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"Anything that has alphanumeric characters, or a barcode, or a QR-code can be vended. As long as it can be digitised, it can be sold. The imagination becomes the limitation.”
Holding the floor is Mark Levy, who founded Blue Label Telecoms with brother Brett in 2001.
The two siblings, who hail from the small farming town of Delmas, east of Johannesburg in Mpumalanga, lost their father at a tender age and had to fend for themselves when they were very young.
“But from early on there was a flow of entrepreneurial blood in our veins,” says older brother Mark. “In fact, my mother always said: ‘If it wasn’t bolted in the house, Brett and I would sell it.’”
Early days
The siblings started out transacting in electronics – “parallel imports where we brought in goods from different jurisdictions at different pricing and we went on and established a solid distribution group. I’m now talking about the 1990s,” says Levy.
When cellular telephony came about, the brothers saw a gap in the market to become involved. Between 2000 and 2001, Telkom put out a tender for home phones and the Levy brothers got a national licence to supply the devices, which was their first foray into the “pseudo-cellular” sector.
“Telkom gave us a stealthy move into other merchants and other places and we slowly started seeing an opportunity in the cellular world,” says Levy.
At that stage prepaid airtime for cellphones could only be accessed via a physical card, which was very impractical.
“Logistically it was challenging, as it was loaded onto low-ish denomination products,” Levy recalls.
“A guy in the middle of nowhere would phone you and say he needs two R55 cards and we’d say you’ll have them in two weeks’ time. There’s just no commercial viability in bringing out just two products. It’s like delivering two tins of baked beans.”
Scratching the surface
Despite the challenges, the two brothers pressed on, realising that the prepaid concept would soon take off.
“We were probably one of the first companies in South Africa to vend an electronic top-up pin. But in those days the [cellphone] networks couldn’t give us pins, so we had to buy cards and scratch them through a production line. But this thing started making sense,” says Levy, “because instead of a network that takes minimum seven days to replenish stock, we could do it almost instantaneously.”
Various merchants around South Africa, including the cellphone networks, started embracing Blue Label’s concept. “We were all receiving the same margins but now they had these guys [Blue Label] who are delivering solutions to bring their products to the market.”
At that stage Blue Label was dubbed “the prepaid company”.
Soon thereafter the brothers started rolling out “points of presence” – a point of sale device, similar to a traditional credit card machine – at various merchants around the country and the uptake warranted further technological developments.
“We sat down and said to each other that, from a merchant’s perspective, it makes sense to have one device that can handle transactions of multiple products through a single balance.”
That meant a shop owner wouldn’t have to do stock calculations, as Blue Label bought the stock and released it to the merchant, who didn’t have to carry the risk.
“In the physical world a merchant has to work out if he has to have more merchandise, and there are always mis-sales and he runs out of stock. But in the virtual world you never miss a sale, as they hold zero stock.”
If a customer wants to buy airtime, the merchant merely presses a button and the prepaid voucher is released. “They just pull down what they require,” explains Levy.
Prepaid – no longer a ‘poor man’s’ product
There used to be a preconceived idea that prepaid products were intended for people who couldn’t really afford contracts or credit facilities, but luckily that stigma has disappeared.
“Even the electricity utilities who had initially said, ‘We don’t need you, we’re billing in arrears,’ have now joined up and began to see the prepaid concept as a viable option,” says Levy, “as it’s a clever way of getting money upfront. No bad debts, no big debtors departments. It’s far more efficient.”
As more people were opting to live in the prepaid world of forced discipline, the Blue Label team could start rolling out a footprint of touch points to enable prepaid transactions, now reaching over 150 000 points.
“And what does that transaction look like? It could be airtime, electricity, a bill payment, electronic transfer or a ticket for a concert. The technology we develop is designed to be product agnostic.”
Some 15 years later, Blue Label Telecoms has firmly positioned itself as a distribution house that can digitise anything in the prepaid world – from airtime, starter packs and data to electricity as well as bus and concert tickets.
This is a shortened version of an article that originally appeared in the 8 September edition of finweek. Buy and download the magazine here.
