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- Fintech group Blue Label says it is looking to apply to regulatory authorities in coming months to take control of Cell C, SA's fourth largest mobile operator.
- The recapitalisation of Cell C weighed on its profits to end-May, as did load shedding, but the group got a boost from its ticketing and gaming interests.
- Blue Label remains confident about the high value of its intellectual property, as well as a strong corporate culture that has very low staff turnover.
- For more financial news, go to the News24 Business front page.
Fintech group Blue Label Telecoms said on Wednesday healthy growth in gaming and commuter bus channels helped it improve its margins in its year to end-May, but its profits still slumped as it counted the cost of load shedding and its pricey recapitalisation of Cell C.
The largest shareholder of SA's fourth-biggest mobile operator, however, is still eyeing control of it, saying on Wednesday there is still good brand value in Cell C which it is looking to leverage.
Blue Label reported on Wednesday that its headline earnings fell 64% to about R370 million to end-May, but when excluding a R523 million hit from Cell C, its preferred measure of profit would have risen 9%.
Gross profit increased by 19% to about R3.5 billion, corresponding to an increase in margins from about 16.6% to 18.4%, it said, partially attributed to the growth in "PIN-less topups", prepaid electricity, ticketing, and gaming.
Valued at about R3 billion on the JSE, the mobile-focused group specialises in prepaid products such as electricity and airtime and the electronic distribution of virtual merchandise and value-added services, while owning just under half of Cell C.
Cell C announced the finalisation of its long-awaited R7.3 billion debt recapitalisation in September, with lenders agreeing on an offer of 20c for every R1 of debt. Due to this process, Blue Label saw its stake grow from 45% to 49.53%, but the restructuring also resulted in, among other things, a loan to Cell C being reclassified.
"The brand of Cell C is really excellent," co-CEO Brett Levy said during a media presentation, with the company having no intention of selling down its stake, but only looking for a few more percent in order to take control.
"It will change Blue Label's life. Today we get the brunt of the performance and rightly so, but we don't have control," he said.
"Blue Label has to a lot to offer ... and I think it is good for the market," he said, adding that he, along with his brother Mark, were proud of the company, and its culture, they had built. The group is in the process of applying to the Competition Commission, a process which could take six months, or two years.
Profit performance
Blue Label said on Wednesday it was a "tough, tough year," particularly as load shedding kept customers in the dark, with co-CEO Mark Levy saying it lost about 32 days, or 10%, in terms of demand for prepaid electricity.
Although electricity revenue generated on behalf of the utilities increased by 3% to about R983 million, helped by tariff hikes, the net commission earned fell 16% to R251 million.
On the other hand, gross gaming revenue increased jumped 72% to R3.6 billion, driven by the continued traction of BluVoucher sales - which can be used to top up online gaming accounts.
Additionally, gross ticketing revenue rocketed 156% to R1.1 billion, primarily from revenue generated through commuter bus channels.
"Gaming has been amazing ... not sure it's amazing for the country or people but it's amazing as a product," said Brett Levy.
Mark Levy said the rise in revenue followed the ability to take a cash customer and allow him "play in the e-commerce universe", even if the amount was as low as R2. This had allowed a significant increase in transactional volumes and values, he said.
"The gaming guys have done their own good job in terms of promoting what they do," he added.
The group had also seen broad-based increases in ticketing - traditionally driven by sports - but there had been a notable jump in bus commuting, with the group introducing a "sophisticated" cashless payment system already in use by Putco in Soweto, with more routes to follow. This, serving as a tap-and-go similar to how the Gautrain operates, significantly reduced chances of abuse, he said.
"There are 600 bus companies in South Africa, they are all using those old, elongated stamp tickets. That's open to interpretation of who stamps and who doesn't, who pays and who doesn't," he said.
Blue Label has already seen a significant number of enquiries from other bus operators, he said, having already signed some up for TicketPro, but hadn't yet migrated to the tap-and-go system.
Shares in Blue Label lifted more than 2% on Wednesday but have still about halved over the past one year.
