Analysis: What's really happening at Fone Logistics?

Analysis: What's really happening at Fone Logistics?

Fone Logistics has a habit of courting controversy. The distributor made headlines last week after Companies House announced it was proposing to strike off Fone Logistics Handset Distribution and North Nelson - two sister companies of Fone Logistics - for failing to file their accounts.

This situation has its roots in another controversy - the restructuring of Fone Logistics in October 2009. In a complex deal that raised industry eyebrows, Fone Logistics' name was changed to North Nelson and all its assets and liabilities were then transferred to a newly formed company.

The new company took the resurrected name of Fone Logistics, leaving the old company's accounts resting in North Nelson.

At the time, industry rivals queried the deal, likening it to JAG's 'pre-pack administration'. Fone Logistics has always maintained it was nothing more than an overdue piece of structural housekeeping following the departure of two private investors in 2008.

Industry players remain cynical and last week's notice from Companies House has fuelled further speculation over the distributor's financial stability.

Fone Logistics chief executive Ian Gillespie insists that rivals are seeing problems that don't exist. He tells Mobile: 'We have nothing to hide. Neither company is trading. Fone Logistics Handset Distribution never traded.

'We set it up when we were thinking of splitting the airtime and handset businesses and then we changed our minds. North Nelson's accounts are being filed now. We were just squaring things up after the restructuring.'

So why, if there is nothing untoward, did Fone Logistics file its accounts so late? Why risk the reputational damage that the strike off proposal brings with it?

'I'll admit, we did drop a clanger there,' says Gillespie sheepishly. 'We should have got it done more quickly but we had a list of priorities. We were getting the new company up and running and the assets and liabilities all had to be transferred from the old company to the new company. Balances needed to be transferred.'

Industry players reject Gillespie's explanation. Their diagnosis is that Fone Logistics is struggling and wants to cover its tracks to give it time to retrench.

One dealer says: 'No company would trade like this unless they had to. The restructuring and now this failure to return their results is not something any business wants.'

Gillespie dismisses his detractors. He says: 'Everything has been done above board with the help of PriceWaterhouseCoopers and Muckle's law firm; both blue chip companies. This is no backstreet deal.'

Above board or not, some believe the complexity of the restructuring, combined with the proposed strike off, has undermined dealer confidence in Fone Logistics.

One player says: 'This is not good for Fone Logistics, particularly with the rise of revenue share. Dealers are worried about the longevity of their revenue share and they want to take fewer risks with the supplier.'

Gillespie insists his dealers and the networks have full confidence in Fone Logistics. He says: 'We have explained the restructuring to our customers and suppliers and we share management information with them and they have no problem with all that.'

He adds: 'The fact that Vodafone audited our books when they signed us up and the fact our other operators have novated their contracts from the old to the new company is proof that we are sound.'

Vodafone's decision to take Fone Logistics back in the fold last October on an airtime deal restored a lot of its credibility in the industry. However, not everyone is convinced.

One rival says: 'Fone Logistics always points to Vodafone's decision to take them back on board as evidence of its financial health, but the Vodafone deal was very strategic. Operators don't like having all their eggs in one basket. Most want to spread their business around.'

Some believe Gillespie's relationship with the industry, more than its financial strength, is what clinched the deal.

'This industry is a lot about relationships and Gillespie has been in the industry a long time. Vodafone's decision is probably based on that more than anything,' one source says.

So will 2010 be as controversial a year for Fone Logistics as 2009? Gillespie says not. 'I think it is going to be a good year for us,' says Gillespie, who is so confident he is promising to bring forward the new company's results to provide further evidence of the distributor's financial health.

He adds: ''We are planning to file the new company's accounts early because we want to keep the same year end. They will be audited in July and be signed off around August. We are producing them quickly to show people the business is strong.'

Rivals will be watching with interest.


Business developments for Fone Logistics

Ian Gillespie has his sights firmly set on winning a place on One Net, Vodafone's converged business offering, within the next six months.

He says: 'That is the game plan. Once we get some more partners and get them trained, and Vodafone is confident we can sell it; then I think it will be introduced.'

Fone Logistics is also consolidating its position as an O2 'Joined Up' partner. The company has just won O2's Best Distributor in the Centre of Excellence category for Q4. It also clinched Best Distributor for Q3 and knocked Avenir Telecom, which had held the title for nine months, off its perch.

The distributor is also extending its business with 3, having just forged a deal with the operator that sees Fone Logistics signing up a new dealer to sell 3 connections exclusively. Additionally, the distributor has re-signed an existing dealer to 3 for another exclusive 12 month contract.

Written by Mobile Today
Mobile Today


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