R79.4 million secret payment – where did it come from?
Blue Label Telecoms’ (BLU) coyness over a R79.4 million payment receipt generated immediate interest when the group announced its interim results last week.
When quizzed about the “once-off other income receipt of R79.4m”, Blue Label Telecom co-CEO, Mark Levy, said that he could not say anything about this payment.
This immediately raised interest about the payment – and two theories are currently seen as the most likely, among industry players.
Vodacom deal?
The first theory suggests that the payment came from Vodacom in a deal which would offer the company some advantage over their rivals through the Blue Label Telecoms distribution channel.
Exactly what such a cash payment may have been for unclear, but it is rumoured that Vodacom may have negotiated a deal with Blue Label Telecoms, which will give it an advantage of exclusivity in some of Blue Label Telecoms’ distribution channels.
One possibility is Blue Label Telecoms’ new plans to sell airtime in remote areas using trucks.
Levy said that the group planned to send out 60 trucks – employing 12 people each, along with 100 foot soldiers – into the more rural areas to grow the business.
The CEO pointed out that 31 trucks were already operational, with a further 10 trucks ordered and paid for and set for operation in April. An additional 19 trucks would serve the rural communities by May 21.
On Wednesday (29 February 2012), a spokesperson for Blue Label confirmed that the trucks would be used to promote SIM packs on the Vodacom network, exclusively – despite having airtime agreements with all major mobile networks in the country.
“We will be promoting SIM packs, and the ability to RICA users on the Vodacom network from each truck… the truck is branded Vodacom,” the spokesperson said.
Vodacom refused to comment on the commercial arrangement, and referred BusinessTech back to Blue Label. “Our commercial arrangements are confidential,” the group said.
8ta deal?
Another theory about the payment, is that the money may have originated from a deal between 8ta and Blue Label Telecoms.
A well-placed industry source told MyBroadband that the R79.4 million on Blue Label Telecom’s balance sheet most likely originated from a deal with 8ta on hybrid contracts. The deal apparently involved one hundred thousand 24-month hybrid 8ta contracts with R100 airtime each per month.
8ta paid Blue Label Telecoms an up-front rebate for the sale of the contracts, without any claw-back clause. This equates to an interest-free loan, where the interest alone will run into millions of Rands.
Telkom/8ta confirmed the deal, adding that it is the nature of Hybrid or Top-up models to commit contracts in this manner.
“The performance of this deal more than exceeds 8ta’s standard ‘Saver’ contracts and the top-up value on average exceeds 40% of the contracted R100, without considering the incoming call interconnection benefit,” Telkom said.
Blue Label Telecoms is rumoured to have sold the contracts for a few hundred Rands each to their distribution channel, bringing in millions in cash – without carrying any risk from end-user contract payments.
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