Blue Label Telecoms announced its interim results for the half year ending 30th November 2013 today. Gross profit increased by 10 percent to R710 million, with the gross profit margin increasing from 6, 80 percent to 7, 82 percent. This was achieved through the efficient application of cash resources to inventory purchases at favourable discounts. In spite of a decline in revenue, EBITDA increased by 16 percent to R431 million, primarily due to an increase in gross profit by R66 million (10 percent) and the containment of growth in overheads to 3 percent. Revenue generated on “pin-less top ups” increased by R310 million. Headline earnings per share of 37, 15 cents equated to a growth of 7 percent, headlineearnings increased by 7 percent to R246 million and cash flows from operating activities was at R742 million.

“These results are predominantly attributable to exponential growth in commissions earned on the distribution of prepaid electricity, compounding annuity revenue generated from starter packs and escalation of the distribution pin-less top ups, an alternative mechanism for the vending of prepaid airtime,” notes Frost & Sullivan’s Information and Communication Technologies Research Analyst, Ankit Trivedi.

The South African distribution segment established itself as the main contributor to this financial growth, offsetting the effects of deteriorating performance of the call centre operations & compounding losses in Mexico, due to margin compression and significant increase in overheads.

“Blue Label Telecoms is well positioned for growth in South Africa in 2014, due to its partnership with MasterCard and acquisition of Retail Mobile Credit Specialists” says Trivedi. With MasterCard, the strategy is to roll out point-of-sale devices to 22,000 small traders and rural shops in South Africa, allowing them to accept card payments for the first time. Blue Label Telecoms already provides thousands of point of sales terminals in South Africa, whichare used to sell prepaid vouchers such as airtime and electricity. In ruralareas and underserved settlements, traders have historically operated on a cash-only basis. Through the partnership with MasterCard, businesses will be introduced to the security and ease of electronic payments, enabling financial inclusion in communities where consumers have largely been unableto use formal payment products.

The acquisition of Retail Mobile Credit Specialists, announced on 24th December 2013, for an initial R307m and up to an additional R32m if earnings targets are achieved, is done by “The Prepaid Company”, a Blue Label Telecoms subsidiary. This business model aligned acquisition shall facilitate the distribution of prepaid cell phone starter packs, airtime and electricity vouchers. RMCS is a service provider of cellular products and services engaged in the supply of telecommunications products and services, content, data and allied activities via both physical and virtual mediums. It has physical stores while its virtual offering is an "over the air" cellular application that enables retailers, credit providers and consumers to communicate and transact over mobile devices.

For international operations in India, Mexico and the UK, Oxigen Services (Blue Label Telecoms operations in India) is expected to report profit in the 2014 financial year as the Indian prepaid card market is positioned for growth at a CAGR of around 40 percent, between now and 2017. In India, 97 percent of the transactions are done through cash but debit and credit cards have risen during the past decade due to growing consumer awareness and internet penetration. However, almost half the population of India is un-banked and only 55 percent of the population have deposit account with banks, which leads to the basic need for prepaid payment channels. Therefore, in addition to being an appropriate payment tool for these customer segments, prepaid cards have also become a preferred choice for corporate India and the consumers. In Mexico, the business is expected to turn profitable in 2015, due to roll out of 140,000 points of sale points with banking transactional capabilities to grow the financial and prepaid services through the distribution network of Mexican partner Grupo Bimbo, while the UK leg of business continues to be profitable.

“As always, continuity in coming up with local market relevant financial services products to cultivate portfolio and expansion of distribution footprint, by growing organically and throughstrategic acquisitions, shall be critical for sustainable growth for Blue Label Telecoms. In addition, the organisation has to be more prudent now so that it can avoid legal complications and can invest its resources fullyon innovation & growth.” says Trivedi.
About Frost & Sullivan

Frost & Sullivan, the Growth Partnership Company, works in collaboration with clients to leverage visionary innovation that addresses the global challenges and related growth opportunities that will make or break today's market participants. For more than 50 years, we have been developing growth strategies for the global 1000, emerging businesses, the public sector and the investment community. Is your organisation prepared for the next profound wave of industry convergence, disruptive technologies, increasing competitive intensity, Mega Trends, breakthrough best practices, changing customer dynamics and emerging economies? Contact us: Start the discussion