Airtime sales under pressure - Blue Label

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Johannesburg - Prepaid cellular airtime sales would come under pressure over the next few months as the drop in call prices was resulting in consumers talking more but buying less airtime, Blue Label Telecoms forecast yesterday.

“That’s what we are watching cautiously,” Brett Levy, the joint chief executive of the international prepaid electricity and airtime voucher distributor, said.

The market had been characterised by increased price competition between cellular network operators led by Cell C and Telkom Mobile over the past 12 months.

“It’s a matter of how little the others lose market share to them,” Levy said, adding that Vodacom had produced compelling offerings while MTN had been serving up “more of the same”.

Revenue generated by the sale of pinless airtime top-ups increased by R310 million during the six months to November last year, Blue Label reported. But because only the commission on such sales is reflected overall, group revenue declined 1 percent to R9 billion.

Commission on prepaid electricity sales grew by 26 percent year on year to R67m. Headline earnings a share gained 7 percent during the period to 37.15c. Earnings before interest, tax, depreciation and amortisation gained 16 percent to R431m, partly as a result of a containment of growth in overhead costs to 3 percent.

The group’s distribution activities in South Africa, which include transport, event and expo ticketing through Ticketpros, remained the largest contributor to overall earnings, offsetting the impact of poor performance of the firm’s call centre operations.

This included compounding losses at Blue Label Mexico, which were due to the roll-out of point-of-sale devices to expand the distribution network. The business is expected to be profitable by the end of the 2015 financial year.

Another subsidiary, Oxigen Services in India, which offers mobile wallet services, was expected to report profit this year after incurring a loss of R3.5m for Blue Label.

Ankit Trivedi, an analyst at Frost & Sullivan, said the firm was well-positioned for growth due to its partnership with Mastercard to roll out point-of-sale devices to 22 000 small traders and rural shops to sell prepaid airtime and electricity, “allowing them to accept card payments for the first time”.

The company had established a similar agreement with Visa and Banamex, owned by Citigroup, in Mexico to extend financial inclusion.

Blue Label was also acquiring Retail Mobile Credit Specialists, which would provide a new distribution channel, Levy said. The deal was at an advanced stage of being reviewed by the competition authorities. Retail Mobile Credit Specialists provides cellular products and services such as content and data and counts clothing retail group Edcon among its more than 200 clients.

The stock shed more than 2.1 percent to a low of R8.22 yesterday morning before recovering to close 0.6 percent lower at R8.35. The shares have declined 1.76 percent for the year to date compared with a 2.23 percent increase in the JSE all share index over the same period. - Business Report


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