Blue Label unfazed by low returns after Cell C buyout
● “David bought Goliath,” reflects Brett Levy, Blue Label Telecoms co-CEO, on its stake in Cell C after the company presented a set of less than favourable results for the year ended December 2018.
The market has doubted Blue Label’s ability to carry Cell C’s giant losses. And with a market capitalisation of R3.91bn, Blue Label is now valued at less than the R5.5bn useto acquire its 45% stake in SA’s third-largest mobile operator.
The company’s share price fell 25% on the day.
“The recapitalisation was massive. I don’t think people give credit for how big it was. The last 12 to 15 months have been about concentrating on Cell C, fix it, clean it up … I would say we’re about 80% of the way there now,” Levy told Business Times.
After making an operating profit of R1.44bn, the mobile operator ended the year with a loss of R1.27bn as more than R4bn in financing costs hit its returns.
Cell C this week appointed Douglas Craigie Stevenson as interim CEO after he had served as the company’s COO since October 2017.
Former boss Jose Dos Santos announced his departure in late February after leading the charge for five years.
With 17.2-million subscribers in SA, Cell C is banking on increased data usage to drive revenue growth in the future.
The operator added 9.5-million smartphone users to its network between 2017 and 2018. One way the company hopes to drive data use is through their “Black” video streaming platform.
“We are not Netflix or Showmax. Our Black offering is far wider,” said Stevenson.
They were pioneers in the market as the first mobile operator to offer a video-on-demand service, he said.
Vodacom and Telkom have both launched video streaming services.
“There’s been a lot of interest but people are still hindered by the data costs,” said Stevenson.
Conversely, regulators are working to ensure operators don’t abuse consumers with high data charges. As of Friday, South Africans will have the choice to roll over data to the next month or transfer to another mobile number on the same network.
In effect, these regulations will see the end of data expiration. In addition, operators are compelled to notify customers as data is depleted — at 50%, 80% and 100%, according to the Independent Communications Authority of SA.
Stevenson is proud that their network was one of the first to comply with the new regulations. For Blue Label prepaid, cellphone repairs and data mining is the future.
“We thought that every single product on planet Earth would go prepaid and that every person would transact on a prepaid basis,” said Levy, explaining the basis for the company’s inception.
Blue Label provides customers with the ability to buy prepaid airtime, top up electricity vouchers, send money, pay utility bills as well as buy tickets through Ticketpro, among other services.
With operations in Mexico and India, Blue Label currently has no plans to expand its footprint in Africa.
Levy said their focus was working on properly integrating the various entities they have into a seamless operation. The company is looking to sell the business in India for $27m (about R380m).
Levy said Blue Label also saw repairs of smart devices as an area of growth as they seek to become the “repairer of choice” for a number of electronics brands in the local market, as well as in Namibia, Angola and Botswana.
The company has made a bid to buy repair chain WeFix, which is in business rescue, and will only share details with the market once the deal is finalised.
Blue Label Telecoms’ share price is down 77% since its high in October 2016.
The recapitalisation was massive. The last months have been about concentrating on Cell C, fix it, clean it up … we’re about 80% of the way there
Brett Levy
Blue Label Telecoms co-CEO