Vita Group (ASX: VTG) announced yesterday a strengthening of its alignment with key strategic partner Telstra (ASX: TLS). The partnership with Telstra began 18 years ago and will last another five, as well as the potential for extensions contingent on certain benchmarks being met.
Vita Group's revenues derived from Telstra will be reflective of driving Chief Executive Officer David Thodey's oft-repeated number one priority of customer advocacy. Additionally, implementing Telstra's strategic priorities will result in a pre-arranged sharing of revenues.
Vita Group is an Australian electronics and telecommunications retailer, comprising six brands: Fone Zone, One Zero, Next Byte (Apple's (NASDAQ: AAPL) premium reseller), iConcierge (Apple's repair agent), Vita Networks and Sprout Accessories, along with selected Telstra Shops and Telstra Business Centres.
There were three new announcements as follows:
1. Vita selling additional Telstra services
StayConnected and StayConnected Plus are Telstra's new device swap, replacement and restoration services, which allow customers to swap or replace their device for any reason up to twice per year. From January 1, 2014, Vita Group will sell these through its telecommunications distribution channels. A more extensive product suite should hopefully result in increased revenues and a profit uplift.
2. Vita to increase the number of Telstra-branded retail stores, including acquiring stores currently owned by Telstra
Currently Vita Group has 85 Telstra-branded retail stores. This will increase along with the proposed acquisition of stores currently owned by Telstra. Capital expenditure is expected to be between $13 to $17 million and incurred in late FY 2014. More store roll outs could potentially assure Vita Group of additional growth.
3. Confirmation of Vita's master-license tenure to August 2018
The new arrangements also confirm Vita Group's master-license tenure to August 2018, thereby providing additional assurance to investors.
Foolish takeaway
As a small-cap whose fortunes are intrinsically linked to those of the behemoths Telstra and Apple, I have no hesitation in recommending this investment.
Vita Group receives negligible broker or press coverage, which presents an opportunity. Gaining an understanding of the stock may enable Mr Market to be outflanked, as a result of the dearth of information and potential mispricing.
Some of my best investments have involved actually walking into a store or business and observing activity levels and staff attentiveness. Should you still feel reservations about Vita Group, I would encourage you to be a mystery shopper and in the meantime add the company to your watch list.
