Reunert confident of Vodacom deal

Nashua Mobile, a wholly-owned subsidiary of JSE-listed Reunert, is confident that it will successfully renegotiate its service provider agreement with Vodacom.

On Tuesday, Reunert published its interim results for the six months ended March 2013, and stated that it was in talks with Vodacom to renew its partnership.

The group also said “discount rates have been reduced, which has negatively affected our margins”.

Further explaining its history with Vodacom, Reunert said: “We have had a mutually beneficial partnership with Vodacom since the inception of Nashua Mobile some 18 years ago.”

“We have successfully renegotiated our service provider agreement with Vodacom a number of times in the past.  We are currently in negotiations with Vodacom to renew our agreement and will inform the market once this process has been completed,” it said.

In October last year, Mark Taylor rejoined Nashua Mobile as CEO from Vodacom, where he served as MD of  Vodacom Payment Services (M-PESA) as well as managing executive for Vodacom’s Supply Chain and Logistics divisions.

Taylor had joined Vodacom from Nashua Mobile, where he was MD from July 2003 to September 2008.

He said that his main goal at Nashua Mobile would be to strengthen the company’s position in the telecoms space, continuing its partnerships with Vodacom, MTNCell C and 8ta (Telkom Mobile).

Results

Reunert’s interim results reflected an 8% drop in revenue.

Normalised headline earnings per share declined by 14%, from 298 cents to 257 cents, while operating profit was 21% lower at R583 million.

Revenues within the Nashua segment declined by 9% to R3.3 billion, whilst operating profit decreased by 23% to R311 million.

Nashua Mobile reflected a 12% decrease in revenue as Least Cost Routing (LCR) revenues continued to decline due to the drop in interconnect rates.

The reduction in interconnect rates also resulted in enhanced hybrid packages from the networks, which negatively affected airtime revenue within this business.

Net connections increased by 57,684; however, these new contracts are generally at lower subscription rates which, together with reductions in the high value LCR business, resulted in a further decline in margin over the comparative period in the prior year, Reunert said.

Shares

Shares in Reunert have declined markedly since March, down from a high of R87.91, to R69.30 in early trade on Thursday (23 May). This despite holding its dividend at 95 cents per share.

Stockbroker and investment expert, David Shapiro of Sasfin, told Moneyweb on Tuesday that Reunert was taking strain from the broader economy.

“All segments were down – from the mobile to the cable side. That 15% is quite hard…they are one of the better dividend payers in the market,” he said.

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Reunert confident of Vodacom deal