Blue Label to push power top-up

Blue Label will ramp up the adoption of its emergency electricity product as it expects double-digit growth in sales. 

The company already sells prepaid electricity vouchers through its partnership with municipalities across the country. Its emergency power plan allows consumers to top up electricity on credit. This is similar to airtime credit offered by mobile network operators, which is repayable with interest when customers buy airtime. Airtime advance has become one of the biggest contributors to service revenues for mobile network operators.

Mark Levy, joint CEO of Blue Label, said BLU Advance is slowly gaining traction as more municipalities embrace it. 

“This is aimed at helping consumers top up when they have run out of electricity and don't have funds to purchase at that time. We draw the electricity from the municipality. We pay the municipality for that electricity, and then we obviously collect that from the customers the next time they reload.”

He said the company had been building the platform for a while and was working with “quite a large chunk” of municipalities. However, the electricity environment was “very difficult and challenging” because of the many different municipalities involved. “Airtime is a lot simpler. You deal with one mobile network operator, one billing system, while electricity is multiple municipalities, different deductions.” 

Adoption in South Africa will take longer and ultimately uptake will be 30-40% because of the costs of handsets

—  Brett Levy, joint CEO of of Blue Label,

The challenge is that “we've got to make sure that we can collect the money that the clients borrow. So I think that is slowing down the process. We already do hundreds of thousands of transactions, so that will continue to grow. If it follows the same manner that airtime advance happened, it lends itself to a fortune of opportunity,” said Levy. 

Blue Label said electricity revenue generated on behalf of the utilities increased from R18.9bn to R21.9bn for the six months to November. Net commission earnings, primarily calculated based on kWh consumption, remained stable at R146m. The constrained growth in commissions was driven by inflationary increases linked to kWh usage and higher electricity consumption after the end of regular load-shedding.

Brett Levy, joint-CEO said the company also expects growth from products such as Ringers, a white label voucher that works on all four network operators; UniPin, a generic voucher for electricity; Ticketpro, especially for transport; and BLU Voucher, a universal voucher for services such as gaming and payTV. “That product (BLU Voucher) is already doing over R1bn a month,” he said. “We consider those products to be good for us.”

Blue Label reported a marginal increase in core headline earnings for the six months to November of R5m, from R419m to R424m. Earnings before interest, tax, depreciation and amortisation decreased by R44m to R653m, primarily driven by a reduction in the Comm Equipment Company (CEC) subscriber base, a lower average revenue per user and increased finance costs associated with the sale of a portion of the CEC handset receivable book.

CEC manages 829,600 contract customers of Cell C, but that business will be integrated with that of the mobile network operator. Blue Label is Cell C's largest shareholder. Cell C has 7.7-million prepaid subscribers and reported a 13% increase in revenue to R6.7bn. About 10% of total revenue comes from mobile virtual network operators using Cell C's network to provide data and voice to customers. They include Capitec, Shoprite and Mr Price. 

Levy said Cell C’s “turnaround has been short of exceptional. We understand there is a lot more to do, Jorge [Cell C CEO Jorge Mendes] and the team continue to do a phenomenal job.”

Blue Label, which distributes 2-million SIM cards a month, has flagged the introduction of electronic SIM cards (eSIM) as a potential threat to its business. eSIMs are gaining momentum internationally while locally adoption is still in its infancy. 

Levy said: “Adoption in South Africa will take longer and ultimately uptake will be 30-40% because of the costs of handsets.”

Although eSIMs may impact Blue Label’s SIM card business, Levy said: “There are a lot of opportunities for how we get involved in the eSim business. I think its important to be on top of it and to understand where we going to play in it.”