South Africa’s third-largest mobile operator Cell C has significantly cut into the prepaid airtime sales of number two operator MTN, as the nation’s telecommunications companies continue to battle it out to gain market share in an increasingly competitive market.

Statistics emerging from Blue Label’s year-end financial results, released in Sandton, on Wednesday, showed that Cell C’s contribution to Blue Label’s revenue generated from prepaid airtime sales increased from 17% during the period from June to November 2013 to 19% from December to May.

This compared with a contribution of only 8% 12 months ago, Blue Label joint CEO Brett Levy said.

MTN’s contribution showed a “massive” decrease from 32% between June and November 2013 to 29% during the period under review, while Vodacom had remained consistent at 50%, with both operators now needing to work hard to respectively reverse and maintain their positions.

While MTN had had a “good July”, with promotions and competitive pricing reversing some of the ground it had lost to Cell C, MTN would need to continue this momentum.

The Jose Dos Santos-led Cell C dropped its voice prices to a straight 99c-a-minute, with per second billing offering a more demystified, simplified and transparent pricing structure, something the other operators would need to work on, Blue Label indicated.

Telkom had managed to grow their contribution from 1% to 2% during the same period.

This was an indication of change, Levy said, noting that “something was cooking in the telecommunications industry”.

He pointed out that the landscape of the telecommunications industry was changing “tremendously,” with mobile operators experiencing margin compression and a competitive pricing environment.

Further, the biggest asset to telecommunication operators was no longer base stations or their respective subscriber count – as was the case for the past ten years – as infrastructure sharing was an increasing necessity and sim penetration had reached 144%.

The biggest asset for the next ten years would be companies’ distribution channels.

FINANCIAL RESULTS
Blue Label expressed mild satisfaction at the company’s performance over the financial year ended May 31, with headline earnings a share up 6% to 67.98c and earnings before interest, tax, depreciation and amortisation rising 10% to R788-million.

Gross profit for the year increased by R78-million to R1.35-billion, with gross profit margins up, from 6.7% in 2013, to 6.96% in the year under review.

Blue Label’s South African distribution division, comprising prepaid electricity and airtime, as well as annuity revenue from starter packs, recorded a 2% rise in revenue to R19.1-billion.

Revenue generated from “pinless top-ups” increased from R997-million to R1.7-billion, while the commission earned on the distribution of prepaid electricity increased 17% to R133-million from sales valued at R8.8-billion.

Blue Label’s share of losses incurred by its joint venture international operations amounted to about R57-million on the back of Blue Label Mexico, which was rolling out point of sale devices across the South American country.