Microsoft partners with Blue Label

Janine Erasmus

Global software giant Microsoft has teamed up with fast-growing South African telecommunications company Blue Label Telecoms. Since its establishment seven years ago the Blue Label group, which supplies a variety of prepaid products and services, has grown into a multi-national player with operations across South Africa and in several countries abroad.

Blue Label Telecoms listed on the JSE Stock Exchange in November 2007, raising over a billion rand through private selling of shares beforehand. Just over 740 million shares were made available on listing. By the end of its first day of trading Blue Label shares had gained 27 percent and the company’s resultant market value was R6.6 billion.

The listing was a pre-condition of the strategic partnership with Microsoft, which has now acquired 12 percent of issued Blue Label shares and has also entered into a mutually beneficial technology and service sales, advertising, and development and distribution agreement with Blue Label Telecoms.

A statement on the Blue Label website provides details of the deal, revealing that the Microsoft/Blue Label partnership will drive services and products in developing economies and will give the two companies the opportunity to mutually explore new business opportunities. This is in line with Blue Label’s stated aim of constantly seeking new partnerships in African countries and other emerging markets. CEO of Blue Label Mark Levy describes the group’s objective as growing a “global footprint of contact points with our customers with a strong emphasis on the fast-growing developing world markets.”

In addition, Microsoft will provide Blue Label Telecoms with advertising services as well as access and licences to various web-based and mobile technologies and services. Says a spokesman from Microsoft, “We will be collaborating closely with Blue Label around co-distribution and markets across both companies’ networks.”

This means that Microsoft’s massive global client base will now be open to Blue Label, giving Blue Label an opportunity to increase its global footprint. Says Peter Mansour, senior director, Unlimited Potential Group at Microsoft, “Microsoft has been active in building services and technologies to support the growth of mobile communications for many years, and we believe our relationship with Blue Label Telecoms will be a win for the many consumers both companies serve.”

The software manufacturer in turn will gain access to Blue Label’s prepaid customers. “We have the ability to touch consumers like no other company around the world,” explains Levy. “Microsoft sees significant value in that ability to touch the consumer.”

Although the prepaid market comprises largely low-end users who will in all likelihood not be spending money on Microsoft’s software products, the corporation is thinking ahead. Says Levy, “I think Microsoft’s view, going into the future, is touching the next billion customers that they’ve got. They’ve got over a billion customers. And to be able to get the next generation, the bottom of the pyramid, there is spend there – and how to get to that spend and how to target that spend is where we play.”

The companies have not disclosed the value of the transaction, but in a December 2007 interview with Blue Label co-founders, brothers Brett and Mark Levy, on South African investment information service Moneyweb, a sum of around R250 million was mentioned in connection with Microsoft’s contribution to the deal, while technology news source ITWeb has calculated the value to be between R513 million and R602 million based on the proposed issued share capital of 743 million shares.

Prior to the listing Blue Label – known then as Blue Label Investments – allocated R240 million out of the billion-plus raised to buying out minority shareholders in several of its subsidiaries and acquiring 100 percent of these companies. The restructured company is now known as Blue Label Telecoms. The company also spent almost half a billion rand on eradicating its bank debt.

Blue Label was founded in 2001. CEO Mark Levy is responsible for technology and international expansion whereas Deputy Chairman Brett Levy oversees local operations and trading.

Blue Label’s products include prepaid airtime (for Vodacom, Cell C, MTN and Telkom) and electricity, starter packs, bill payment, electronic funds transfer, gift vouchers, loyalty programmes, and other prepaid offerings such as the location-based services Look4Me and Look4Help. The group distributes through over 100 000 points of presence within South Africa to retail, petroleum forecourts and wholesalers as well as end users. The success of its business strategy has enabled it to expand to other emerging markets and it now also operates in Mozambique, Democratic Republic of Congo and India.

In recognition of their achievements the brothers were awarded the ABSA Business Achiever Non-Listed Company Award at the prestigious ABSA Jewish Achievers Awards ceremony held in August 2007. They were also nominated as Ernst & Young World Entrepreneur SA Finalists for 2007. Ndaba Ntsele, CEO of Pamodzi Investment Holdings took top honours as the Best Entrepreneur, and Patrick Dickens, Managing Director of Centurion Systems was named Emerging Entrepreneur. Ntsele will compete against 40 other finalists from all over the world for the global title of Best Entrepreneur, to be announced at a ceremony in Monte Carlo in June 2008. He will hope to emulate the success of South Africa’s Bill Lynch, CEO of Imperial Holdings, who was named the 2006 World Entrepreneur Of The Year.