Blue Label Telecoms on Tuesday reported a marginal rise in revenue of 3% to R13.2 billion, for the half year ended November 2016, due to continued growth in local market share.
Operating profit improved to R660 million, from R573 million, while headline earnings per share grew 54% to 81.78 cents.
Blue Label said the financial performance of Oxigen for the six months ended November 2016, amounted to a loss of R120 million.
The major portion of these losses was attributable to substantial expenditure incurred on the marketing of the brand and the acquisition of wallets.
Total wallet subscribers accumulated to 25.6 million as of 30 November 2016, it said.
“This quantum is expected to increase in perpetuity and in turn increase the value of Oxigen. The expenditure incurred on the creation of additional wallets was congruent with the decision that has been made to focus on the value creation of a compounding wallet subscriber base as opposed to the revenue generated thereon,” Blue Label said.
The investment in Oxigen was initially of a long-term nature as it was expected to emulate the business model of the South African distribution operations.
Oxigen is now viewed as a venture capital investment, and will have no impact on group earnings, Blue Label said.
South African distribution perpetuated its dominance in contribution to group earnings, with its core headline earnings equating to a growth of 26%.
Although Blue Label Mexico (BLM) continued to incur losses, the group’s share declined by 32%, from R32.5 million to R22.1 million.
Blue Label said it remains positive with regard to the investment in Cell C and other commercial benefits that will follow.
On Monday, the group said it has entered into a ‘binding umbrella restructure agreement’ with Cell C, debt providers of the mobile operator, a third party investor, and other relevant parties to ensure that its acquisition deal goes ahead.
“The demand for low-cost smart phones and tablets is expected to accelerate and in turn enhance revenue and profitability,” it said.
“The financing of the mobile device element of postpaid contracts as well as that of providing short-term finance for emergency top-ups are initiatives that are currently under consideration,” Blue Label said.