Blu Label Unlimited Group Limited (BLU) Earnings Call Transcript & Summary

So thank you, everyone, for joining us. Thanks to Mark, Brett and Dean for being on the call. I think as the call kind of indicated, it is a pretty close period call. So I'll open the floor to Mark and Brett to talk about their business, and eventually, we'll open up to Q&A. Over to you, Mark and Brett.

Excellent, thank you. Hello, everybody. I hope all is good on your side. Just to run through the purpose of the call, just so we're all on the same page is, obviously, we had a call approximately 3 or 4 weeks ago, and we promised to have a closeout call before half year-end, which is on the 30th of November on Wednesday. We've obviously been getting a few questions. So we thought it's easier to have these calls and try to answer everything that's around. We'll give you a nice little overview to start with. But really, the intention of this call is for any of the questions that are out there that you want to ask us before, obviously, we're going to a close period. So I think just to kick off, let me kick off with, obviously, just the market itself and where we find ourselves at the moment. So obviously, you've seen a lot of action in -- let's start with Blue Label and then we'll move over to Cell C. So all this actually start to Cell C. You've obviously seen a lot of action in the markets around the speculation of what Telkom was doing. A lot of results being put out by Vodacom and Telkom themselves, and MTN also a couple of weeks back. So there's obviously a lot happening in our market. There's obviously a lot of changes in our market. Not to specifically go through again what I went through on the first call. I do think that we're in a slightly different position to the other networks through mistakes that we have made in the past, of course. And we know where we want to be at Cell C. We know where we want to play. I explained to you guys the far real assets of the company and the strategy around all 5 of them. And we really just feel that our fight is slightly different to everyone else's. We are CapEx-light, just to go through that specifically. I think that was a very good call on behalf of Cell C. I guess you can all see now that tremendous difficulties at networks are having around networks, the building of networks themselves, not only the CapEx of building the network, but of course around the load shared in the diesel that's required, the extra batteries that are required. So our viewpoint that there can only be 2 main networks in South Africa, and I guess, around the world, it's going to be a very similar thing, I think is spot on. The rest are going to have to do deals with those networks. Of course, ours isn't a pure roaming deal, as you know it. We have our own spectrum, of course, and that makes a massive difference to what we do. We obviously do mocking deals, not roaming deals. And of course, we use our own spectrum. So very different. But I think the CapEx-light model is spot on and I think that's been proven to the world and specifically to South Africa. And I think it will be proved more and more as time goes by. And then, of course, our strategy around the engine and what we're doing around there is explained. And then, of course, our strategy around MVNO. And I see Capitec put out a very interesting press release a week ago that they really hit over 100,000 clients. That's under a month. So I guess, this total strategy around MVNOs, total strategy around the engine, I think we are on a good path. Of course, the recap was done, as you're all aware, at the end of September, at the beginning of November. And we're now into this new journey in our lives and look forward to closing out this year. And then more importantly, look forward to this new journey in Cell C, the strategy around Cell C into 2023 and beyond. And then, of course, around Blue Label, we proved to be resilient. We proved to -- we have always proved, but we've proved to have a good business model. From a telco-specific specifically, obviously, you've seen flat growth on our revenue side there, but it's nothing new to what we've explained to the market. I think what we've been trying to say the market is that if you went back many years, telcos made up 99% of our profits. Today, it makes up around 50% of our profits. And going forward, it will make up even less of our profits. Not that it's decreasing. It's obvious that the other products are coming through in the form of electricity, the form of gaming, ticketing and so on and so forth. So the actual strategy of how we aggregate and what we do around Blue Label, and I don't think too much has to go into that, but we're really looking forward to the next 24 months, as I said before. There's a real lot happening in our space. It's not about what to do. It's more about choosing the right ideas and products and services to do. There's no lack of it. There's actually too much of it. And it's a matter of concentrating, focusing on what we've done. So overall, for the 6 months in Blue Label, from our perspective, we think we've had a really good 6 months. We've had what I used as a solid 6 months, and more importantly, what next year looks for us. So Blue Label good. And of course, Cell C on this new journey. So overall, I'd like to use the word calm. It's much more calm on our side. And we are quite bullish of what the next 12 months and 24 months look for us, unlike what is going on out there. There's obviously certain industries that are doing really well. They're not ignorant to what is going on with the consumer, not ignorant to what's going on now with, of course, call it as the interest rate hikes. There's a lot happening. There's a lot of negativity in certain places. There's obviously a lot of positivity in a lot of places. It's really back to basics for us, concentrate really specifically on what we're doing and executing. It's all about execution. And I think that's the right word. This is -- really 2023 for us is execution. We have the products, we have the services, we have the right strategy. It's really about executing it. And then lastly, just to touch a bit on our debt. If you recall, when we explained it to you, we had split our packages into 2 packages with the banks. I'll just call it facility A, which was our 2-year facility, which was in obviously a normal RCF facility, our normal facility, of which we trade with and what we do. And then our second facility, which we only put in place for 24 months, and that was to be paid back to the banks on a monthly basis in equal installments. And of course, that's underway. So really looking at 2023 to bring our debt package with the banks down by a very big amount, and of course, over 24 months to bring down entirely facility B. So in the first 12 months, we'll bring down facility B by obviously half and in the following 12 months, we'll bring it down by full. So a really clear strategy around our debts with the bank. And want to get into a position where we're obviously very cash generative, getting back into a position where we sit with cash rather than facilities with the banks, and obviously get us back into a position where we can do share buybacks and dividends and exactly what we've done in the past. So I think overall, from our debt, overall from our strategy, I think we are on the way. And as of now, I'm pretty confident over the next 12 months and pretty bullish over the next 12 months. So I think that's just a large overview of where we are. And I'd like to open it up to questions more so than just running you through a macro overview, again, which all of you have heard and seen, I think just to dwell more specifically into questions that you might have.

Thanks, Brett. I think until everyone comes up with question, let me start with the first one. You talked about your debt profile and how confident you are of paying this debt B package over the course of 24 months. I think there was this negative perception of the whole Blue Label debt that came about in terms of recapping your Cell C in there. So I think just kind of pretty much linking how do you see the free cash [Audio Gap] I mean, yes, just kind of removing that notion of negativity. I mean, you would say that in effect, I mean, it's good debt, which eventually will be paid off and you're still quite confident on the free cash flow generation of the business.

Absolutely. So the entire repayment schedule of the banks is forecasted into our cash flow. So there's no surprises for us. We've always had a facility with the banks of around about ZAR 1.6 billion to ZAR 2 billion over the years. The new facility with the banks obviously increased to ZAR 3 billion. So we never took on the recapitalization of Cell C., we never took on an additional ZAR 2.4 billion. We took on really realistically about ZAR 1.4 billion. And we're absolutely confident about paying it back. We're paying it back from the free cash flow that we generate in Blue Label from a monthly basis. And of course, I guess the real question to everyone and to ourselves is what is the debt level that we are happy with in Blue Label. Obviously, we were happy with the debt level at ZAR 3 billion, but it's we want to bring it down. It's an internal strategy of ours to bring it down. And I guess, where we are absolutely comfortable with is a facility of around about ZAR 1.6 billion mark, and that's really a trading facility, which we use for [indiscernible] and early settlements and everything we have over many, many years in the past. So yes, I think we're bang on target of where we want to go with our debt and how to pay it back. And we are paying it back, obviously. We're already 2 months into it. We've already paid back obviously, the 2 months that were required of it to be paid back and we will continue on a monthly basis. And I think just to answer and I think ultimately, a facility of around about the ZAR 1.6 billion and obviously generating cash all around that. So it doesn't mean that the facility is a facility that is always out. It means that a facility that can be used as and when we wish on a daily, weekly or monthly basis, and obviously continue generating the cash around it that we have over the many years. And then, of course, what it does for Cell C is, really what it means is that Cell C took on no additional debt. And I think that's a very important thing. So in this recap, the debt was taken on by Blue Label. The debt has been paid back by Blue Label within the 24-month period. And Cell C then find themselves in a position where they took on no new debt. And obviously, in a trading position where they sell sufficient and they're trading with their own cash.

Thanks. I think just kind of continuing on the same [Audio Gap] in order to get more equity in Cell C business. I mean I think just in terms of your estimate, what would be the percentage move up in terms of your ownership of Cell C with that conversion of debt?

So just to touch on that question because I think we've been asked many questions around that. First of all, if we should, and I use the word if, because there is a lot of [ irregularity ] around this, and I really want to be specific. If Blue Label goes for control of Cell C, it would require ICASA approval before, of course. It would require CompCom approval before. And only then would be able to obviously take control. Of course, those 2 requests to both CompCom and ICASA is anyone's guess of how long it can be. We all know in the past that these things can take 6 months or they can take 18 months. So that's in the hands of the regulators themselves. But I think very important control from where we are is not necessarily taking 50% of Cell C. It could be taken 5% or 10% of Cell C. As you're all fully aware of the structures of the SPV structures, we would be looking to convert some of the SPV structures of debt into equity if that could be one of the mechanisms. And it could be converted some of our debt into Cell C from debt into equity. That could be another mechanism. We have no intention of doing anything of a rights issue. We have no intention of raising money to take control. I think that's a very important note to make. We have mechanisms in -- just in the facilities we have with Cell C. So we look only to the debt that we have in Cell C and converting some of that debt into equity, that would give us the ability to take control. So we are not near the stage internally of the mechanism yet. We do and are aware, just like of the many different mechanisms that do exist out there for us to do so. And obviously, in the new year, we will start to play around with the different strategies around it, the different mechanisms around it. And of course, what that percentage will be, will obviously be determined on whether we do go for control, the time it takes for us to get control and where Cell C is at that time of us getting control of Cell C.

Yes, so I raised my hand and just because I just wanted to follow on from [ Vik's ] question. On one of the slides, from your investor call update in October, you had the 2 SPVs there, which was your indirect exposure to Cell C, SPV1 and SPV2. I just want to make sure I understand it correctly, the cumulative -- or the total of those 2 SPVs, the debt that sits in there from -- which is debt that is owed by Cell C to Blue is ZAR 250 million. And as far as I remember from recap 1 -- 4 or 5 years ago, that ZAR 250 million total from the 2 SPVs was equated to 25% equity pledged by Cell C. So my question is you can effectively get to an extra 25% in Cell C for only ZAR 250 million worth of debt, would you convert to equity. Is that right?

No, not exactly, Phil. It's a little bit more than that. But and I don't want to go too much into it because I think the strategy must have come out for itself. The strategy of converting our own debt in Cell C first would be a better strategy for Cell C as a company. So for example, the SPV debt is not debt that sits inside Cell C, as you're all fully aware. It's debt that sits outside of Cell C. Cell C is not liable for it and so on and so forth. So the reason up with this forward is that a conversion of actual debt in Cell C for equity might be a better deal for Cell C. So we would look at the internal debt in Cell C first, that is obviously the ZAR 3 billion that you've seen that we have, and then we would look at different mechanisms. But we would do the right deal for Cell C at the right time. So I don't want to focus too much on the SPV debt because it's debt that is convertible exactly how you say it. This debt that sits outside. And if you really want to position Cell C into a very strong position, you almost are in a position where you can eliminate 77% -- outside of the leases, you can eliminate 77% of Cell C's entire debt for equity. Not speaking on behalf of the remaining 23%, which is Gramercy and Nedbank. So they are very smart ways of how to do this. They are very good ways of how to do this. And as I said at the time, when the time arrives, we'll make the right call for Cell C as a company, which puts them into a very strong debt position with very little debt. And if that's why the direct debt as whole or it was via direct debt and SPV debt, I think we'll determine at that stage. I just want to make clear 2 things. One is there are many mechanisms to do this, and we've explained the layout to all of you. So it's not very difficult to see where it comes from. And the second part is our intention is not to do a rights issue and put more debt on that. Our intention is to reduce the debt in Blue Label. So I think those are just the very important 2 key parts to take out of it.

Okay. And then just a follow-on question, and this is just speaking hypothetically, I just want to make sure I got my numbers right, you've got gross debt, and this was post recap, gross debt at below ZAR 4.8 billion, which includes the off-balance sheet CEC ZAR 1.7 billion, so maybe one should exclude that, but let for the gross debt to ZAR 2.8 billion. The cash of [ ZAR 2.7 billion ], so a net debt of about [ ZAR 2.1 billion ]. Then on consolidation, and this is -- I'm just saying hypothetically, we were ZAR 4 billion of debt at Cell C, ZAR 3 billion of which is Blue. So when you control -- when we consolidate that, that ZAR 3 billion doesn't get double counted. So you're sitting with ZAR 1 billion extra to the ZAR 2.7 billion. So net debt of the controlled entity is ZAR 3.7 billion and a controlled EBITDA of about ZAR 4 billion. So, yes, so it gives you just under 1x of net debt-to-EBITDA if control happens. Is that correct? And the reason why -- the reason I'm asking you is because you do have that internal -- not internal, but you have the debt, which is from Cell C to Blue. So on control -- on consolidation, that would fall away.

So that's 100% correct, actually. We don't consider the CEC debt as part of our main debt. It is completely ring-fenced. So it is not part of the main debt of Blue Label -- or it's part of the main debt, but it's ring-fenced entirely out of Blue Label. It's secured against obviously the CEC book, which exceeds the ZAR 1.7 billion. Of course, that is owed by quite a long shot as well as the CEC debt inside Cell C. So together, the book and the CEC debt in Cell C is around about ZAR 3 billion and just over ZAR 3 billion to the outstanding debt to African bank, which that facility sits with. So removing that and going in your EBITDA ratio to that is correct on day 1. What is important is that number is coming down between ZAR 80 million and ZAR 100 million every month by repayments as well. So if you took it out for 12 months, if hypothetically, we started a process of control and it was 12 months out, your number would be ZAR 1.2 billion less than the number that you've spoken about.

[ John Marie ]. Brett, earlier, you mentioned gaming. Would you mind giving a very brief explanation on your involvement or exposure to it? And how big is gaming and Blue Label's life? I mean what sort of percentage is it of property in Blue Label?

Excellent. So let me start with saying that I actually cannot believe the size of this industry and actually how it is growing. So first of all, we are not a gaming company. So we are not a Betway, we are not a Hollywoodbets, we're not a LottoStar. We do not own any of our licenses. We are not exposed to gaming for any amount of money. What we do in gaming is what we do for all our other products. We have a single voucher called a Blue Voucher. It's a very, very small voucher, which allows people who are going to buy a very generic vouchers, so a ZAR 10 voucher, ZAR 20, ZAR 100 voucher, whatever voucher you want in a denomination. And then you yourself go and bet on any of the gaming companies that are listed with us, which is all the main ones -- well lots of them, not only the main ones. And therefore we make a normal click fee like we do across all the other products that we do. What's absolutely extraordinary about this product is the size of the bets, which are very small and the quantum of what we're doing. So we're already doing close to around about ZAR 250 million to ZAR 300 million a month in gaming. So it's really becoming a very significant number. We've had growth again of high double-digit numbers at 30%, 40% growth again for the year -- for the 6 months. And there's no slowdown that we can see in the gaming. I'm not sure what these gaming companies are making or the risk that they have to the customers, I'm sure that they have their own. But if you take just 3 of them specifically in Hollywoodbets, LottoStar and Betway, they are obviously making tremendous inroads into the market and gaming as a product line is becoming a very big product line across the world. It's not only, obviously, in South Africa. What we do is we offer gaming outside of your totes, if that's what you call it. So if you walk into a normal tote, that is the normal bet that has existed forever. What Blue Label does is all gaming that exists outside of the tote. So I'm not quite sure where this ends on. I'm not quite sure how big the actual market is, but it is a very sizable market. Right now, we don't break it down exactly into the profits that we make specifically per product that we do, specifically for reasons that -- it's internal reasons that we just don't do that. But it obviously is becoming a good number and in time become -- will become even a better number. I think more importantly, what it is, it's an add-on to what we do, of course. So it's another product you distribute it at zero cost because you already have the distribution channel, and it's really the strategy of mocking off from day 1, which is once you have the distribution channel, as you add more and more products, your expenses remain the same, but your click fee becomes 100% of the profit or 90% of the profit. So yes, I think this is one to watch for everybody, not specifically in Blue Label, I think. Just specifically I think the gaming companies are doing extremely well around the world and extremely well in South Africa, and it's just another product line in what we offer.

So I've got a couple of questions. The first one is from the results from MTN, Vodacom and Telkom, we have a good sense of how well or not the market is growing, but maybe you can just kick off by saying, telling us the trends underlying it in terms of the various channel partners you have, the banks, the mom-and-pop shops and before -- how is that going? What's the trends? Are there any trend changes or is it still more of the same that we saw before?

So I think we mentioned over the last like 18 months, the trend of the market. I think the trend of the market is spot on to what we mentioned to you. So if you went back, let's just pick it 5 years ago, you would have -- you had a wholesale market that made up around about 50% of the market. You had banking that made up probably around 20% of the market, and then you had your informal market that made up around about 30% of the market. Today, if you have a look at it, the banking part of the market or online, so that's the apps that people have in the VodaPay or the MoMo and the banking side, probably makes up around about 60% of the market and obviously, predominantly the banks themselves. The banks are getting stronger and stronger. We have a very, very good bank network in this country, a very trusted bank network, and we believe that their market share will always be around the 60%. And then you have the informal market that is making up around about 30%, and it's a very big market in itself. That is your traditional informal traders, your informal retailers via [ plus ] system, an integrated system, your mom-and-pop stores, [indiscernible] shops and everyone else. And then the last 10% of the market is being made up by what you call your traditional retail. Wholesale is actually basically fallen away. It's really becoming nonexistent. It probably makes up less than 5% of the market today. So the remaining 10% is now in your traditional retailers of your spas, Checkers, Shoprite, Pick n Pay and so on. So the exact layout of the market is almost identical to what we have mentioned to you in the past, and this is how we foresee it into the future. If you made it into 2 real parts, 100% of the market is not 100% because you will have traditional retail in it. But 100% of the market is going to be your informal market and your banking market. And that's 1 transaction at a time, maybe gaming, ticketing and so on and so forth. So that's definitely what's shaping to. I know we've had this discussion in the past. All of us, and it's not for today. The discussion is who wins the online market? Is it the banks directly or is it the networks directly? Well, in Blue Label's strategy, make sure that we are a supplier to both the banks and the networks for the value-added service, the VAS products, which we are today, and we will continue to be in the future. So it is a dogfight between the 2 of them. Who wins it, obviously, and I've mentioned it before, we have a very, very strong banking system in this country that offers a lot more than just the VAS to clients. So I think the banks will always have a very strong presence in the country and where the actual networks land or specifically MoMo and Vodapay, time or till of which products work well in their system and which don't, whereas in a banking system, it's obviously products across the board.

Right. The second question is linked to what you're talking about. Recently, we got an inkling of how well Flash is doing on a cost table. How are you finding them in the market? We had a decent sense how the growth and the -- but it's not directly comparable in some respects, but in many respects, it is. So how do you think you're faring against these guys in the last few months?

So Flash is a tremendous company. It's a great, great business. Flash is predominantly the independent world, so the informal market. They are very, very strong in the market. They obviously use the PEP outlets as outlets, for example, swap-out of the hardware. And obviously, they have the branch network of Pepco group. -- you could take nothing away from Pepco and from Flash. They do a fantastic job in the independent market. And if you had to look at Blue Label only in the independent market, Flash is definitely bigger than we are. There is a big enough market for all of us. In fact, there's a third company as well that you probably have come across called Kazang, which is owned by now it's owned by Net1 or Lesaka as called today. So there are 3 predominantly strong players in the actually informal market in the form of Net1's company called Kazang, Blue Label and Flash. The market is more than big enough for us. But if you took specifically the actual independent market, Flash would definitely be #1 in that market.

And then on the CEC side of things, how is that going? Maybe some color as to how business is progressing because that's quite big in your life right now.

This is very big in our life. I think for the last 2 years, at least, I've made a specific to all of you to watch this company carefully. It's really doing well. It's really not the company we bought on day 1. When we bought on day 1, it was there for specific use and did a specific thing today, it does an additional 10, 20 products, 10, 20 services, 10 or 20 different things. So it's a lot about how we focus Blue Label, the company itself, in putting all the right products and services into the right divisions. And CEC itself has got a lot of legs. We've got a lot of products coming through the system. Our strategy around this a very different strategy to traditional Blue Label. And yes, we've had a nice 6 months, [indiscernible] and -- as I've said to you in the past, we expect to have a really good next 12, 24 months for CEC. And hopefully, all our new products that are coming through the system like loans that we've spoken to you before, they obviously take time. There's a lot of tested in the market. There's a lot of making sure that systems are right, collections are right, and that has been going on for the last 6 months. So yes, we are bullish at CEC, by the way. We like what they're doing in the market. We like how they're doing it. We like how we've positioned ourselves in the market. We are really very relevant in the market in what we do in there. And yes, it's one to watch. It's a good one. We've had a nice 6 months in that.

Sorry, Brett, I was on mute. Sorry about that. I've got 3 questions. I think the first 1 I'll deal with is the Capitec MVNO. What are you learning from what you've seen so far I'm thinking about what the average ARPU is for these new customers, where these customers are coming from? Are they just old Cell C customers? Or are they coming from other networks. Maybe you can just talk a little bit more about the type of customer you're getting and how that business is tracking.

Awesome, so let me just start with the first 1 because it is really, really far soon to give you an ARPU discussion on it. And it's not trying to avoid the question. [ Nick ], we really need to trade out the next 3 or 4 months because every single day, there's add-on of new customers, there's learning how the Capitec system works. So the ARPUs are obviously there already. I mean that goes without saying. But I'd rather answer -- I'd like to answer that in the first quarter of next year, meaning Cell C's quarter. Cell C is a January-to-December company. So in the first quarter, i.e., the end of March, we then have been trading for around about 5 months, 5.5 months, and I think it will be a good indication of where they're tracking ARPU both on a data perspective and a voice perspective because I think it's good to look at them individually. The second part of your question is the interesting one because -- they're not Cell C customers at all, right? Cell C is a piece of it, really. I mentioned this the last time, but the MVNO market in the world was launched many years ago, and of course, wasn't very successful. It was actually unsuccessful, and you only had a very few of them that were successful. I honestly believe you are now at the time where MVNOs into the future are going to be extremely successful. Not all of them, but the ones that can offer their clients something that's very relevant to them. And I think that answers your question, which is who are the people that are coming to it. It's not new people. Everyone is trying to get what you call a primary SIM because we all know that we have 3 or 4 SIMs. So when you take the ARPU of a person, when I look at you as a network, I might see you at ZAR 100, but your ARPU is really ZAR 250 because you might have a primary SIM with x that you spending ZAR 150 with and so on and so forth. That's not something new. That's the market itself. So the key is to get the primary SIM. And how do you get the primary SIM? Is you get the primary SIM by offering the customer, of course, the right deal on telcos itself that goes without saying. But it's the add on around it that makes it very valuable to you as a client. So you are going to see more and more MVNOs in this country. You are going to see more and more of them become more relevant. There's no doubt about it. And it's all going to depend on what they're offering to the end consumers, [ Nick ]. So if I am a bank customer, and I can give telcos at the right price, either prepaid or postpaid, you don't have to be both, but either prepaid or postpaid. And then along with that, I get what the bank offers me and I get it, for argument's sake, discounted. And now all of a sudden, the 7 products that I was buying are now discounted because the bank offers them. Telcos then become secondary to actually the product. So I think MVNO space is something to watch carefully. I think that there are going to be a few of them that make a very big impact. And I think the client that they're going to take, [ Nick ], is an existing client. It's not a new client.

Just my second question is Lesaka, Net1. They continue to value their stake in Cell C at 0. And that's from the last year results about a month ago. I know you were planning to have a valuation of Cell C done by an independent valuator. Maybe you can just speak about that. And also I think Net1 probably don't have the visibility on Cell C that you guys have. So how do you convince them that the value of Cell C is not 0 anymore?

So I think 2 things -- 3 things on that, actually. Let's start with the first part. I think that the recap was only done in, as I said, the beginning of October, end of September. So then putting out their results, I don't believe they would have had a chance to revalue it. So they would probably be doing exactly the same thing that we are and what we've promised you is we've obviously appointed an independent valuator. We are busy doing that valuation. And in our November results, which we will be presenting to you guys in February, we will have the start of that revaluation. And I'm sure that Net1 will be doing a very similar thing to that and be revaluing it post the recap. I can only imagine. Well, we're definitely doing that and we will be presenting it in our results in February. From a line of sight, I think that's more relevant to actually the valuation. They do have a Board member. They still do have a stake in Cell C, and therefore, the prudent thing to do would be to get a valuation and see where it sits. So I think next year might be different. It should be different for them. It will definitely be different for us. And let's see what the valuations come out at that stage.

My last question is on interest rates. I mean, interest rates have been going up quite a bit. In the old days, Blue used to make quite a bit of money by holding large cash balances and earning interest on that. And the cash was only paid over to the networks after you've received it. Your business has become more complicated now, you've got ticketing and you've got these vouchers as well. How significant is the higher interest rate? What impact does it have on your business?

You're actually spot on, [ Nick ], our interest rates in Blue Label are very positive. And I'm happy to take this offline with ever wants to understand the more detail. But obviously, the cash that we used to sit with that, obviously, and it allows us to do the bulk buying and the early settlements. It's very interest driven, and I guess, covenants driven. So actually, higher interest rates in Blue Label have always been definitely more positive than negative as an overriding statement. And I don't believe into the future, you will see too much of a difference from that as an overall. As we come into more and more cash, we'll then from a positive point of view, it will become even more powerful. What is good, just so you know, is that a lot of our facilities, we did a fixed facility. So we didn't do a facility that moves with the interest rate. So we know exactly where we sit for the next 24 months on those facilities. And I think that was another smart move by Blue Label, including our treasury fixed a certain amount of our borrowings against a fixed interest rate, and that has been extremely positive for us. Obviously, at a much lower amount. So all these things, [ Nick ], we are dealing with much -- in a much smarter way in Blue Label. We're definitely getting better from a treasury point of view. So yes, we're not affected like anyone else from higher interest rates. And as I said, overall, high interest rates is actually better for Blue Label. So let's see how this plays out for us in the next 6 to 12 months. Are there any other questions.

I don't see any hands up. So I think thank you so much for giving us the overview and your thoughts.

Maybe I can just squeeze in a couple.

Sure. Myuran, go ahead.

Just quick questions. Cell C, you've had it running now post recap for a couple of months. And by the end of December is the year-end, if I remember. Is there a plan to give us some visibility of operational performance between January and March? Sometimes they'll come to the market to give us how they've been doing and whether this cash flow is coming through the business.

[indiscernible] what Mark and I and Blue Label really want to avoid was a very big mistake we made the first time which was to talk on behalf of Cell C. Cell C must stand on its own 2 legs and must talk for themselves. And it is 100% our intention next year. And to make sure that they report on their own and they view and see the market on their own and that they interact with you on their own. So yes, the short answer of that is -- it's 100% our intention and will be implemented in the new year.

Yes, Brett, I mean, this difference in year ends between reporting periods for Cell C and Blue creates a lot of noise. Can we fix that somehow and make the years coincide?

Absolutely, [ Nick ]. So is it an intention we might not get it right. Just from a process point of view, there's an intention to try bring them together by May of next year. So we foresee this as much as you do, as well as we have a rotation of auditors by the way. PwC's mandatory rotation next year. So one, if it's possible, it's not always possible, but it will really be good to have auditors that are the same for both companies. That's number one. it would take out a lot of the expenses that Blue Label have by having 2 different auditors. So I think that's an important thing to note. And if we don't get it right by May of next year, it is really our intention to get it right by the following year. So there is no doubt that we need the same year-end, and it is 100% the intention of Blue Label to bring it together.

Thanks, Brett. I'll throw 1 more at you. I mean we pre-bought a lot of airtime from Cell C and is sitting on the balance sheet. Now you obviously sell that down every month. I'm not sure how much is sold down every month. And then I mean, do you just top it up again by the exact same amount? Or how does that mechanism work?

No, we don't top it up. We just don't sell as much as our actual sales are. So basically, our sales a month are in excess of ZAR 400 million a month. What we sell down of old stock is approximately ZAR 100 million to ZAR 120 million of old stock and the rest we purchased in the normal course from Cell C on a monthly basis. So the short answer to your question is we're still in down by ZAR 120 million a month. The rest is purchasing from Cell C on a monthly basis in the normal course.

And the ZAR 120 million so that balance reduces by ZAR 120 million a month, would that be correct, of the old stock?

That is absolutely correct. On the top-up portion, just to tell you, if you -- just to take you back to our SENS announcement, is that in year 2, so in month 13 to month 24, we purchase from Cell C quarterly in advance. So we don't buy the bulk again of the ZAR 1.2 billion upfront. We just buy quarterly purchases that we require. So i.e., ZAR 300 million in advance for the quarter. So that's the only top-ups that we're doing. But if you take it over the next 24 months plus the top-ups, obviously take it over the next 30 months, we are selling it out at the ZAR 100 million a month that will put us in a normal position after between month 24 and 30.

I'm going to give you 1 last question. As you guys launched the nano loans already and where can I get one of these loans?

We have been piloting. The pilot is really around clipping in air that no matter where a person -- we don't call them nano loans. They're not loans, they're advances. And we're really piloting on prepaid electricity advance. We're the only company in South Africa to do so. So what we've been piloting is just ensuring that to issue advances is probably the easiest thing. So we've built our own scorecard and middle profiling. What we're making sure is no matter where you reload through any channel that be able to clip it in air. So this year, the last month or so, we're just piloting refining it now. I think we're going a full-scale launch in probably, let's call it, the end of Jan, just should be making sure technically everything aligns. And then once you got that going, then the question would be is how to scale this up, how to get it out there more and then potentially what additional products you would look to do in the future.

[ Philip ], do you want to go ahead?

Just in addition to the -- my earlier questions on the hypothetical control, of Cell C. I mean you become quite a much bigger player. You're sitting currently with ZAR 1.4 billion EBITDA, you then become close to ZAR 4 billion EBITDA company on Cell C's guidance that they gave at the last meetings that their own ZAR 2.5 billion EBITDA to double over 5 years, I suppose, largely with the Capitec deal. Does the combination of the 2 give you anything else in terms of what you can be as a company for clients and customers? I'm just wondering if the sum of the 2 is greater than the -- with the whole is great and the sum of the parts in terms of you will operate. You've got the relationships with the banks on the MVNOs. I think we see a distributor of various products. So just a combination, is there something extra that you'll be able to offer the market?

Yes, I think it goes back to a point I made a while ago, which was Blue Label buying Cell C was definitely the right strategy. The execution of it obviously failed, and that's why we find ourselves where we are today, but the actual strategy around it was spot on. The actual strategy around what we think Cell C is doing, we think is spot on to where the market is and where it's going. And of course, to have a distributor of Blue Label's magnitude and a network in one comes with a lot of advantages. So Yes. I mean, I don't want to go into the specifics, Philip, but the moral of the story is, I think if you work out the parts of Blue Label and you work out the parts of Cell C, to have both of those parts in one obviously is very beneficial. So that is the plan. That will be the plan going forward. Should we consolidate and should we go? And should we have control. Obviously, even without control, it is our intention to work much closer with Cell C and other things around our value-added products and other things that we might offer and what they offer, something that we weren't able to initiate and execute over the last 3 years because we've obviously been dealing with the recap and had, I guess, bigger things to worry about than the actual partnership between Blue Label and Cell C together. So yes, I think it's a good space to watch. I think it's a good question for then a question that you should follow up all of our reporting periods because I think it's an important line item to explain to you guys in more detail as we go along. It's something we cannot explain in more detail now for various reasons. But in time, we will.

I am looking for any hands that are up after Philip. Nothing there. I think -- yes, we'll probably call it a close there. Thank you so much, Mark and Brett, for giving us basically what the market is doing and how you see it going forward? And yes, all the best for the future and...

Thank you all from my side. I'll leave it to market close. Wishing you all a great Christmas and a safe December away, and hopefully, look forward to a much better year with all of you next year. May it be more positive and may it be a better year for South Africa and for all of us.

Thanks, guys. All the best for the festive season.

And to you guys as well.

Thank you.

Thank you. Bye-bye.