1. RESULTS OF OPERATIONS
1.2 Revenue
 

The Group earns revenue from the sale of goods and the provision of services through its vast proprietary distribution channels and platforms. Owing to the wide array of products and services provided, the Group interacts with a broad cross-section of South African society. The Group generates revenue based on various contractual arrangements with its customers, the major sources of which are listed below. These sources aggregate revenue by nature, extent, timing and risk.

Revenue source   Performance obligations included   Recognition   Measurement and terms of sale   Critical estimates and judgements

Prepaid airtime, data and related revenue

 
a. Prepaid airtime and data
 

The sale of prepaid airtime and data represents the majority of Group revenue. Prepaid airtime and data is either physical PIN, virtual PIN or PINless.

Physical PIN inventory is sold in bulk to customers (who themselves are generally distributors) as and when they place orders with Blue Label. Customers will either collect the physical stock at Blue Label depots or it will be delivered via courier to them. Virtual PIN inventory is delivered as a stock file via secure file transfer protocol to a customerís point of sales device, secure network location or sales terminal. This file contains the same information delivered to Blue Label by the mobile networks, being PIN numbers, product codes, serial numbers and expiry dates.

PINless sales relate to airtime and data sold that is not in the form of either a virtual PIN or physical voucher and accordingly no inventories exist. Airtime or data is requested by an end-user via one of the Groupís customerís integrated systems, upon which Blue Label will automatically notify the applicable network to increase the relevant end-user balance. Blue Label does not take control of PINless stock at any point.

b. Commissions, bonuses and incentives
 

Commissions, bonuses and incentives related to the sales of prepaid airtime and data are earned by the Group based on reward structures agreed with the cellular network providers.

 
a. Prepaid airtime and data
 

Physical and virtual PIN inventory sales are recognised on transfer of control of stock to the customer. Control is transferred at the point of delivery of physical stock or stock files to the customer. In general, the Group does not provide warranties, nor the right of return on inventory that has been delivered as it cannot reasonably determine whether any PINs have already been activated. The Group considers itself as the principal in the sale of PIN inventory sales, and thus recognises the full face value (transaction price) of the voucher sold net of any discounts in revenue.

PINless sales are recognised on the successful completion of the airtime or data reload transaction, which culminates in an increase of the end-userís balance. It is at this point that the Group has completed its performance obligation to connect the parties through its integrated system and facilitate the transaction. The Group considers itself as the agent in the sale of PINless airtime and data, and thus recognises only the commission on the sale as revenue.

b. Commissions, bonuses and incentives
 

Commissions, bonuses and incentives related to the sales of prepaid airtime are recognised on a systematic basis (generally monthly) once the Group has established its right to receive payment based on the achievement of the sales, activations or recharges criteria for the period measured.

 
a. Prepaid airtime and data
 

Physical and virtual PIN inventory sales are measured at the face value (transaction price) of the voucher sold net of any discounts. Payment arrangements vary per customer and can range from payment before delivery to terms of up to 60 days.

PINless sales are based on the commission percentage earned on the face value (transaction price) of the airtime and data sold. Payment terms for PINless sales do not generally exceed three days, with settlement usually taking place the next business day.

b. Commissions, bonuses and incentives
 

Commissions, bonuses and incentives are measured based on the contractual value or percentage commission earned in accordance with agreements between the Group and the relevant cellular network. Payment terms do not exceed 30 days.

 
a. Prepaid airtime and data
 

The Group has considered whether it acts in the capacity of an agent or principal in the sale of physical and virtual PIN inventory. Among other considerations, the Group maintains control of the stock prior to sale and bears all risks related to it. The Group has concluded that, in respect of these sales, it acts as principal.

In relation to PINless sales, the Group has concluded that it acts in the capacity of an agent as its primary responsibility is the facilitation of the reload transaction rather than the handling and distribution of an inventory item.

b. Commissions, bonuses and incentives
 

No significant judgements or estimates.

Postpaid airtime, data and related revenue

 
a. Prepaid airtime and data
 

Postpaid revenue is different in nature, timing and risk to prepaid airtime and accordingly is managed as a separate source.

Postpaid airtime is generally sold in terms of hybrid postpaid arrangements with customers. Hybrid arrangements provide the customer with a fixed amount of airtime which, when exhausted, will result in the conversion of the customer to prepaid. Both postpaid and prepaid revenue generated in terms of this delivery model is included in this aggregation. The Groupís performance obligation on a hybrid contract is to make available an active line for the month and provide the agreed airtime value for the customer to use on that line.

b. Commissions, bonuses and incentives
 

Commissions, bonuses and incentives related to these arrangements, including the sale of prepaid airtime and data to this customer base, are earned by the Group in accordance with reward structures agreed with the cellular network providers.

 
a. Prepaid airtime and data
 

Revenue earned on postpaid and hybrid contracts is recognised monthly when invoiced to the customer in arrears. The Groupís performance obligation is the provision of a line with airtime supplied over the duration of the contract, and accordingly revenue is recognised over time. Sales of prepaid airtime to postpaid customers is recognised in the same manner as the sale of prepaid airtime to prepaid customers described above.

b. Commissions, bonuses and incentives
 

Commissions, bonuses and incentives are measured based on the contractual value or percentage commission earned in accordance with agreements between the Group and the relevant cellular network. Payment terms do not exceed 30 days.

 
a. Prepaid airtime and data
 

Revenue earned on postpaid and hybrid contracts is measured at the face value (transaction price) of the fixed airtime provided, net of any discounts. Payment terms are generally 30 days from invoice. Prepaid airtime sold to postpaid customers is measured in the same manner described above for sales to prepaid customers.

b. Commissions, bonuses and incentives
 

Commissions, bonuses and incentives are measured based on the contractual value or percentage commission earned in accordance with agreements between the Group and the relevant cellular network. Payment terms do not exceed 30 days.

 
a. Prepaid airtime and data
 

The Group acts in the capacity of principal in relation to postpaid and hybrid contracts as the Group takes the full inventory risk, sets the price for these contracts to the end-users and is the primary obligor.

b. Commissions, bonuses and incentives
 

No significant judgements or estimates.

Prepaid and postpaid SIM cards

 
a. SIM cards and preloaded airtime
 

Physical SIM cards are either sold to customers independently or with preloaded airtime through the Groupís wholesale and retail distribution channels. The sale of a SIM card with preloaded airtime is considered one performance obligation by the Group and accounted for entirely within this aggregation.

b. Activation bonuses and ongoing revenue
 

Activation bonuses are earned from the cellular networks on the successful activation of a SIM card. Ongoing commissions are earned on any subsequent airtime recharges by the customer utilising the SIM card.

 
a. SIM cards and preloaded airtime
 

Revenue earned on the sale of the physical SIM card starter pack inventory, as well as preloaded airtime, is recognised when a SIM card is initially sold to the customer.

b. Activation bonuses and ongoing revenue
 

Activation bonuses received from the networks are recognised when the SIM card is activated on the relevant mobile network. Activation criteria, as well as the point of activation, is determined by the mobile networks. Ongoing revenue and other incentives are recognised once the associated contractual criteria have been met.

 
a. SIM cards and preloaded airtime
 

Revenue on the sale of the physical SIM card starter pack inventory and any pre-loaded airtime is measured at the individual selling price of the inventory and pre-loaded airtime, net of any discounts. Where the SIM card starter pack inventory is sold on extended credit terms (greater than 12 months), the revenue recognised is reduced by the financing component, which is subsequently recognised over the projected term at the effective interest rate. The payment terms for SIM card starter pack inventory sales sold on normal payment terms are between 30 and 90 days. Extended terms vary between three and 48 months.

b. Activation bonuses and ongoing revenue
 

Activation bonuses and ongoing commissions are measured at the contractual amounts receivable. The payment terms for activation bonuses and ongoing commissions are between 30 and 90 days.

 
a. SIM cards and preloaded airtime
 

Critical estimates include the estimation of the anticipated repayment term and discount rate for SIM card inventory sold on extended credit terms. The Group uses the South African Reserve Bank prime lending rate as a reference to determine the rate used in assessing the significant financing component of these sales. The Group acts in the capacity of a principal on the sale of SIM card inventory.

b. Activation bonuses and ongoing revenue
 

The Group recognises the variable consideration relating to ongoing revenue as and when it is received because it is only at this point that it is highly probable that a significant reversal in revenue for that contract will not occur in the future. Ongoing revenue is fully constrained at the individual contract level due to the high variability in behaviour of the individual customers, including the period over which prepaid customers remain on the same SIM card (this can range from one day to a number of years) and the spending patterns of individual customers, which is also highly variable. In addition, because the terms of the ongoing revenue structure with the telecommunication companies are regularly up for negotiation, the Group is not able to predict the likelihood or magnitude of a revenue reversal.

Services

  Major sources of services revenue include location-based services, SMS transaction services, value-added services in the form of media and content supply to customers, call centre and data transaction services, technology services and payment provision services.   Revenue earned from services is recognised in the accounting period in which they are rendered. Where services revenue is recognised over time, the completion of the specific transaction is assessed on the basis of the actual service provided as a proportion of the total service to be provided. Due to the nature of the services rendered by the Group, most are short term in duration (less than one month), and seldom, if ever, impact more than one accounting period.   Revenue earned on transactions linked services is measured at the effective unit selling price of the service provided at the point of provision. If the service is not directly transaction linked, or provided over a longer period of time, the proportion of the selling price relating to the actual services provided compared to the total services to be provided is recognised on a monthly basis in arrears. Payment terms are between one day and 30 days.   The Group applies its judgement in the recognition of services revenue as either principal or agent. This will depend on the nature and contractual arrangements of the service provided. The Group considers who controls the service prior to it being provided, who is responsible for the performance of the service and who sets the price for the service provided. Due to the short-term nature of the services provided by the Group, no significant judgements or estimates are required to be made regarding the timing or amount of revenue recognised.
Electricity commissions   The Group earns commissions on the facilitation of prepaid electricity sold to customers on behalf of utility suppliers.   Electricity commissions earned are recognised on the sale of a voucher to the customer. The Group cannot accept returned vouchers. Vouchers expire 12 months after issue; however, the number of expired vouchers is not significant and thus does not materially affect the quantum of commissions earned.   Electricity commissions earned are measured at the contractually agreed commission percentage per rand of electricity sold. Payment terms are generally 30 to 60 days.   The Group acts in the capacity of an agent in relation to electricity commissions. The Group has applied the same factors as those considered for services revenue in making this determination.
Handsets, tablets and other devices   This category represents revenue earned on the sale of handsets, tablets, accessories and other devices to customers through the Groupís wholesale and retail distribution channels.   Revenue from the sale of these goods is recognised at a point in time when control of the goods transfers to the customer, which is generally on acceptance of the goods by the customer.   Revenue on the sale of these goods is measured at the effective selling price of the items sold after subtracting discounts and rebates granted to customers on volume purchases and early settlement where applicable. Payment terms are between 30 and 60 days.   The Group has assessed that the right of return that customers have in relation to sold goods does not have a significant impact on the revenue recognised. This is due to the fact that the majority of returns are related to products returned under warranty where back to back warranty arrangements are in place with the product manufacturer and thus there is a minimal impact on revenue recognised.
Finance revenue   Interest income earned on financing arrangements where the core business of the Group is the provision of financing to its customers in its capacity as a principal financier.   Finance revenue is recognised on the accrual basis over the term of the financing provided.   Finance revenue is measured at the effective interest rate implicit in the financing arrangement.   No significant judgements or estimates.
Other revenue   Other revenue earned by the Group on products and services which are incidental or complementary to those described above include the installation of prepaid electric meters, electricity audit projects undertaken on electricity sales for municipalities, rentals earned on point of sale and other devices used to facilitate the above major revenue streams, and the sale of tickets for transportation and to sporting events.   Revenue is recognised either at a point in time or over time as control is transferred to the customer in the arrangement.   Revenue is measured at the consideration received in terms of the arrangement with the customer. Payment terms are generally between 30 and 60 days.   No significant judgements or estimates.

 

Total Africa Distribution   Solutions  
2020 
Rí000 
  Restated*
2019 
Rí000 
2020 
Rí000 
  Restated*
2019 
Rí000 
  2020 
Rí000 
  2019 
Rí000 
 
Revenue from contracts with customers  20 756 487    23 174 511  20 567 383    22 971 273    189 104    203 238   
  Prepaid airtime, data and related revenue  18 842 481    20 780 969  18 842 481    20 780 969    –    –   
  Postpaid airtime, data and related revenue  137 922    141 405  137 922    141 405    –    –   
  Prepaid and postpaid SIM cards  634 809    964 054  634 809    964 054    –    –   
  Services  319 623    350 081  130 519    146 843    189 104    203 238   
  Electricity commission  358 728    347 538  358 728    347 538    –    –   
  Handsets, tablets and other devices  262 926    432 374  262 926    432 374    –    –   
  Other revenue  199 998    158 090  199 998    158 090    –    –   
Finance revenue  378 839    427 753  378 839    427 753    –    –   
21 135 326    23 602 264  20 946 222    23 399 026    189 104    203 238   
* Revenue generating entities accounted for as discontinued operations that were previously disclosed within the Africa, Mobile and International segments are not included in current or prior period revenue per the Group statement of comprehensive income. The Group has restated its comparative financial information. The Mobile and International segments have been excluded from the above table as the only revenue generating entities that were accounted for within these segments were part of the VAS operations that have been accounted for as discontinued operations and disposed of. Refer to note 11.