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BLUE LABEL
INTEGRATED ANNUAL REPORT 2017
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24
The Joint Chief Executive Officers’ report
continued
market value of the investment with a
view to unlocking the Group’s share
thereof. With the advent of its change
in focus to financial services through
wallet subscription, it is no longer
strategically aligned with the other
business units of the Group and is
unlikely to generate profitability in the
short to medium term. However, the
market value of the company is
expected to increase in conjunction
with its growth in wallet subscribers.
This in turn creates the potential to
unlock the investment in the future
and the Group is pursuing this new
strategy with respect to its investment
in Oxigen.
Blue Label Mexico’s losses continued
to decline, with the Group’s share
thereof reducing 42% to R37 million,
mainly underpinned by higher blended
gross profit margins.
Vertical integration of our
ecosystem
Blue Label’s model of distributing
virtual goods and services across
multiple economic sectors affords
it access to vertical integration
possibilities in its ecosystem. Our
strategy is to combine or link
appropriate opportunities into a
richly networked ecosystem.
Integration creates further scope for
design thinking alongside existing
operating processes and systems.
Integration also brings together a
number of different players, which
are now able to serve markets in ways
previously beyond the capacity of a
single organisation. The ecosystem’s
diversity and collective capability to
learn, adapt, enable, disrupt and
innovate are key in determining its
further successes and sustainability.
Acquisitions
Blue Label delivered two landmark
transactions subsequent to financial
year-end:
Cell C
The R5.5 billion funding of Blue Label’s
participation in the recapitalisation of
Cell C was funded through a hybrid of
our own cash resources and the
placement of shares. Implementation
of the acquisition was effective on
2 August 2017.
Our rationale for the vertical
integration with Cell C embraces three
main pillars:
1. Creating value as a free-standing
entity;
2. Ensuring longevity of our existing
trading relationship with Cell C;
and
3. Commercial synergies, as Blue Label
becomes a service and product
provider to Cell C across multiple
shared services arising from the
alliance.
3G Mobile
In August 2017, Blue Label announced
the acquisition of 3G Mobile, a
distributor of the major tier 1 and 2
mobile device and handset
manufacturers, such as Apple,
Samsung, Huawei, ZTE and Nokia.
Through 3G Mobile’s wholly owned
subsidiary, Comm Equipment
Company, it offers financing for the
mobile handset element of postpaid
and hybrid contracts.
The R1.9 billion acquisition cost was
structured in two stages. Initially
47.37% was acquired for
R900 million. The remaining
52.63% will be acquired for a further
R1.0 billion, subject to the fulfilment
of conditions precedent in relation
thereto, the completion of which is
anticipated to be in early 2018. Of the
initial purchase price, R250 million
was applied through vendor placement
of shares, and the balance of
R650 million will be payable on
28 February 2018.
Our existing handset and tablet
business comprises both low-cost
smart phones and certified pre-owned
mobile handsets. By vertically
integrating with 3G Mobile, we are
now able to offer a complete range of
handsets and tablets.
Blue Label’s success going forward will
be characterised by management’s
execution capability in aligning,
integrating and extracting operational
and financial metrics from these
significant investments.
Evolving our digital presence
in Africa
The recent acquisition of 3G Mobile
instantly augmented Blue Label’s
footprint across the continent. When
coupled with Blue Label’s merchandise
available through its Mobile segment,
countries now served include
Botswana, Cameroon, DRC, Ghana,