Blue Label eyes India profitability
Blue Label Telecoms has outlined its ambition to turn a profit in its two key international markets, namely Mexico, and India.
The group saw its earnings for the year ended May 2013, curbed by accelerated losses incurred by its operations in Mexico, while Oxigen Services India also reported a R600,000 loss.
Having incurred losses of R60 million after the amortisation of intangible assets in 2012 – of which the groups 40% share equated to R24.9 million – losses in Mexico escalated to R113 million in 2013, of which the groups share equated to R51.1 million.
Speaking at the group’s results presentation, joint CEO of Blue Label Telecom, Brett Levy said that the group’s international strategy replicated its SA business model by putting into place the necessary infrastructure.
Blue Label’s core business is the virtual distribution of secure electronic tokens of value, including prepaid airtime, and electricity vouchers, and transactional services across its global footprint of touch points.
The group said that its roll-out of services in Mexico, along with its upgrade of systems in India was on schedule.
In Mexico, the roll-out of Point of Sale (POS) systems reached 60,000 in the reporting period, while Blue Label said it hoped to reach a target of 140,000 by mid-2014.
“While we do this, we expect to incur further losses, mitigated by new products and services,” joint CEO, Mark Levy said.
He said the group hoped to be profitable in Mexico in the financial year 2015, with similar losses expected in 2014, from those seen in the current reporting period.
The Levy brothers said that the group has already signed two deals, with a major bank and a major acquirer which it aims to announce soon.
In India, Blue Label said it was earnings before interest, taxes and depreciation positive, however the group targeted profitability in the next financial year.
Mobile
In South Africa, Blue Label noted that mobile operator Cell C had gained traction in the market regarding prepaid airtime sales and starter packs, up 2% to 12% in terms of contributions to Blue Label’s revenue in the segment.
Vodacom accounted from 51%, unchanged from the prior period, while MTN slipped 2% to 38% of revenue.
Brett Levy said that the 2% gain by Cell C was a “massive number” given its high number of airtime it distributes on a monthly basis. He said that South Africa consumers were generally lethargic when it comes to adopting change, “but when they do, it happens very quickly”.
He said that the change which took place in May 2012 with Cell C’s 99c per minute rate was beginning to take effect. “The trend is definitely on the up,” Levy said.
Earlier in August, MTN reported that its total subscriber base for South Africa declined by 420,000 to 25 million in interim results for the six months ended June 2013.
“MTN South Africa felt the effects of weaker consumer demand and was slow to respond to aggressive price competition in both voice and data offerings,” it said.
Blue Label, meanwhile, also noted a big win in its prepaid electricity segment, as it continues to sign up more municipalities. The group said this segment is set to overtake its airtime business in the future.
Financial results
Blue Label said that group revenue from continuing operations was only marginally higher to R18.98 billion, from R18.72 billion in 2012.
Operating profit declined to R645.67 million, from R658.93 million before, while Blue Label reported diluted headline earnings per share of 63.14 cents, from 63.70 cents in the prior period.
However, the company noted that the comparative year included a once-off income receipt of R79.4 million. On exclusion of this income, headline earnings per share increased by 17% to 64.17 cents.
Blue Label declared a dividend of 25 cents per share.
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