Brothers build Blue Label into R5bn firm in no time

In just over five years the Levy brothers have turned R35 000 into a R5 billion fortune.

Since starting Blue Label Investments in 2001, Mark and Brett Levy have expanded its virtual distribution footprint nationally and internationally.

The company, recently renamed Blue Label Telecoms, supplies a variety of prepaid products and other services to wholesalers, retailers and end users. Blue Label's prepaid products and services include insurance, electricity, cellular airtime vouchers and starter packs. It also provides bill payment, electronic fund transfers and location-based services like Look4Me and Look4Help.

Now the brothers are eyeing the JSE's main board, where they plan to raise R1.4 billion when they list Blue Label Telecoms in a fortnight's time.

Blue Label will sell a 30 percent stake at between R5.75 and R6.75 a share through a private placement ahead of the listing. This values it at between R4.3 billion and R4.9 billion.

For the year to next March the company has forecast core net profit of R340 million and core earnings a share of 45.81c.

The prepaid cellular market has grown phenomenally and now constitutes about 80 percent of the nearly 40 million active cellphone SIM cards in the country. Cell C, MTN and Vodacom are aggressively targeting this market, which mainly consists of low-end users, through the introduction of small-denomination airtime vouchers. MTN recently introduced a R5 voucher, copying Cell C's move to vouchers of less than R10.

"It has been an exciting journey," Mark Levy said yesterday. He said physical distribution of airtime vouchers had proved daunting for suppliers and network operators to manage.

"We had to be creative … to get products to clients, also to help [network operators] and retailers manage the environment better," he said.

Blue Label also operates in Mozambique, the Democratic Republic of Congo and India.

In preparation for listing, Blue Label has restructured its business by spending R240 million to buy out minority shareholders in subsidiaries. These include Virtual Vouchers, a prepaid voucher management system operating at more than 500 Engen petrol stations, and Kwikpay, a distributor of prepaid airtime and other prepaid products to retail chains such as Spar and Clicks.

Blue Label Investments sold its non-core assets, including a 28 percent stake in Wireless Business Service (WBS), to shareholders, including the Levy brothers, and changed its name to Blue Label Telecoms.

Last year Vodacom bought a 10 percent stake in WBS, which owns wireless internet provider iBurst, for an undisclosed sum. Vodacom had an option to increase its stake to 25 percent, but the deadline to exercise the option lapsed on September 14. However, Vodacom said it had extended the deadline and was still considering whether to increase its shareholding.

Vodacom bought into WBS to get access to its WiMax licence. WiMax is a microwave technology for accessing high-speed internet at a distance.

iBurst has aggressively grown its national network and now has more than 50 000 clients.

Business Report