Fone Logistics strikes back

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Airtime and handset distributor Fone Logistics has grown tired of rumour in the channel that its future is in the balance. It claims the scaremongering comes from rival firms, looking to unsettle its dealer customers. The anonymous claims of its financial troubles are false, it says. In response, at its base on the outskirts of Newcastle, managing director Ian Gillespie and marketing director Julien Parven reel off its successes in 2009, including the reinstatement of its Vodafone contract and, it claims, the highest share of third-party O2 B2B business anywhere in the market; reasons perhaps its rivals are compelled to stoke the fire of gossip that appears lit around it.

Along with Kent distributor MoCo, which holds a lower-key profi le in the market, it is the only privately-owned UK airtime distributor left – HSC belongs to Carphone Warehouse, Avenir Telecom to French retailer Avenir Group and Anglia Telecom Centres is a recent purchase by AIM-listed Daisy Communications. Mainline and Midland, meanwhile, are part-owned by Orange.

Its public rivals are parts of companies whose chief interests lie outside of dealer airtime sales. As such, and as its recent record attests, Fone Logistics is the only acquisitive firm in the sector. Its 2008 purchase of 20:20 Mobile’s airtime unit Dextra, which had been hit hard by the collapse of cashback trade, removed a formidable brand from the market and brought Fone Logistics some new share.

But the market remains overcrowded, with suppliers fighting for fewer than 1,000 dealer customers in the traditional channel, and Fone Logistics has been open with its ambition to lead further consolidation of airtime supply.

It is not really the talk of a troubled brand. However a root-and-branch restructure in November last year got the market wondering.

Restructure and rumour
Fone Logistics, then, informed partners it had been acquired by a new company. Gillespie said at the time its ownership and running order essentially remained in tact, and that service would continue as normal – for staff , suppliers, dealers and their respective accounts. Still, it sounded strange to the market, and people talked and worried they would not be paid on time.

The problem for Fone Logistics, and reason for the restructure, was the loss of the Vodafone contract from 2007, worth around £6 million to it in revenue (£1 million in profit). It came shortly after Gillespie had sold two thirds of Fone Logistics to certain private individuals, and while he waited on part-payment from them. It came just before Fone Logistics followed most of the rest of the indirect sales channel away from consumer sales to embrace small business connections.

In the end, Gillespie took the hit himself. He bought back Fone Logistics through a new entity, in the process correcting its balance sheet and making the deferred payment from investors a private issue.

Parven, who took a pure marketing role in the restructure and handed all sales duties to Duncan Edwards, puts it: “As a competitor of Fone Logistics, it (financial instability) is the biggest doubt you can plant in a dealer’s mind. It was an opportunity for them to destabilise some of our relationships. The reality was all our partners have always been paid on time, in full, every week. The message wears thin. The only message we have, is the same as it has always been, that we are here for the long term.”

He adds: “Our customers have been fed lies, and there is only so many times you can defend yourself against that. The only decent way to respond and to do business, really, is to get on with it and keep your head down. If there was any problem, we would tell our partners. We tell the truth, our customers know that, and we have not lost any business through all of this.”

It has not helped that Fone Logistics has been so late to file its 2008 accounts. The reason for the delay, it appears, is Gillespie in principal did not wish to make a private matter public (he took on the debt himself), and to alert rivals and worry partners, which it has anyway.

The issue has been sorted with the restructure, and Fone Logistics has now filed its 2008 accounts (late), which show turnover in the year was down from £76 million to £53 million. Financial director Michael Fitzpatrick assures that profitability is up at the same time, as Fone Logistics has refocused on highermargin business sales and slashed its cost base. It has 75 staff now, compared with 155 in 2007.

Full article in Mobile News issue 457 (February 15, 2010).

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