Nashua Mobile chief executive, Mark Taylor says that the business is set to wind down completely within the next six months.
On Monday, Reunert, the parent company of the mobile service provider, announced that Nashua Mobile will dispose of its MTN and Vodacom subscriber bases saying that “it is unlikely that this business would generate acceptable returns”.
The group said that the sale would generate a combined gross sum of R2.26 billion plus VAT.
“Approval from the competition authorities will be pursued as part of the conditions precedent and once received Nashua Mobile will wind down,” Reunert told BusinessTech in an emailed response on Monday. “It will not continue as a reseller.”
Speaking on BusinessDayTV, Taylor said that by following the competition commission process, as well as a technical process to transfer the base, “we estimate it could take as long as six months.”
“Three months for competition approval, and tribunal to award and then anything up to 60-90 days three months for the transfer of customers themselves to the network.”
Taylor said that, amid the cuts in mobile termination rates and tariff snipping, it meant that not enough margin is left for a third party service provider like Nashua Mobile to run a sustainable business.
Taylor said that the transition to get customers back on to MTN and Vodacom’s networks will be extremely smooth. “The customers will see no impact at all. There will be no bureaucracy, there will be no paperwork to fill in,” he said.
Nashua Mobile said that it entered into “separate and distinct sale agreements” on 11 April 2014, to dispose of its MTN and Vodacom subscriber bases to the two biggest operators in South Africa.
The group is also in talks to offload its Cell C subscriber base. Nashua Mobile is “pursuing various alternatives for the disposal by Nashua Mobile of its Cell C subscriber base.”
Taylor said that for Cell C customers, Nashua was in “final negotiations”. “We should make an announcement within the next couple of days again.”
When questioned about what will happen to Nashua Mobile’s retail stores, Reunert said: “We are looking at all the options for our retail outlets.”
“The networks and other service providers are interested in being given an opportunity to bid for the outlets. We will not be able to progress any of these options until the conditions precedent to the sales agreements have been finalised.”
Reunert noted that there are approximately 600 permanent employees within the Nashua Mobile brand. “There will be retrenchments, but all options are being considered to place employees within the rest of the Reunert group and in the industry where possible.”
“Unfortunately we are unable to be more specific until the conditions precedent in the sales agreements have been concluded,” it said.
In a SENS announcement on Monday, Reunert said: “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.”
Reunert said that the subscriber base sale proceeds will be used to settle liabilities of Nashua Mobile to support the growth strategy of Reunert, and for the payment of dividends and/or repurchase of Reunert shares.
In November, Reunert said that its Nashua business faced a challenging year, with the race for customers and declining business confidence impacting performance.
Nashua saw revenue decline by 6% to R6.8 billion – while operating profit declined by 24% to R636 million, from R839 million in 2012.