Communications and consumer electronics provider, Vita Group, is strengthening its alignments with Telstra through an adjustment to its remuneration model which will see it place greater emphasis on the telecommunication company’s strategic priorities.
From January 1, Vita will add the Telstra’s StayConnected and StayConnected Plus services to its portfolio which will be sold via its telco distribution channels, and will retire its proprietary Swap and Extended Warranty products.
Vita claims that despite the retirement of its proprietary products, results will continue to reflect the amortisation of deferred revenues on the sale of such products made before January 1. Deferred revenues are released to profit over 30 months, over which time period Vita continues to have obligations to purchasers.
Vita’s results will therefore include both the remuneration on the sale of StayConnected and StayConnected Plus services and the amortisation of benefits on the previous sale of its proprietary products for a period of time.
The company said the non-cash benefit is expected to be about $6.2 million in the second half of the 2014 financial year, $8.5m in the 2015 financial year, and $2.5m in the 2016 financial year.
The new arrangement is also expected to see Vita increase the number of Telstra-branded retail stores in its portfolio beyond the current 85, including the proposed acquisition of stores currently owned by the telco.
Total CapEx associated with these additions, and the planned acquisitions is expected to be between $13m and $17m, to be incurred late in financial year 2014 and early financial year 2015.
Additionally, the arrangements confirm Vita’s master-license tenure to August 31, 2018, as well as the potential for extensions to this tenure, contingent on certain performance benchmarks being met.