Blue Label Telecoms strives to become the leading global distributor of secure electronic tokens of value and
transactional services, including non-banking value-added transactional services, within emerging and
developing markets. In pursuing this vision we are committed to behaving and interacting with all stakeholders
in a professional and ethical manner.
Blue Label Telecoms is a proud supporter of Business Against Crime South Africa.
The group has identified the following key impacts and risks to the group.
| |
Impact/Risk |
|
Comment |
|
Response |
| |
General economic
conditions |
|
In an economic downturn consumers
are forced to limit expenditure,
particularly on non-essential needs.
This could have an adverse effect on
revenue and profitability. |
|
It has been the group’s experience thus
far that its mix of products, services
and distribution channels has limited its
exposure to economic downturns, in
that the bulk of the product mix
consists of goods, the demand for
which thus far appears inelastic.
Consumers appear to be unwilling to
reduce spending on utilities, transport
and airtime. |
| |
High volume/low margin
business which is sensitive
to supplier pricing |
|
Network operators determine the
margins available to the prepaid
airtime distribution channel. Blue
Label Telecoms may not always be
able to pass on to the retailer or
customer any margin compression
enforced by the network operators. |
|
Management is confident that based
on the terms of the group’s customer
agreements and business model it
should be able to pass on margin
compression to its customers. The
possible margin compression is also
likely to force marginal distributors out
of the distribution chain. |
| |
Regulation of Interception
of Communications and
Provision of
Communication-Related
Information Act (RICA ) |
|
RICA requires the registration of
personal details of all South African
cell phone subscribers. All new
starter pack activations subsequent
to 1 August 2009 require such
registration.
Furthermore, all historically active
users of cell phones will have to be
registered within eighteen months
from that date.
Registration is administratively
complex and leads to a delay in the
ultimate activation of starter packs. |
|
Activi, the technology arm of the group,
has developed a suite of data collection
products that are designed to
complement existing point-of-sale
devices, enabling the immediate
registration of RICA details.
Once RICA’d the starter pack base is
likely to be more stable and less likely
to churn. By developing superior
capabilities to RICA customers this
presents both an opportunity and a
competitive edge for the group. |
| |
Reduction of inter-connect
fees |
|
Parliamentary intervention to reduce
cellular inter-connect fees in the
immediate future appears likely.
This, in turn, is likely to lead to lower
cellular airtime prices. Lower pricing
may lead to margin compression by
the networks. |
|
It is management’s view that prepaid
customers currently consume not as
much airtime as they require, but as
much as they are able to afford. It
would therefore appear likely that
prepaid consumers spend will remain
the same, but consumers will receive
more value for that spend.
For these reasons management
believes that the group’s business will
not be materially affected by the
reduction in inter-connect fees. |
| |
Inability to attract and
retain key personnel and
qualified employees, in
whom intellectual capital
resides. |
|
The group’s future performance will
depend largely on the efforts and
abilities of its key personnel and
employees. The existing management
at Blue Label Telecoms pioneered the
mass prepaid market and established
the group’s business model. Blue
Label Telecoms’ future success will
depend, in part, upon its ability to
continue to attract, retain and
motivate the necessary personnel,
including the succession of executive
officers and certain other key
employees. |
|
The joint chief executive officers and
co-founders are both substantial
shareholders and are dedicated to the
sustainability and growth of the group.
Key members of the management
team are bound by service
agreements, restraint of trade
undertakings and are also strategic
shareholders in the group.
Blue Label Telecoms’ remuneration
committee has designed remuneration
policies that include long-term
retention and incentives. The group
also focuses on training existing staff
to develop required skills internally. |
| |
Non-exclusivity of various
supply, distribution and
WASP agreements |
|
Certain of the group’s supply,
distribution and WASP agreements
are non-exclusive and can be
terminated at short notice. This type
of agreement is standard in the
industry. |
|
Management is committed to continue
to grow the group’s footprint by
increasing its points-of-presence (touch
points) and owning the entire
technological value chain, which drives
the group’s products and services. This
has placed the group in a strong
position in the distribution chain.
Relationships with and service to
suppliers and customers are of
paramount importance and an
important factor in management’s
time allocation. |
| |
Blue Label Telecoms
conducts the majority of its
existing business in South
Africa and is subject to
certain political, social,
environmental and
economic conditions in
South Africa |
|
While South Africa features a highly
developed financial and legal
infrastructure at the core of its
economy, it has high levels of
unemployment, poverty and crime.
Particular considerations include how
the South African Government will
ultimately address the political
tensions and social and economic
problems, to what extent its efforts
will be successful, the political, social
and economic consequences of such
efforts and the effect on South
African businesses of the continuing
integration of the South African
economy with the economies of the
rest of the world. |
|
Blue Label Telecoms believes that the
economic sentiment is broadly positive
for the future. The group continues to
expand its operations beyond the
borders of South Africa, with particular
focus on emerging markets. |
| |
Rapid growth of off-shore
operations in territories far
removed from head office. |
|
As the group diversifies its operations
to earn income from off-shore
companies, executive management’s
ability to closely oversee those
operations could be diminished. |
|
The group always enters international
territories with a local partner, whom it
carefully selects. The group also has a
policy of seconding senior managers
from within the South African
operation to off-shore subsidiaries. This
is designed to ensure Blue Label
Telecoms’ strategy and culture is
effectively and consistently applied
throughout the group. |
| |
Vulnerability of the middle
man |
|
In most industries a wholesaler is at
risk of being eliminated from the
supply chain if the supplier elects to
supply the customer directly. |
|
From its inception, the objective of the
group was to become a “one stop”
destination for the supply and
distribution of all of the networks’
offerings. This would provide both
convenience and efficiency to the
retailer and customer. Furthermore
the technology and footprint developed
by the group allows retailers to earn
additional revenue by the introduction
of additional products. This would make
it difficult to disintermediate the group.
No single network can offer this
complete solution. |
