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
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
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
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
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
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