A year after Reunert pulled the plug on its Nashua Mobile business, Altech Autopage is also being shut down, but the delay in following suit has cost Altron R34 million on its bottom line.
Autopage was profitable at the operating level (R137 million compared with R264 million last year), and was still a large contributor, at R5.7 billion, to Altron's overall flat revenue of R27.6 billon in the year to February. Yet, the service provider is facing the same circumstances that led to Nashua Mobile's demise. These include lower mobile termination rates, and a depressed economy.
Altron CEO Robert Venter explains Autopage's GSM subscriber base (between 80% and 90% of its business) is set to be sold, and discussions are at an advanced stage. Although he cannot name the potential buyer, analysts concur the only likely candidates are the mobile operators.
Venter notes Altron looked at Autopage "very carefully" towards the end of last year and felt it would be better served by exiting the business, and investing the gains in other areas. Altron has not named a selling price for its one million-strong subscriber base, but its carrying value for the business is R541 million, while Nashua Mobile reaped R3.2 billion in total for its sale of about 950 000 customers.
At the time Nashua Mobile sold, Venter saw the move as positive for Autopage. Now, however, he says the companies are making the "same decision, just at different times". Altech Autopage will continue to service its base until the end-users - corporate and consumer - are handed over, and notes it has been through such a transition already.
Altech Autopage should be sold off this year, and the rest of its business - the Internet service provider portion - will be incorporated into Bytes.
Time for change
Ovum analyst Richard Hurst says Autopage had its time in the sun when the cellphone gold rush was on, but now there is no more fat to be gleaned from being in this business as margins are under pressure in a saturated market. He says no one will care about Autopage's demise, and the impact on the market will be "negligible at best. It was inevitable."
Hurst notes Altech Autopage "held on an extra year" as a middleman, but did not add much value to its customer base.
Adrian Schofield, ICT commentator, says the end of the era will not provide any great advantage to end-users, as the removal of Autopage from the market will simply lessen the amount of available choice. However, he notes, if Autopage was not providing brand loyalty and differentiating itself through service, it has no motivation to keep going.
BMI-TechKnowledge director Brian Neilson adds Altech Autopage's closure will push the shopping burden back to the individual customer, but this is a negligible loss for most clients. "Corporations with large numbers of individual cellphone bills spread among different operators may experience a higher workload at month-end," he notes.
Neilson adds the value proposition around Nashua Mobile and Altech Autopage was initially well understood, but eroded over time as consumers became better educated and the operators' online self-service platforms improved. "Web-savvy consumers can also use independent Web portals that will allow comparisons across operators and packages."
Schofield notes the mobile operators - which had the customer base anyway even through it was a step removed - will see some benefit in improved margins. He doubts anyone will care about the era of third-party service providers coming to an end.
Difficult times
Altech Autopage was not the only unit to experience difficulty during the year, as Altron's profitability was adversely affected by strike action in its manufacturing businesses, a marked decline in orders from Eskom, and challenging market conditions in the telecommunications sector.
Besides the strike, the multimedia businesses were also affected by lower international orders as a result of a delay in African digital TV migration, and a lower-than-expected take-up of its Node entertainment and home automation system by the retail channel. "We have a mix of macro-economic and operational issues that impacted our results this year," says Venter.
However, Altron is hopeful its power unit will reap the benefit of continued upgrades to SA's national grid by Eskom. The company also notes its IT assets (which consist mainly of the previous Bytes businesses) continued to perform well, and exceeded expectations.
Altron has a number of "important" operational and corporate projects on the table, says Venter. "We need to focus and streamline our group which will mean selling off some non-core assets and adapting our offering to our customers. We are certain that these steps, which will be taken in the near future, will benefit our stakeholders."
As part of its plans, Altron will start moving from a family-managed business to an independent management structure and will also streamline its management structure. However, Venter says he will remain in place to see its operational and corporate projects through.
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