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BLUE LABEL INTEGRATED ANNUAL REPORT 2015
CONVERSATION WITH JOINT CHIEF EXECUTIVE OFFICERS
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margins filtering straight through to the bottom line.
The speed of launching and delivering new products
is unparalleled.
The importance of distribution is that the operator
of the last mile of the channel determines
merchandising techniques and pricing, as the POS
terminal is located in the last mile of the channel.
HOW WE OPERATE
The business model is based on strategic
partnerships, underpinned by long-term contracts.
Operations are grouped into four main business
segments: South African Distribution, International
Distribution, Mobile and Solutions. The South
African segment remains the predominant
contributor to the Group’s profitability, derived
mainly from the prepaid airtime, starter packs, data
and the electricity businesses. The strategy of the
International segment is to pursue growth
opportunities across our global footprint, presently
though an associate in India and a joint venture
in Mexico.
Income is derived from three main pillars: the sales
of commodities (such as airtime, electricity, water
and tickets), annuity transactions (from our SIM
card base, contractual Vodacom starter packs,
location-based services and other subscription
services) and interest earned on surplus
cash generated.
The commission structure is based on long-term
contracts with the network operators, covering
payment terms, annuity and commissions receivable.
The commissions received are shared with
merchants in the distribution channel.
THE EVOLVING
TELECOMS LANDSCAPE
There are a number of trends evolving in the
industry worldwide, which influence our strategy
and our operations.
South Africa:
The emphasis on voice
communication is rapidly moving to m-commerce as
trends in data consumption increase. We do not
differentiate when selling airtime, be it for voice or
data consumption.
The growth of data will be infinite, as more and
more data or content becomes available and is
downloadable 24/7, exceeding consumer time spent
on voice. Blue Label, as a South African distributor,
has enviable lines of sight into a number of sectors,
such as banking, retail, consumer and
telecommunications.
We observe a changing landscape:
•
•
telcos are becoming banks – with money
transfers, while banks are becoming telcos –
through aligning with MVNOs,
•
•
competitive pricing among the MNOs,
•
•
consolidation through M&A activities –
infrastructure, co-location and radio access
sharing among the networks – spurred by the
realisation of the costs involved in upgrading
4G to 5G connectivity,
•
•
margin compression due to this competitive
pricing and consolidation,
•
•
the rise in the economic status of internet
enabled millennials (people born after 1980),
•
•
the exponential availability of inexpensive smart
phones, as the growth in mobile data,
e-commerce and m-commerce continues
to outstrip that of voice, and
•
•
the intensified interest in South Africa as
a destination by international mobile
phone producers.
The focus of the MNOs is forever evolving. In 2003
their goal was to maximise the number of base
stations in service. Soon thereafter followed the
chase for subscription numbers, which led to
massive penetration of users and which now
touches 144% of South Africa’s population, on
inclusion of multiple SIM cards per user. Around