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WirelessG needs more Vodacom revenue

WirelessG CEO Carel van der Merwe is confident his company will pull through business rescue.

WirelessG CEO Carel van der Merwe is confident his company will pull through business rescue.

WirelessG needs Vodacom to contribute more to its revenue to turn the distressed business around, says CEO Carel van der Merwe.

"Although Vodacom has the largest market share of WiFi-enabled customers, and the largest and most effective sales and distribution enablement, they only contribute to a third of our revenue. This clearly indicates that something serious is wrong, which urgently needs to be rectified during the rescue period."

WirelessG, best known for its WiFi brand G-Connect, filed for business rescue earlier this month. Van der Merwe says retrenchments already took place during the first week of rescue.

"We cut the salary bill by more than 50%. We are redesigning our entire internal environment."

Vodacom is a 19% indirect shareholder in WirelessG but Van der Merwe says it is not leveraging enough profit from the partnership.

"Vodacom needs to assist in making our product commercially available to their end-users through Vodacom's entire retail distribution channel network and activation mechanisms.

"We need a committed and active marketing and sales effort through our mobile channels. In terms of the rescue plan, we will need commitments and actions in good faith."

Van der Merwe says WirelessG has an exclusive agreement with Vodacom, "where they have to offer our WiFi data products in conjunction with their mobile broadband products through their entire distribution network". However, he says consumers are often not given the choice to buy G-Connect WiFi bundles of over 1GB at Vodacom retail outlets.

"The matter of the fact is that the company is experiencing a situation of financial distress in terms of cash flow. This does not sound logical when taking our partnership model into consideration and hence is the very reason we applied for rescue."

The company was founded in 2002 and now has around 2 200 integrated WiFi hotspots across South Africa in shopping malls, restaurants, hotel chains, and major airports, as well as running in-flight WiFi services for Mango Airlines. Van der Merwe says there are between 15 million and 20 million WiFi-enabled users in South Africa and in terms of infrastructure, WirelessG reaches around 80% of the commercial public.

"In general, all consumer-related markets are under stress. The telecommunications industry is experiencing massive restructuring and remodelling all over the show. These are all signals of an industry under distress," says Van der Merwe.

Despite the distress, he believes the company can pull through the rescue process as it knows what needs to be done.

"We need to realign our entire internal environment more effectively with our external environment in a very short time span. This obviously includes realignment with creditors, coupled with very specific recommitments from channels − and more specifically Vodacom, who will, to a greater extent, contribute to revenue."

Vodacom's announcement last week that the network is now able to facilitate voice over WiFi calls "came as a very big surprise" to WirelessG. Van der Merwe says the company was "not consulted at all".

"However, that does not change our agreement terms. We will work the estimates in terms of revenues into our plans."

Van der Merwe says there is some silver lining, as WirelessG hopes to announce an integration partnership soon.

"This new partner seems to be very dynamic and aggressive in the market. We are working towards visibility of the G-Connect SSID on all our integrated hotspots by October. Seamless SIM authentication through your mobile operator account will be the next big thing."

* Requests for comment from Vodacom remained unanswered by the time of publication.

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