How Advantage was lost

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Distributor Advantage Cellular Communications, comprising an airtime unit and a handset division, was on the face of it a decent operation, projected to turn over £32 million this year and make a profit.

Why, then, did its benefactor, Polish billionaire Roman Karkosik (pictured right), place it into administration last month and turf 40 staff out onto the swelling UK job market?

In the end, Advantage Cellular was caught between a rock and a hard place; between Karkosik and its founder Simon Earle (pictured left).

The pair fell out over money last summer and ultimately failed to resolve their differences, to enable the unit to restructure and to run independently of defunct sister businesses Extreme Mobile and Advantage Business Solutions.

Last August, Earle was ousted as Advantage chairman. But he remained as director and shareholder in the business, as well as its parent company Xebra, by virtue of a complicated ownership structure set down when Karkosik first bought into the scheme in 2007.

Karkosik was ranked 557 in the 2007 Forbes billionaire rich list, with a fortune of $1.8 billion, made from the steel, copper and chemicals industries.

Earle, a veteran of US distribution giants Cellstar and Brightpoint, considered B2B airtime sales a growth area in the UK market. He was looking for ways to reignite his old Advantage trading operation, which stopped activities in 2002 when Earle became ill and ‘grey’ market  carousel fraud took root.

Karkosik wanted a way into telecoms. Centernet, a Polish internet service provider owned by Karkosik’s Midas investment fund, was lining up a bid for Poland’s first 3G network licence – which it eventually won in October 2007. He also wanted an MVNO interest in his homeland in case the 3G auction did not go his way.

The Extreme Mobile MVNO licence was available for the UK and 26 other markets. Earle was contacted, and the pair bought the rights to it. Karkosik agreed in principle a deal to run Extreme Mobile off incumbent network Polska Telekom in Poland.In the UK, a wholesale deal was already in place with Vodafone.

Advantage Cellular was organised to run as a fulfilment house for the UK venture, with Earle’s B2B unit Advantage Business Solutions tacked on the side. Meanwhile, Midas purchased Polish developer mLife in June 2007 to serve the UK MVNO and both Polish providers with appropriate mobile content and services.

The deal Earle struck with Karkosik in 2007 saw Earle dilute his stake in Advantage holding company Xebra to 20 per cent. The remainder was handed to  Centernet.

Xebra owns a 61.25 per cent share in distributor Advantage Cellular and B2B seller Advantage Business Solutions. Earle has a 38.25 per cent stake in the two units, equivalent to 51 per cent when combined with his Xebra holding. Xebra has a 100 per cent share in Extreme Mobile, the nominal MVNO operation.

At launch in September 2007, Karkosik pledged $1 billion to the development of Extreme Mobile, Advantage Cellular Communications and Advantage Business Solutions in the UK.

Distribution veterans John McFarnon, Frank Masson and David Whitaker were recruited to the cause.

Last summer two things drove a wedge between Karkosik and Earle, and ultimately saw their distribution business collapse helplessly and needlessly.

Full article in Mobile News issue 436 (April 4, 2009).

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