31 / 198
29
BLUE LABEL INTEGRATED ANNUAL REPORT 2016
Conversation with Joint Chief Executive Officers
continued
expert and online environment. The
trend is in customers demanding
low-cost smartphones, fully enabled
with social media and data
consumption apps. There is also a
requirement for certified pre-owned
and refurbished handsets and screens.
Owing to the high cost of branded
smartphones, we believe that
customers in the postpaid world will
soon benefit by being able to finance
the mobile device element of their
contract. We are well aligned with
this opportunity as it integrates with
our importation and distribution of
both branded and unbranded
handsets.
In terms of our route to market, we
are entrenched in the Edcon Group.
Its excellent back-end approved
customer credit facilities and systems,
complements our unequalled
experience and management of
starter packs/SIM cards throughout
South Africa. In addition, our diverse
range of merchandise is available at
retail outlets branded Blue Label
Connect and Edgars Connect.
Vertical integration plan is
progressing
On 10 December 2015, we
announced our proposed participation
in the recapitalisation of Cell C,
followed on 5 October 2016 by the
finalised terms for the acquisition of a
45% stake in Cell C for R5.5 billion.
The process to finalisation and
implementation continues steadily.
Our rationale for this bold vertical
integration plan embraces three
main pillars:
1. Valuation and ROI in the medium
term: Cell C houses good and
attractively valued assets, which
can serve as the cornerstone to a
positive turnaround in Cell C’s
financial and operational
performance. A restructured Cell C
offers compelling growth
prospects, including a liquidity
event such as a stock exchange
listing.
2. Margin defence in protecting our
existing trading relationship with
Cell C: Our participation in a
recapitalised Cell C aligns with our
vertical integration plan, will
neutralise any theoretic
disintermediation and enable us to
manage more of the “last mile”. It
is important to emphasise that our
existing contracts with the main
networks continue in “business as
usual” mode, with long-term
contracts in place.
3. Synergies as Blue Label becomes a
virtual service provider to Cell C
across a multitude of shared
services: We foresee a number of
opportunities for Blue Label in a
tie-up with Cell C, arising from
vertical integration and other
synergies in the procurement
chain, distribution network and in
products and services.
Marketing and brand
awareness campaigns
Our marketing approach focuses on
delivering technology, products and
services which are required by
merchants and consumers. Extensive
research and perception studies help
to identify opportunities in order to
entrench our distribution footprint in
formal retail, independent, petroleum
forecourts, corporate or low-cost
device channels.
Our visual identity and brand
awareness campaign, accelerated just
after the financial year-end, with Blue
Label’s partnership with SA Rugby in
sponsoring the Springboks for the
remainder of 2016. With jersey
branding rights, on and off-field
prominence, and concomitant media
exposure around each game, both
domestically and abroad, stakeholders
are assured to see the name Blue
Label Telecoms prominently.
Brett Levy
Mark Levy
Joint Chief Executive Officers
9 November 2016