Blue Labels Telecom and Multi Links

JSE-listed Blue Label Telecoms says a controversial contract signed with Telkom’s ailing Nigerian operation, Multi-Links, is being reviewed.

Blue Label co-CEO Mark Levy says the contract has reached its annual review time, and the company is willing to make some concessions to help save the troubled Multi-Links.

Multi-Links and Blue Label, through its subsidiary Africa Prepaid Services (APS), signed a 10-year contract in 2008 that gave Blue Label exclusive distribution rights for the Nigerian company.

Multi-Links is in dire financial straits, and Telkom has blamed much of the trouble on contracts with APS and other service providers, including Helios Towers, which operates about half of the company’s base stations.

Telkom acting CEO Jeffrey Hedberg, who was formerly CEO of Multi-Links, has warned that if the two contracts are not renegotiated, the Nigerian business may have to shut up shop.

These contracts, together with the high cost of expatriate staff from SA, contribute between 75% and 80% of Multi-Links’s operating costs.

Levy says Blue Label understands Multi-Links is not in a strong position. However, he says the renegotiation process is not a one-way street.

He says Telkom needs to come to the table with a solid strategic plan before any deal can be struck. “Telkom can’t ask us to give up 100% of the margin and do nothing in return. We also need to have value out of the relationship,” says Levy.

Blue Label also has distribution agreements with other operators in Nigeria, including Zain, Globacom, Etisalat and the CEO of Transnet Freight Rail to do so.