7/21/2010 11:52:00 AM
Under the lens: Peter Jones’ exit strategy
Rumours of Peter Jones’ exit from the telecoms business were reignited earlier this month when the Dragons’ Den star confirmed the merger of online retailer eXpansys, Data Select Network Solutions and PJ Media.
On 6 July, eXpansys – an AIM listed company – announced that it would be carrying out a reverse acquisition of the two companies – a move that surprised many of Data Select’s competitors.
Jones, who cut his teeth at the infamous Caudwell Group, is one of the industry’s longest serving figures. Over the past 10 years he has built up an empire of telecoms businesses, with the key elements embedded in the distribution industry.
Jones’ future has long been the subject of speculation, but it is now clear that his exit from the telecoms industry is just a matter of time.
Why start with Data Select Network Solutions and PJ Media?
A statement released earlier this month said eXpansys had been reviewing potential acquisition opportunities, identifying two target businesses in DSNS and PJ Media as ‘being complimentary to the core eXpansys offering and a compelling strategic fit with the group’.
For some observers, the sale of DSNS raised some pertinent questions. A key issue for eXpansys in the past concerned its lack of airtime offering. DSNS – Data Select’s Sim card business – was only created around six months ago. It has already established links with retailers and networks and could be the springboard eXpansys needs to compete with the established online players.
However, others have interpreted the sale of DSNS as Jones moving the most profitable parts of his business into one manageable place as the Dragons’ Den star prepares to exit the telecoms business.
Speculation about Jones exiting the telecoms market has been circulating for years.
However, documents seen exclusively by Mobile indicate that Jones may have considered leaving the industry as early as 2003.
In March 2003, Close Brothers Corporate Finance and KPMG created strategic pitches outlining an exit strategy for Jones. At that time he still owned Generation Telecom, a connections business that was later sold to Vodafone. He did not have any shareholding in eXpansys and DSNS did not exist.
Close Brothers Corporate Finance’s strategy said ‘investor perceptions of the group would be enhanced by a simpler structure’ (from the current six companies under the group umbrella to two or three operational divisions).
Ultimately, Close Brothers recommended ‘a partial break-up’ of the group to provide ‘an opportunity to refocus the group while addressing funding requirements’.
The documents may indicate a long-term strategy for Jones and the telecom market.
Was this always in the pipeline?
Jones started buying shares in eXpansys in 2008, when he acquired a 22% share.
Over the past year and a half he has managed to secure 75% of the company.
During that time, the online technology retailer has had its trials and tribulations. For two consecutive years, in 2007 and 2008, the company posted pre-tax losses. In 2008, that translated to £2.5m, up from £800,000 in 2007.
But despite the losses, eXpansys did manage to increase its turnover by 29% during the same period. Then, in January 2010, Anthony Catterson was appointed as CEO of the company.
Catterson joined eXpansys from Carphone Warehouse, where he was MD of the retailer for two years. Prior to joining Carphone, he had also been an MD of Phones 4u for three years and MD of Micro-P for two years. Catterson brings both mobile and retailing experience to eXpansys.
After joining the company, Catterson carried out an extensive review in a bid to create scale. It is clear that eXpansys is a focus within Jones’ portfolio of businesses.
eXpansys moving forward
Despite evidence of Jones exiting the market, eXpansys’ statement makes it clear the business is looking to continue building its presence.
Expansys CEO Anthony Catterson had called the move ‘a transformational moment’, adding that the deal opened up ‘a number of significant strategic opportunities’ for the company that ‘we fully intend to exploit’.
A strategic plan has also been put in place, which will see eXpansys looking to build strong relationships with operators, creating a robust online platform that will allow it to access a wider market and offer a wider range of products.
Through the acquisition, Peter Jones’ stake in eXpansys will drop to 43% from 75%.
He remains the sole shareholder of Data Select and maintains a stake in the Phones International Group.
Despite the appearance of consolidation, Jones is a savvy player in the UK mobile industry and should not be underestimated. He has made shrewd decisions before and is likely to make them again, but perhaps this time that means making a timely exit from the market.
Online technology retailer specialising in Sim-free handsets, laptops and TVs. Floated on AIM in 2007, Jones started buying shares in 2008.
Created in 1998, specialises in distribution of Sim-free handsets, maintains official relationships with manufacturers.
Website and ecommerce company whose clients include the Sony Ericsson eStore and Vodafone UK.
Jones invested in the company after CEO Jason Roberts pitched on Dragons’ Den. Tech 21 is a manufacturer of durable mobile cases for handsets.