mobile subscriber base performance, it is unlikely that the gross consideration will be adjusted by more than 10%,” Reunert said.
Among other things, the deal’s conclusion is subject to approval from competition authorities and the successful sale by Nashua Mobile of its Cell C subscriber base. Nashua Mobile hasn’t agreed a deal with closely held Cell C Pty Ltd for South Africa’s third-biggest mobile subscriber base and is seeking alternatives, according to Reunert.
“Nashua Mobile is pursuing various alternatives for the disposal by Nashua Mobile of its Cell C subscriber base,” Reunert said.
Reunert will use the cash to settle Nashua Mobile’s debt, after which it will be used to support the group’s growth strategy. Lastly, a dividend may be declared or the money could be used to repurchase Reunert shares.