JSE-listed Altech is looking into integrating offerings from Autopage and Altech Technology Concepts (ATC), and may launch a virtual mobile network operator, although no decisions have yet been made.
The two entities have synergies that could be combined to offer a converged service, as Autopage is strong in the voice arena, while ATC offers data and Internet service provider solutions.
COO Jeffrey Hedberg says Altech wants to create scale and drive convergence between the two companies. He says this process has just started and Altech will provide more clarity to the market towards the end of its financial year, which is in February.
CEO Craig Venter adds the units will grow closer together over time and will go to market with a combined voice and data offering.
Venter says there is potential for the entities to launch as a virtual operator, a strategy the company is looking into. However, Altech will not invest billions in building its own network, and the company is likely to focus on niche segments, rather than launch nationwide operations.
Driving convergence
The units are operating well as standalone entities, but will need to be reinvented to ensure growth in about five years' time, says Venter.
A converged service provider would be able to benefit from Autopage's almost 140 nationwide outlets, and develop an integrated suite of converged voice and data services, notes Hedberg.
The Independent Communications Authority of SA has indicated it will have regulations in place by November to enable local loop unbundling.
However, Hedberg stopped short of saying whether the proposed combined entity would become a new telecoms operator. Venter says the new business has the opportunity to become an operator, but there are many strategic aspects the company must look at over the next three to five years.
Venter adds the company is capable of participating in upcoming spectrum auctions, but the playing field has not been set. He says the company has the potential to become a “stealth competitor”.
Margin pressure
Autopage, Altech's largest unit, grew revenue from R2.8 billion to R2.997 billion, and improved its operating profit margin from 3.7% to 4.1%, in the six months to August.
Venter says the mobile market is still “exceptionally competitive with aggressive price movements”.
Autopage has a million customers and on-sells offerings from cellular companies such as MTN, Vodacom and Cell C.
ATC reported an operating loss of R16 million from revenue of R27 million, which was slightly more than expected as the company transforms into a tier one Internet service provider. “The focus now is to increase revenue by expanding the network's distribution capacity, both directly and indirectly, over the next two years,” explains Venter.
ATC, an Internet service provider focused on the small and medium segment, offers value-added services such as firewalls and hosted e-mails, and launched its network in February.
Hedberg says it is still early days, but it is difficult to continue to sell consumer voice as a standalone entity, as margins will come under pressure due to increased competition. Although Autopage “still has legs”, the company would like to reposition it to give it “more legs,” he adds.
Autopage will have a stronger focus on the business-to-business channel, comments Hedberg. He says if it joined forces with ATC, if would be able to offer converged voice and data solutions.
Altech has an individual-electronic communications network service licence after taking on late communications minister Ivy Matsepe-Casaburri in a lengthy court battle to force government to allow value-added network service providers to build their own networks.
Its win paved the way for more than 400 value-added network services to self-provide through electronic network services licences, instead of on-selling Telkom's services. Matsepe-Casaburri had doggedly opposed this concept since September 2004.
Altech has spent R35 million on a network for ATC, to ready it to play in the converged space. Autopage and ATC will share the licence and offer converged voice, data and triple-play solutions.
Share