Blue Label Telecoms’ airtime distribution agreement with Vodacom was set to terminate at end of January 2021 but has been temporarily extended.

This is according to Blue Label Telecoms head of investor and media relations Nicola White who was responding to questions from MyBroadband.

Blue Label Telecoms is a specialist in prepaid products and the electronic distribution of virtual merchandise.

It is South Africa’s largest supplier of prepaid airtime that is done through voucher or PIN-based airtime, and PIN-less or direct top-up airtime.

In the last financial year, Blue Label Telecoms recorded R32 billion in prepaid airtime and data transactions – its biggest revenue driver.

As South Africa’s largest mobile operator, Vodacom contributes significantly to the company’s prepaid airtime and data sales.

It was therefore big news when Vodacom gave Blue Label Telecoms notice of termination of its airtime distribution agreement in 2016, which has a five-year notice period.

In February 2017, Blue Label Telecoms denied that Vodacom has cancelled the company’s airtime distribution agreement.

Blue Label CEOs Brett and Mark Levy said while their contracts are governed by confidentiality, they were “renegotiating their distribution deal with Vodacom”.

White has now confirmed that Vodacom has terminated its agreement with Blue Label Telecoms’ in 2016.

However, she added that this agreement has been temporarily extended to allow both parties further time to review and negotiate a permanent contract.

Blue Label Telecom and Vodacom

Mobile operators are increasingly using their own channels for prepaid airtime and data sales, which is putting pressure on Blue Label’s growth.

As a result, Blue Label’s prepaid airtime and data sales revenue declined by over R2 billion over the last financial year.

As airtime sales are still the foundation of Blue Label’s business, it will have to ensure that it does not lose Vodacom as a client.

This gives Vodacom the upper hand in negotiations to lower the sales commission it pays to Blue Label.

The margin on Vodacom’s airtime sales is already much lower than for Cell C, and a new agreement may well cut these margins further.

With Cell C struggling and seeing a decline in subscribers, Blue Label will increasingly rely on Vodacom and MTN for revenue in the airtime space.

The two larger operators are well aware of their importance to Blue Label, which is now playing out in the airtime distribution agreement negotiations.

No comment from Vodacom

MyBroadband asked Vodacom for comment regarding its agreement with Blue Label Telecoms, but the company would not provide any details.

“Blue Label remains an important business partner. Our distribution agreements are governed by confidentiality clauses that prevent us from disclosing the terms and conditions with third parties,” a Vodacom spokesperson said.

Source: My Broardband