Operational overview
 

Nashua

 
 
   
Information and communication technologies

The challenges prevalent during the previous reporting period continued into 2011, most notably the continued reduction in interconnect rates. This put substantial pressure on Nashua Mobile’s ability to grow revenue at the pace it has in previous years. These rates, which mainly affect least-cost routing (LCR) products previously accounted for 32% of Nashua Mobile’s revenue and have reduced to 26% in 2011. With further interconnect rate cuts due in 2012 and 2013, it is apparent that LCR represents a rapidly diminishing source of revenue.


Performance indicators       2011  
  2010  

Economic  

         
Revenue   Rm     6927,5     6867,2  
Operating profit   Rm     794,2     653,7  
Total assets   Rm     3847,7     3595,4  
Capital expenditure   Rm     20,4     44,3  

Environmental  

         
Petrol & diesel consumption   litres     231 576     464 105  
  GJ     10 175     20 582  
Electricity consumption   kWh     8 435 572     10 667 080  
  GJ     30 368     38 401  
Water consumption   kilolitres     77 138     40 620  

Social  

         
Total number of employees       2 767     2 545  
Training spend   Rm     5,1     5,4  
Community investments   Rm     4,9     5,3  
Enterprise development spend   Rm     20,7     21,7  

 

 

 

Increase in operating profit by
21%

 

Despite this challenge and the generally quiet market conditions during the year, the Nashua group companies all produced satisfactory results. Operating revenue for the group rose some 1% to R6 927,5 million (2010: R6 867,2 million), while the operating margin improved to 11,5% (2010: 9,5%). Cost reductions at Nashua Mobile and Nashua Office Automation also accounted for the increase in operating profit by 21% to R794,2 million (2010: R653,7 million).

In July the concept of Nashua One was announced but, following an in-depth due diligence process, it was decided that the various operations would continue to operate independently.

Subsequent to the financial year end, Andy Baker announced his intention to resign but agreed to remain with the Reunert group until January 2012 to assist with various projects. Chris Radley was appointed managing director of Nashua Mobile, Dave Coutinho became managing director of Nashua Limited (Office Automation) and Andy Openshaw the managing director of ECN.

In the medium term a strategy will be implemented to integrate the offerings of Nashua Mobile, Nashua Communications and ECN to deliver world-class LAN, WAN and mobile solutions.

A highlight for the year was the successful acquisition of ECN, following unconditional Competition Tribunal approval in June. This acquisition, valued at R172 million, brings many exciting opportunities to the business. Teams at Nashua Mobile and ECN are working hard to integrate the new operation and to realise these opportunities.

Excellent customer service remains the main differentiator for the various Nashua operations. In the short term a key focus of the Nashua executive team will be on even closer engagement with customers and with our all-important franchise and other distribution channel partners. Concerns raised during the year by some of these partners about relationships with Nashua will be effectively addressed.

Excellent customer service remains the main differentiator for the various Nashua operations.

 

  Nashua Mobile

 

Customer base increased by
3,2%

 

Nashua Mobile increased its customer base by 3,2% or 27 486 customers to 846 521. Average revenue per user has, however, decreased by 10% to R416 (2010: R463) due to the deactivation of LCR onbillers to VoIP, an extremely competitive and saturated market, and an increase in bad debt levels. Management responded decisively and effectively to the challenges facing the business. Further cost-cutting measures were introduced, including reductions in employment, travel expenses, entertainment, logistics and marketing.

In addition to the impact of interconnect rate cuts on Nashua Mobile’s performance, the loss of a major LCR onbiller customer reduced the number of Nashua SIM cards in use by some 20 000. Bad debts, which rose 14% this year in line with generally tough economic conditions and growing unemployment, provided further cause for concern.

Nashua Mobile     2011  
  2010  
2009  
Subscriber base size (closing base at year-end)    846 521     819 035   722 638  
Number of subscribers signed up (Connections)    174 151     187 382   159 560  
Number of subscribers lost (excluding LCR onbillers)    119 706     90 985   100 709  
Average spend per customer     R416     R463   R501  


As part of rationalising costs, it was necessary to make 156 positions redundant across the business. While retrenchment costs amounted to about R14 million, cost savings of R46 million were realised.

The process of meeting the Regulation of Interception of Communication Act (RICA) requirement of registering all our users’ handsets was completed this year. At the end of June 2011, 96% of Nashua handsets had been registered, which compared favourably to other telecommunications service providers. This process required considerable time, energy and cost, the successful completion of which was a great reflection on the Nashua Mobile team.

An important growth area for Nashua Mobile is the financing of handsets. Currently some 134 000 devices are financed, with this aspect of the business increasing significantly by 91% from 70 000 in 2010.

During the year an international call-forwarding scam affected all networks and service providers. However, working decisively and promptly with our peers in the industry, this potentially burgeoning fraud was contained and charges brought against some of those responsible. To mitigate risk from this type of fraud in future, a high-usage team monitors suspicious spikes in customers’ usage and responds accordingly.

Primary brands, products and services Nashua Mobile offers choice of a complete range of post and prepaid products from all four networks (Vodacom, MTN, Cell C and 8ta). A wide range of devices to supplement these services are provided and includes: cellular handsets, mobile data modems, laptops, tablets and accessories.

In-house developed products include SMS Gateway, Click-to Recharge, SMS4Info and EasiSolutions.  
Operational areas Nashua Mobile has more than 846 000 contract subscribers with a network of 150 retail outlets.  
Market sectors Corporate, retail contract market.  
Standards & verifications Rica, Independent Communications Authority of South Africa (ICASA) Regulations, CPA, ECNS, Registered Financial Services Provider  
Current BBBEE level 3  
2012 target 3  

A key focus for 2012 will be the overhaul of Nashua Mobile’s IT systems to improve the billing ability and further enhance customer service levels. Another area of focus will be migrating prepaid customers to contracts, as research indicates that a significant number of customers are willing to migrate provided they are given sufficient incentive to do so and that the registration process is not cumbersome.

  Chris Radley (45) 
 
  • Managing director: Nashua Mobile
  • CA (SA)
  • Appointed 1 July 2002