SEGMENTAL REVIEWS

During the period under review Blue Label Telecoms considered several international opportunities and potential investments. This culminated in the launching of Blue Label Mexico, Africa Prepaid Services Nigeria and investments into the United States of America and the United Kingdom, augmenting the group’s presence in India, Australia, Mozambique and the Democratic Republic of Congo.

The overall strategy is to ensure growth in the group’s global presence through a combination of establishing “bricks and mortar” operations in selected markets, entering into strategic partnerships and providing technology licences to third parties.

Blue Label Mexico

Blue Label Mexico commenced trading operations in May 2009.

Technology developed by Activi has enabled the company to facilitate on-line real time direct recharge of prepaid accounts.

The company is growing the number of points-of-presence and an increase in the average number of transactions per site.

A number of key agreements have been concluded with both mobile operators and important sales channels. In the forthcoming year the company is targeting points-of-presence which will cover a wide range of distribution channels, from multi-lane retailers and petroleum forecourts, to convenience outlets and informal sales channels.

Africa Prepaid Services Nigeria

In December 2008 Africa Prepaid Services (Pty) Limited concluded an agreement with Multi-Links Telkom Limited a subsidiary of Telkom South Africa, to service all of their distribution channels in Nigeria. Operations successfully commenced in May 2009.

APS Nigeria is expected to be the major contributor to revenue and profits for the African initiative of Blue Label Telecoms.

Virtual Private Network

In December 2008, Blue Label USA, a wholly owned subsidiary of the group, entered into a limited partnership agreement with wholesale distributors of physical international calling cards. The objective of this new venture was to convert a captive client base from physical to virtual distribution. This conversion would be powered by the virtual distribution technology developed by Activi.

In July 2009 Blue Label USA chose to withdraw its capital investment in the partnership and to replace it with a technical agreement with Activi, another subsidiary of Blue Label Telecoms. Blue Label received a refund of its capital investment in the sum of $5 million. This technical agreement, which embodies installation of intellectual property, maintenance and support, will result in Activi receiving annual licence fees and transactional fees generated from sales to the country-wide captive base of the wholesalers. The effect of this transaction is to afford the Blue Label group access to the footprint of the client base of the wholesale distributors.

Ukash

The strategic investment holding in Ukash has provided the Blue Label group with technology that enables it to supply the end user with prepaid Ukash vouchers which effectively digitises cash. This voucher enables the customer to transact on-line for multiple products and services through a single prepaid voucher.

*When compared to core pro forma earnings

The Ukash initiative has given the group the ability to provide its products and services to a footprint established by Ukash, covering several countries in Europe.

The Ukash issuing, redemption and settlement platform facilitates integration with third party devices and technology, ensuring rapid deployment and broad-based coverage.

Ukash has concluded a technology deal with MasterCard “RePower” to be the recharge provider for the launch of the prepaid debit cash loading platform in Europe.

		Oxigen India Although Oxigen India has not as yet turned to profitability, a combination of continued growth in outlets supplied and new initiatives resulted in an improvement towards the end of the financial year under review. These initiatives include the following: Reduction in monthly expenditure Consolidation of technology competencies Improvement of connectivity and reliability of the communications interface Introduction of prepaid E-Toll recharge vouchers Piloting of prepaid railway ticketing Agreement with The State Bank of India to pilot the PIN-less top-up of airtime and Oxicash via mobile phones to its consumer base (the integration is complete and testing is underway): An agreement with Nokia’s Ovi stores to utilise Oxicash as a payment mechanism for all Nokia N-Gage products during the extended warranty period The appointment of Oxigen as a service provider of airtime sales in all Nokia branches.
		Content Connect Australia This company was established as an aggregator of localised content to mobile operators and third-party clients. It is the intention to enhance the range of products distributed by the company in order to encompass all the e-tokens of value that comprise the bouquet of products and services that Blue Label Telecoms affords to customers globally. Democratic Republic of Congo The negative economic climate in the DRC has necessitated a restructure of the business model. Operating costs have been reduced in line with the elimination of an element of the product offering.

Mozambique

APS Mozambique established five additional branches. This initiative together with an escalation in starter pack activations resulted in improved margins emanating from additional volume discounts from the networks.

SharedPhone International

SharedPhone operates a SIM-card mobile payphone solution that allows vendors in rural areas – including other African countries – to offer consumers access to a public payphone and the means to vend prepaid airtime and prepaid electricity.

The company has penetrated several international markets over the past year (with particular success in Africa) by:

• becoming the leading connector of CST payphones in South Africa;
• concluding an exclusive rollout in Rwanda with the leading GSM network;
• pioneering in Liberia as the first GSM PayPhone supplier; and
• making notable inroads in Mozambique.

The company has successfully implemented pilot operations with Blue Label Mexico, positioning itself for expansion into Latin America in 2010.

PROSPECTS

Africa Prepaid Services is expected to contribute significant growth to the international segment primarily through its strategic 51% shareholding in Africa Prepaid Services Nigeria. The current mobile penetration level of 45% in Nigeria augurs well for potential future growth, considering that most established markets have penetrations in excess of 100%.

Blue Label Mexico is steadily increasing its points-of-presence and turnover in accordance with its business plan.

There has been an improvement in the financial performance of Oxigen India which is expected to continue.

Ukash will provide consumers with the means to cash-in, utilise cash, and cash-out at their own convenience. The current economic climate has seen an increased acceptance of the prepaid model, even in developed markets. Ukash is well positioned to exploit this trend.

Technology partnerships will be pursued in line with the model established in the USA.