Cutting Room: Dealers being backed into a corner

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Paul Withers thinks a lot of dealers could be in danger of falling by the wayside this year, with ‘consolidation’ and ‘acquisition’ the hot topics of discussion

‘Consolidation’ and ‘acquisition’ have been the buzzwords of the mobile industry for as long as I can remember.

For years the independent dealer channel has spoken of its intentions to expand, buying up a base here, opening a new office there. But for many, this talk has been cheap.

But today, the noise now coming from the channel appears to have greater substance than before.

Of course, no one envisaged the economic slump, which undoubtedly saw many an acquisition plan torn up, instead replaced with a survival guide. And for the past couple of years dealers have been forced to ride the challenges of the rough economy.

Budgets have been tight, revenues stretched and dealers have been happy just to grow organically and focus on improving the service they provide to their current customer base.

But judging by the views of some of the country’s leading dealers, 2012 will be the year they dust off their chequebooks.

Handset distributor Data Select recently told Mobile News there are probably 1,000 mobile dealers now in existence. Which sounds great. But of that 1,000, only around 150-200 are what they would call “key accounts” of any real value, with the remaining ones typically seen as modest lifestyle businesses.

And it is those business that appear to be increasingly at risk of falling by the wayside, and the feeling among the O2 Centre of Excellence and Vodafone platinum partners of this world, is many are now ready to sell up.

Many dealers claim to have been approached and to have held discussions with smaller dealers looking to do just that in the past 12 months, more so than at any time before. Many simply don’t want to be part of the new convergence world, learning to sell fixed line and IT or trying to understand ongoing revenue, but the reality is clear: if you’re still a one-trick pony and not adding value by offering additional products and services, you’re in trouble.

Competition is as tough as it ever has been, with hundreds of dealers still competing against one another to win and keep customers. Many are struggling to compete and are giving into the pressures of either selling their network base or entire businesses as a whole.

Both options appeal to the larger dealers who have expressed an interest in a ‘buy and build’ strategy this year and are now ready to strike in order to enhance their business, expanding their customer base and product and service portfolios.

So the ‘cheap’ talk now seems to have a backbone. The race to the top seems not so much an ambition as a necessity. Dealers once fought to become the dominant player in their local and regional markets. Now they seem more intent on invading others to build a national brand. The quickest way to this, ultimately, is to buy others.

Qualitel says its wants to acquire six businesses by the beginning of 2014 after years of continued organic growth, in a bid to make the next step up and become a national rather than regional player.

Evolve Telecom, believed to be Vodafone’s second largest platinum partner with a customer base of 43,000 connections, is looking to more than treble its base through the acquisition of a number of Vodafone bases or dealers this year, no matter how big they may be.

Fellow platinum partner Phonebox has secured private equity funding and is targeting dealers regardless of their network base and any complementary businesses that would assist in its growth.

But the sharks are also circling outside the traditional mobile channels as well. A prime example is Pinnacle Communications’ purchase of General Telephone Company (GTC) at the end of last month. The purchase sees Pinnacle take around 15,000 Vodafone connections and make its first steps into mobile.

It’s also key to note that GTC is no small partner – it is a Vodafone platinum partner and one of the operator’s 26 leading dealers in the UK.

What is a real possibility is the emergence of a football-style league table format. The dealers that are successful in acquiring their targets will be competing at the top, while the others who continue to live in the past and not innovate beyond traditional mobile services could face a daily struggle to survive.

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