Prepaid distribution company Blue Label Telecoms aims to grow profit from its international operations to 50% of its bottom line earnings, from the current 2% level, within the next four to five years.
However, its progress in achieving this milestone hit a snag late last year, when Multi-Links terminated a distribution agreement with a Blue Label associate company in Nigeria. Despite the termination, which all but wiped out international profits in the six months to November, Blue Label is confident of growing its Nigerian operation.
The company this morning published its results for the six months to November. It said revenue grew 8%, to R9 billion, and net profit after tax gained 9%, to reach R193 million. A year ago, its Nigerian operation contributed R8.4 million to Blue Label, but this dropped to R2.6 million during the six months, because of the early termination of the deal.
Joint-CEO Mark Levy says the company is currently quantifying its claim against Multi-Links for the early termination. The next step would be an arbitration process unless the companies can settle.
Court consideration
In November, Blue Label said its Nigerian unit would sue Multi-Links over the lost profit because the deal was canned after Telkom said it was looking at exiting the struggling CDMA business in Nigeria.
Africa Prepaid Services (APS) Nigeria had a “super dealer agreement” with Multi-Links, which allowed it to acquire customers for Multi-Links' CDMA network, as well as sell and market the range of Multi-Links' CDMA service and products for an exclusive 10-year period until December 2018.
Blue Label has a 36.72% stake in the company through its 72% ownership of APS, which owns 51% of the Nigerian company. APS distributes bulk printed physical prepaid products and starter packs.
Multi-Links has defended its decision to cancel its contract, last year saying there were a number of contractual breaches by Africa Prepaid Services Nigeria.
Life after Multi-Links
However, Blue Label is moving ahead with its Nigerian strategy and is expanding its existing footprint by adding more operators to its network. “There was life before Multi-Links and there will most certainly be life after Multi-Links,” says Mark Levy.
Usually, he explains, it takes three to four years before international investments pay off because the company needs to invest in a network.
Blue Label operates in SA, India, Mexico and Nigeria, and also has a small operation in the UK. Brett Levy says the company aims to grow profits from these regions to half of all profits by 2015. In the six months to November, 98% of the company's profit came from its local operations, he notes.
Brett Levy says the company will grow its international profits by focusing on its current international operations. Blue Label does not have any plans to expand outside its current geographies, he says.
Blue Label also wants to see profit from prepaid vouchers outside of the telecoms sector reach half of the company's profit by 2015. Currently, 88% of profit comes from selling prepaid telecoms vouchers, and 12% from selling prepaid electricity vouchers.
The company is adding new offerings to its supply chain, and will also provide wholesale and retail data bundles through its current network. The company has 140 000 point-of-sale devices in outlets across SA, says Mark Levy.
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