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BLUE LABEL INTEGRATED ANNUAL REPORT 2015
NATURE OF BUSINESS
CONTINUED
The prepaid model is
empowering
The cornerstone of our businesses is new
groupings of consumers and our distribution
of products and services to them.
Within emerging and developing economies,
the supply of products and services via prepaid
channels is an increasingly important distribution
model. This is because the distribution of physical
product is often logistically difficult, a significant
portion of consumers in these markets are
unbanked or badly banked or in rural areas and
therefore transact in cash, while many do not
qualify for purchasing on credit. Given these
limitations, prepaid cash consumers are now able
to demand equal treatment and can access
first-world products and services. Blue Label is
able to enhance the consumer’s ability to transact
conveniently, affordably and with greater
accessibility and choice.
Prepaid is a convenient method of payment for
consumers, who are now able to purchase Blue
Label’s products anywhere, anytime. Prepaid
provides for forced discipline in budgeting,
ensuring no surprises at month-end, as may be
the case in the postpaid world. The budgeting
and convenience that prepaid offers now
extends to all classes of the economic pyramid,
particularly evidenced in transport ticketing.
Economic slowdowns have seen many postpaid
consumers migrate towards prepaid in order to
enhance their financial flexibility and control
spend. In general, prepaid consumers are
purchasing airtime in lower denominations, while
also benefiting from price reductions and variable
call discounts introduced by the major mobile
network operators.
A development in the prepaid space is a “hybrid
contract”, which is a postpaid contract with a
specified limit, and when that is exhausted, it is
immediately sequenced by a prepaid top-up for
the same products or services.
A key to distribution in emerging markets is to
make products and services available as a prepaid
offering as an alternative to postpaid.
Our three income
streams:
•
•
Interest income:
The Group’s high volumes,
coupled with its favourable trading terms,
generate significant cash from operating
activities. Interest is earned on cash balances.
•
•
Annuity income:
On distribution and successful
activation of starter packs, the Group earns a
rebate or activation bonus. Ongoing annuity
revenue is earned on topping up for the life
of each starter pack. A number of affinity
programmes mitigate churn in the starter pack
base. Annuity revenues are earned from
subscription-based businesses, where customer
retention is a key focus. Launching additional
products and services to new and existing
subscriber bases enhances annuity revenue.
•
•
Sales of commodities, products and/or
services:
The Group distributes virtual and
physical prepaid airtime on behalf of the mobile
network operators, as well as electricity tokens
on behalf of the utilities.
Our distribution system can
be compared to a virtual
railroad delivering prepaid
goods
Our business is about the distribution of secure
electronic tokens of value and services. If a product
can be digitised, it can be distributed by us.
As distribution plays an important role in the
economy, our leverage of the last mile of the
distribution channel is critical. Whoever manages
the last mile of the channel actually owns the
whole distribution channel. Since the POS terminal
is always located in the last mile, the person
managing it decides what products and services
may be sold from it.
OUR BUSINESS MODEL
High-volume distribution of e-tokens of value and complementary services leverage off a
favourable working capital cycle. Long-term contracts with suppliers of products and services
underpin the model.