IT reseller, Vita Group (ASX:VTG), is set to expand its footprint of Telstra-branded stores around Australia, following remuneration changes to the telco’s licenced channel network.
Vita Group operates in the retail channel under the Telstra, Fone Zone, and One Zero brands, and in the business segment under the Telstra Business and Vita Enterprise Solutions brands.
The publicly-listed company told shareholders on November 25 that it would “accelerate” its physical optimisation program. According to the company, the move will involve both “additions and exits,” but will ultimately result in an overall increase in the number of Telstra-branded stores it operates.
The company has not yet confirmed the number of new Telstra-branded stores it intends to open.
The move comes as the company agrees to changes to its commercial terms with its strategic partner, Telstra. Under the agreed new terms, its remuneration structure with Telstra will change.
“Some elements of remuneration will reduce, where they have been deemed to be less effective in driving value,” the company said in a statement. “This will be partially offset by an increase in remuneration designed to incentivise the sale of a broader range of product solutions to customers.”
The company told shareholders that, although the net impact of the changes on earnings is, at present, difficult to determine, it expects to see overall sales volumes improve, offset by some additional pressure on profit margin potential.
The announcement also follows recent negotiations between Vita and Telstra, about strategic and tactical opportunities available to the partnership.
“In line with normal commercial practice, on Friday 28 October 2016, Telstra briefed Vita Group and the broader Telstra licenced channel in confidence about some potential changes to the remuneration construct, reflecting a number of market and commercial factors,” the company told the Australian Securities Exchange (ASX) on November 1 following an official price query.
“Vita and Telstra are currently in confidential discussions about those potential changes, and other strategic and tactical opportunities available to their partnership,” it said at the time.
“Over the 21 years of Vita’s partnership with Telstra, we have worked well together to reach mutually beneficial outcomes – strategically, operationally, and commercially,” Vita Group CEO, Maxine Horne, said.
“After all, it is in our joint interests to do so. We remain focused on delivering on our strategic plan and doing what we do best,” she said.
The company's share price stood at $3.60 at the time of writing.
