JSE-listed Blue Label would move to distribute about 10 000 partly subsidised low-cost point-of-sale (POS) terminals throughout South Africa’s rural areas over the next year, following the successful launch of its Rechaja Mo promotion, in February.

The initiative would give merchants with monthly profits of less than R25 000, free or low-cost access to POS systems. Currently, standard POS systems were too costly for the smaller vendors and merchants.

The first month of the initiative saw 156 units distributed – significantly surpassing Blue Label’s target of 20 – generating turnover of about R280 000 through prepaid airtime sales and R1.3-million in prepaid electricity sales.

Blue Label devised low-cost hardware and a “whole different strategy” to distribute the systems to rural regions, starting with areas in the less saturated Western Cape and Bloemfontein areas, before branching out to the rest of South Africa, including KwaZulu-Natal, Gauteng and the Eastern Cape.

While the company could not realistically reach all of the estimated one-million lower-profit merchants in the country, it would take the project as far into deep rural as possible, said joint CEO Brett Levy.

Blue Label previously indicated that it expected to secure between 100 000 and 300 000 new merchants, with an addition to profit of 1.25%, which would start to emerge within the next seven to eight months.

PRICE WAR
Meanwhile, Cell C’s move to induce a price war was starting to gain traction as its contributions to Blue Label’s revenue rose to 12% during the period from August 2012 to July 2013, cutting into MTNs input, which dropped from 38% in the corresponding period the year before, to the current 36%.

The Alan Knott-Craig-led Cell C dropped its voice prices to 99c a minute in May last year, with per second billing offering a more “demystified”, simplified and transparent pricing structure, which has now started to gain traction.

MTN fell behind after its “slow response” to the price war, but Vodacom maintained its share of 51% as it “did not sit back”, and launched its own response immediately. Telkom had contributed a steady 1% of revenue to Blue Label during the year, said Levy.

South African consumers are generally hesitant to change, he explained, adding that when they do, it occurs rapidly – and this was something to look out for.

Levy pointed out that consumers had gained as the prices decline, citing that two years ago, an average customer with R65 worth of airtime could not undertake even 15 one-minute calls. But now, owing to drastically reduced prices, that same customer could make 65 one-minute calls with the same amount of airtime.

FINANCIAL OVERVIEW
Blue Label posted an after-tax net profit of R455-million, 12% higher than the R406-million reported in the prior year.

Headline earnings rose 5% from R676-million last year, to R710-million during the year under review, while headline earnings a share contracted 1% to 64.17c, excluding a one-off receipt of R79.4-million in the prior year.

Revenue increased to R19-billion for the year to May, up from R18.7-billion the year before, excluding growth of R820-million from pinless top-ups, which were not included in the revenue.

Blue Label declared a dividend of 25c for the full year.