Why Blue Label plans to offload Indian unit
Blue Label was in discussions to dispose of a portion of its shareholding in its struggling Indian unit, joint CEO Brett Levy said on Thursday.
The JSE-listed cellphone pre-paid airtime distributor owns 58% in Oxigen Services India, which provides money transfers, bill payments and other prepaid services.
Blue Label’s share of losses from India widened to R119m in the year to May, from R27m last year, with the group saying that its marketing expenditure had increased significantly during the period.
Levy said that the group wanted "a partner that understands and sees the value of the business and is prepared to invest in the market".
Oxigen Services India is facing regulatory challenges after the government imposed new changes that may affect the fintech sector.
Intellidex research analyst Phibion Makuwerere said Oxigen’s reorganisation was likely to provide an "artificial boost to earnings in the short term, but potentially provide real earnings growth in the medium term".
Blue Label reported core net profit growth of 19%, to R893m in the year to May. Headline earnings per share increased 18%, to 117.98c. Revenue was unchanged at R25.7bn.
Blue Label generates the bulk of its revenues in SA, where it connects between 700,000 and 1-million SIM cards a month.
Levy attributed the group’s overall performance to organic growth. Blue Label recently completed the acquisition of a 45% stake in Cell C and the entire business of smartphone distributor 3G Mobile.
Makuwerere said Blue Label revenue remained depressed, in line with other telecommunications companies.
"We believe the current financial position of its new acquisition, Cell C, is problematic and is likely to cause short-term pain for Blue Label. However, with savvy reorganisation of Cell C operations and creativity in expanding income streams, it could be a value enhancer in the medium-to long-term," he said.