ASX-listed Cellnet has been dropped as distributor of Nokia accessories, ending a nine-year relationship with the mobile giant.
The Scandinavian vendor announced last week that WA-based Force Technology International had won the sole accessories distributor contract, which was put out to open tender in June. Brightpoint, Roadhound Electronics and Tech Pacific were retained as handset distributors after being put through the same process.
“With Nokia releasing more mobile phones and enhancements [accessories] than ever before, it made sense for us to review our distributors to ensure we are addressing the changing needs of the market,” general manager for Nokia mobile phones in Australia, Alex Lambeek, said.
“We were looking for strength in logistics and fulfilment services, superior relationship management and the ability to deliver stock quickly and efficiently across Australia.”
While Nokia refused to comment on the relative merits or failings of the different applicants, the decision certainly came as a shock to Cellnet, which had submitted a bid for both handset and accessory distribution.
“It was a king hit and came from the left,” Cellnet managing director, Stephen Harrison, said. Cellnet had been distributing 65 per cent of Nokia’s accessories in the Australian market.
“We felt we had done such a good job of building their brand during the past nine years that it came from out of nowhere to be honest,” Harrison said. “I think they have a lot to answer for in terms of the decision they have made.”
Lambeek said accessories were becoming an increasingly important part of the Nokia business.
“We have expanded our enhancements from the traditional items such as battery chargers and car kits to new devices including digital cameras, Bluetooth accessories, music stands and image viewing units — all of which are designed to make life more mobile,” Lambeek said.
He suggested the appointment of Force Technology would provide a strong boost for that side of Nokia’s business.
Harrison, on the other hand, said he thought the decision had been made because Nokia was unable to exert enough control on Cellnet.
“It’s a big power play on their part and, at the end of the day, it’s all about control,” he said.
“I’m not happy to have all my eggs in one basket — I like to spread the risk and that decision has paid off because things like this happen.”
The distribution of Nokia accessories accounted for about $20 million of Cellnet’s annual turnover of about $315 million.
“It’s a fair proportion but it’s not a showstopper for us by any means,” Harrison said. “Our own Cellnet branded accessories have a very good following and much better margins. They are on a par with Nokia products for us in terms of turnover but a lot greater if you look at gross profit.”
While the end of the relationship would hurt overall market share, Harrison was confident Cellnet would remain the number one mobile accessories distributor in Australia.
Cellnet has estimated the loss of the Nokia contract could have an adverse impact of $0.03 earnings per share, equivalent to $1.5 million net profit in a full year.
But Harrison said he was confident the company could offset the loss in the current financial year through a combination of achieving growth in the distribution of its own branded accessories, new contributions from the recent acquisition of Cassa Australia and a general improvement in market conditions.
The relationship between Nokia and Cellnet would come to an end towards the end of September but final transitional arrangements were not available at the time of going to press.
Harrison said Cellnet had contracts with several major carriers and retailers it would like to continue.
“If this has done anything, it’s made us wake up and smell the roses,” he said. “We will become a lot more aggressive.”