MTN undeterred by Blue Label’s Cell C plan
MTN has thrown its weight behind Blue Label, despite the listed electronic distribution company’s plans to buy a stake in its competitor Cell C.
Blue Label is the biggest distributor of SIM cards and prepaid airtime for mobile network operators. Its acquisition of a 45% interest in Cell C is seen as a conflict of interest as it will become a service provider and a competitor to its clients.
MTN CEO Mteto Nyati says as a former board member at Blue Label, he understands the business model of the group and that there is no way the company will favour one company at the expense of the others because it will destroy Blue Label’s business.
MTN has “strengthened its partnership” with Blue Label and has given it “aggressive growth targets”, says Nyati.
The company has met those targets since January, meaning that MTN is now increasing its market share.
The story is apparently quite different at Vodacom, which is the leading mobile network company in SA. Vodacom is said to be reviewing its contract with Blue Label. The contract still has about four-and-half years to go and Blue Label has denied that there are talks about terminating their arrangement.
Blue Label needs Vodacom’s business. The deal contributes a large chunk of its revenue but it should prepare itself for stringent conditions Vodacom may impose.
Although there is so much at stake for Blue Label, it is hard to imagine how it will keep its relationship with Cell C at arm’s length. For now, MTN seems to have secured a lucrative deal with Blue Label, although for how long that will be maintained has to be a guess.
Blue Label clearly understands the market and Vodacom knows this. At worst, Vodacom might scale back the scope of the business it gives to Blue Label. While Vodacom might not like it, it does not seem to have much choice in the matter for the moment.
Go Life, the small pharmaceutical grade nutrient (nutraceutical) company with a primary listing in Mauritius, has attracted very little investor interest since securing a secondary listing on the JSE in 2016. But there’s no doubt that a riveting cautionary notice released this week will raise a few eyebrows.
It seems there was quite a bit of consternation after a report on a petition by Eversheds — which appears to be a law firm — to the Bankruptcy Division of the Supreme Court of Mauritius for the winding up of the company in early February.
On Thursday, Go Life advised that the amount in dispute was less than R40,000 and that the matter had been settled and the action withdrawn.
To be honest, that’s not very reassuring and would certainly raise some questions in the minds of cynical investors. The critical point to mull is how a publicly listed company failed to resolve a dispute that could taint its corporate reputation and do so long before the matter reached court and the ears of the investment public.
Unfortunately, developments will no doubt not only prompt investors to fixate morbidly on Go Life’s liquidity, but also ponder whether other outstanding settlements will now surface. If Go Life wanted to raise fresh capital on the JSE, these were issues that the company directors would need to tackle swiftly and convincingly.