PREPAID vouchers distributor Blue Label Telecoms, which has made its first profit in India nine years after it set up operations in the country, is looking for acquisitions to enhance its short message service (SMS) aggregation services.
However, the company, which ended the year to May with R2bn in cash, is unlikely to expand into new territories. Apart from South Africa, it has operations in the UK, Mexico and India.
Blue Label joint CEO Mark Levy said Blue Label would buy a company that would add new products to its existing range, enhance earnings, and be either strategic or defensive in nature.
Blue Label sought to "create economies of scale through mass aggregation, as well as enhancing the range of SMS services available to customers", he said.
Blue Label reported a 4% increase in revenue for the year to May, to R18.7bn, boosted by voucher sales to mobile operators. Commission from the sale of prepaid electricity rose 39%, from R61m to R85m. The electricity operations also contributed 0.11% to the company’s 5.69% margin.
The South African distribution business reported 3% growth in revenue to R18.4bn, largely attributed to prepaid airtime and annuity revenue generated from starter packs.
"Blue Label may be benefiting from the high demand for prepaid airtime vouchers. However, the squeeze on margins from the price war between the mobile operators may very well impact Blue Label’s future profitability", said Lehlohonolo Mokenela, information and communication technologies research analyst at Frost & Sullivan.
"However, with the introduction of small-denomination vouchers, increasing sales volumes will ensure the company maintains its profits," he said.
Revenue from the international business declined 40% to R17.4m. Blue Label’s share of profits from India’s business Oxigen Services was R4.6m, compared with a loss of R5.2m in the year to May last year.
Mr Levy attributed the turnaround to the addition of banking services to its prepaid airtime platform in that country. Blue Label owns 55.83% of Oxigen India.
Blue Label has an exclusive partnership with State Bank of India on technology offerings and mobile wallets. It also signed partnerships with other banks to provide domestic remittances, insurance products and merchant payment.
Blue Label’s business in Mexico incurred a loss of R25m, rising from a R6.5m loss the year before. The loss was attributed to increased spending in the roll-out of point-of-sale devices through its partner Grupo Bimbo’s distribution network. BLT has reduced its shareholding in Mexico’s unit from 70% to 40%.
Mr Mokenela said Blue Label’s willingness to take the "short-term financial hit" in its Mexican and Indian operations was "beginning to bear fruit".
"The company sees a lot of potential in the mobile banking market in India, and is looking to capitalise on a high unbanked portion of the Indian population," he said.