The increasing uptake of prepaid electricity meters in South Africa has boosted JSE-listed Blue Label Telecoms’ electricity distribution commission by 29% in the six months ended November 2012.

Speaking at the release of the firm’s interim half-year results in Sandton on Wednesday, joint CEO Brett Levy said the commission received from prepaid electricity increased by 29% to R53-million during the interim period under review, compared with the R41-million recorded in the prior year.

This equated to prepaid electricity utility sales of R3.5-billion over the period, compared with R2.7-billion in the previous year.

Levy, along with his brother and joint CEO Mark Levy, believed the uptake of the prepaid electricity meters would increase to 15-million or 16-million units by 2014, up from the current nine-million installed units, with the value estimated to increase from R12-billion, to at least R14-billion.

Blue Label’s South African distribution division, comprising prepaid electricity and airtime, as well as annuity revenue from starter packs, recorded a 2% rise in revenue, from R9.1-billion during the comparative period the year before to R9.3-billion in the six months to November.

This excluded growth of R404-million in sales of pinless top-ups.

Brett Levy commented that there had been a significant rise in the sales of pinless airtime, with the group recording sales of R411-milllion, compared with the R7-million in the half-year to November 2011.

Pinless purchases for airtime and electricity were considered to be a growing trend, as prepaid products rose in popularity in an ever-evolving world.

Within five years, Brett Levy commented, it was expected that 90% of the products that companies were able to offer in a prepaid form, would be offered as an alternative to the dominant postpaid model, and 90% of consumers would be buying at least one new product through prepaid services.

South Africa quickly bought into the concept of prepaid cellular airtime and electricity and would move to adopt other prepaid technologies if suppliers digitise their payment methods.

MOBILE
Meanwhile, the group, which continued adding 450 000 new prepaid starter-pack connections a month, expected prepaid airtime growth to continue.

Levy noted that despite Cell C contributing 10% of the revenue generated from prepaid starter packs, the third-largest mobile operator was expected to shake up the market as it induced a price war in the industry.

MTN, Vodacom and Telkom each contributed about 37%, 51% and 2% to the company’s revenue respectively.

Cell C was starting to give the market a “run for its money”, and would be the mobile operator to watch as it forced a reduction in mobile prices.

The Alan Knott-Craig-led company dropped its voice prices to 99c-a-minute, with per second billing offering a more “demystified”, simplified and transparent pricing structure.

While the group would face a tough fight from the deep-pocketed larger operators such as MTN and Vodacom, Cell C had a good chance of achieving its intended market share of 25%.

Vodacom’s offer of 57 minutes of free talk time, in response to what had now been dubbed “the price war” between mobile operators, was good marketing, said Levy, adding that MTN and Vodacom were not likely to just yield their market shares.

However, Cell C was en route to changing the market’s perception about pricing with the “right marketing” and it was only a matter of time before consumers realised that, despite Vodacom’s attractive offers, the smaller operator offered services 50% cheaper than anyone else.

Consumers stood to benefit from more competitive pricing and the more the operators fought, the more the consumer would benefit. Cell C’s drastic drop in prices took South Africa from being one of the most expensive countries in terms of voice to one of the lowest priced almost overnight.

The market would see a real impact over the next three to five years, he commented.

NEW PRODUCTS
The company would launch subsidised low-cost point-of-sale (POS) terminals on March 1 to allow merchants with profits of up to R25 000 access to POS systems.

The current POS systems proved to be too costly for the smaller vendors and merchants.

Blue Label expected to secure between 100 000 and 300 000 new merchants, with an addition to profit of 1.25%.

The group was also launching loyalty packages for cricket, rugby and Justin Bieber fans.

For Blue Bulls rugby club supporters and cricket fans, reward cards, digitised coupons and loyalty programmes would be rolled out. The programmes would enable exclusive benefits and incentives, while enabling more digital interaction and ease of access for the sports fans.

Bieber fans would be able to buy “Justin Bieber starter packs”, hosted off the Vodacom network, to kick off an exclusive “community” for fans to share news, enter competitions, learn facts and access incentives and benefits.

The company had already sold, within three minutes, 750 000 of these starter packs to merchants, and believed they could have stretched this to 2.7-million.

The initiatives formed part of the group’s methodology of reengineering and recreating a personalised approach to consumers.

The group was currently trialing its new-entry market – financial services – with an expected impact emerging during the company’s year-end financial results.

The services would focus on mobile wallets, mobile banking, money transfers, remittances, bill payments and electronic funds transfers, besides others, which Blue Label believed over 20-million people currently transacted on.

The distributor of prepaid secure electronic tokens of value and transactional services recorded a gross profit for the period of R644-million – up 9% from the R590-million recorded in the six months to November 2011.

Headline earnings a share increased 26% to 34.78c, after excluding the one-off income of R80-million in the comparative period in order to represent the actual performance of the company under the period under review. This represented a 5% fall in headline earnings including the one-off income.