Cellnet looks to offload Mercury

ASX-listed distributor, Cellnet, is considering offloading its mobile phone content arm, Mercury Mobility.

Chairman, Red Clairs, made the announcement during the company's annual general meeting. While it was too early to speculate on how the sale would come to fruition, a trade sale or listing on the Alternative Investment Market (AIM) in London were options.

"In recent times it had come to the board's attention that mobile content businesses trade on higher, more attractive multiples than distribution companies," Clairs said in an AGM statement. "Effectively, the potential value of this business may be overlooked by being combined with the other Cellnet business. It would be remiss of us not to look at how we can unlock this value."

The board could complete a sale within the current financial year if a suitable transaction was found, Clairs said.

Cellnet has been investing significantly into Mercury, hiring new specialist staff and growing its geographic footprint through contracts with Bell Canada, 3 UK and Telecom NZ.

In other news, Cellnet managing director, Adam Davenport, reported it had experienced a disappointing first quarter, with telco business sales dropping by $10 million year-on-year. He attributed the fall to the ongoing ramifications of Telstra's decision to cut mobile handset distributors. The telco giant opted for a sole supplier agreement with Brightstar earlier this year.

"We had anticipated some of this impact, but Telstra's new approach has hurt sales and profits by more than we had expected," Davenport said in a statement.

The loss of Telstra had neutralised the cost savings benefits made through Cellnet's restructure, he said. But although second quarter results were expected to be down, he predicted a stronger second half.

As part of its focus on improving revenues, the distributor has appointed Martin Bicknell as its general manager of sales.