South Africa’s Nashua Mobile has announced to its shareholders it will be selling off its MTN and Vodacom subscriber bases to the mobile operators, citing inadequate returns as the reason for the transactions.
Nashua plans to make the sales for ZAR2.26 billion (US$214 million), excluding value added tax (VAT).
“After careful consideration, the boards concluded that it is unlikely that this business would generate acceptable returns. Accordingly, agreements with the Purchasers for the MTN and Vodacom subscriber bases have been concluded,” parent company Reunert said in a statement.
The company said the subscriber base would be transferred to MTN on a date selected by the operator “which… must fall within the second calendar month after the fulfillment”, while the Vodacom transfer would occur when Nashua Mobile successfully migrated its Vodacom base to Vodacom.
MTN will have to pay 90 per cent of the transaction fee on the day of transaction, with the balance being paid within ten working days, and Vodacom will pay 85 per cent within five days of migration.
Last year Nashua Mobile reported a three per cent drop in revenue for the year ending September 30.
Reunert’s revenue was down to ZAR11.4 billion (US$1.1 billion), while operating profit declined 13 per cent to ZAR1.3 billion (US$123 million), which it put down to a “compression experienced in margins due to sales price pressure and increasing costs”.
Nashua Mobile experienced strong headwinds as competition between mobile operators intensified in a saturated cellular industry. The further reduction in mobile interconnect rates had an adverse impact on revenue. Operating profit was dampened by reduced margins due to lower discount rates from Vodacom,” Reunert said.