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Yatango Mobile enters Voluntary Administration

According to this report from Smart Company, Yatango Mobile (Australia) Pty Ltd has entered voluntary administration on September 29.

I took some time this morning to delve deeper into the prospectus that was released a few months ago by Latitude Consolidated Ltd, as part of Yatango’s plan to complete a reverse takeover and become listed on the ASX.

In the prospectus issued on 1 July, it had allowed for a four month period for the Yatango offer to raise a minimum of $6 million, by selling 60 million shares at 10c each.

On 12 August, Latitude Consolidated announced to the ASX that the minimum fundraising target that had been set ($6m) had not been reached, and therefore the acquisition would not be going ahead. They also requested repayment of the $250,000 loan that they had made to Yatango as part of the prospectus process.

Some interesting things that I found when I read the prospectus again this morning after this announcement:

  1. “The cash flow from the operations of Yatango has been managed on the basis that Yatango has been seeking to grow rapidly. This has left Yatango with a high level of creditors, and accordingly, the sum of $1.91 million will be used to repay trade creditors from the proceeds of the raising under this Prospectus.” – page 104.
  2. “Yatango Mobile customers can potentially fully utilise their mobile device plans and thus negatively impact Yatango’s profit margins by turning them into loss making customers for the relevant 30 day period that their service relates to.” – page 105.
  3. From a report issued by Deloitte Corporate Finance Pty Ltd that appears on pages 146 and 147 of the prospectus: “A Review conclusion was issued by Deloitte Touche Tohmatsu which included an emphasis of matter in relation to Yatango’s ability to continue as a going concern in the absence of the acquisition by the Company.”
  4. “Optus has confirmed in a letter provided to Andrew Taylor on 28 August 2014 that it will not exercise its right to terminate the Optus Agreement for a failure by Yatango Mobile to meet the minimum number of net activations targets for year 1 and year 2 of the Committed Term of the Pre-Paid SD” – page 172.

Point 2 is particularly interesting, because it is the same issue that Kogan Mobile’s wholesale partner ispONE faced where they were making a loss on people who fully utilised their “unlimited” plans, something that people who choose to take up these on contract, SIM only plans are much more likely to do than consumers on regular 24 month contracts that include a handset.

Also worth noting here is that Yatango would send monthly e-mails to users on its service, advising them of their best plan option for the next month, based on their current usage – effectively reducing their ability to earn lucrative “cap excess” rates for usage by their customers above and beyond their included allowance. Excess usage was charged at Yatango’s low PAYG rates of 11c/min, 9c SMS and 5c/MB data rates.

Point 4 is also interesting, as Yatango are required to sign up a minimum number of new customers each year across their 5 year contract with Optus, much like other MVNOs like Amaysim are required to do, and they had not managed to achieve this number for the first two years of their agreement – a grounds for termination of their agreement in the contract that has not been exercised by Optus.

It seems like Yatango were going after some very aggressive growth targets in their mobile division and based on the report issued by Deloitte, it looks like they may have desperately needing the capital injection that they were looking for from this share offer/reverse takeover.

Based on the information in the prospectus, the parent company Yatango Pty Ltd owned 55.29% of Yatango Mobile Pty Ltd which then owned 100% of Yatango Mobile (Australia) Pty Ltd, however in the prospectus, Yatango said it had planned to purchase the remaining 44.71% of Yatango Mobile Pty Ltd following the capital raising event from the prospectus issued by Latitude Consolidated.

There have been no announcements from Yatango Mobile (Australia) Pty Ltd on their social media channels or via e-mail to existing customers of “what happens next”, but we’ll keep you updated when we hear more.

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