Blue Label Telecoms sees great growth potential in prepaid vouchers as the global meltdown continues to bite into consumers' pockets.
Joint CEO Brett Levy says there is a global move to prepaid cards, especially in emerging markets, and the potential expands beyond the telecommunications arena.
The group distributes prepaid secure electronic tokens of value and transactional services within emerging and developing economies.
It is focused on taking products and services to consumers within the middle and bottom of the world's economic pyramid, and processes more than 300 million monthly transactions through its global footprint of several hundred thousand mobile and physical points of presence, which span four continents.
Levy says, in the US, a quarter of the market is expected to rapidly move to prepaid payment methods to avoid surprises in the post at month-end. He says this makes the company recession resistant.
In SA, gift cards are becoming a payment method as shoppers can load the cards and limit what they spend at the till, helping them budget, he says. The company is already involved in gift cards through furniture chain Ellerines, which African Bank recently bought. He says gift cards are a big growth area for the company.
Standing firm
Blue Label will focus its attention on entrenching itself in the countries in which it has a presence. This includes SA, Mozambique, the Democratic Republic of Congo, Nigeria, India and 18 European countries.
Blue Label is making progress with its Mexican expansion plans and has met its aim of reaching 2 500 point-of-sale presences since its interim results, which were announced in February for the half-year to November.
Nigeria is also doing very well, Levy says, and the first six weeks of trading in the African country have been promising. SA also continues to grow on a monthly basis.
Interest cuts
Despite earning 30% of its net income from interest, the recent rate cuts have not had an impact on Blue Label Telecoms, the company says.
Levy says it keeps around R1.6 billion in the bank and as long as that cash goes up, the company will limit the effects of interest rate cuts. He says Blue Label aims to keep the cash increasing through early settlement discounts, which has avoided it taking a knock on earnings.
The company's business model relies on earning bank interest on cash from prepaid vouchers, through one of its units, and it has traditionally made low margins off the product, although the company has worked to push margins up.
In SA and international markets, its distribution business distributes electronic tokens of value, encompassing prepaid airtime and starter packs, bill payments, prepaid electricity, prepaid insurance and redeemable prepaid vouchers for online products and services.
Its value-added service business does telemarketing of cellular and financial services products, inbound customer care and technical support through four call centres. It also markets location-based products “Look 4 me” and “Look 4 help” (Vodacom) as well as “Where are U “and “2 my aid” (MTN).
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