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Blue Label Telecoms: Mark and Brett Levy

Growth and innovation has been the Blue Label Telecoms hallmark since its inception. In a few short years, co-founders Mark and Brett Levy have created a global company worth billions

Juliet Pitman

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Mark and Brett Levy of Blue Label Telecoms

Lining the wall of the newly listed Blue Label Telecoms boardroom are hundreds of Johnnie Walker Blue Label bottles. “You can track the company’s entire history in those bottles. Each one tells a story,” says Mark Levy, who, together with his brother Brett, started the company as Blue Label Investments in 2001.

The bottles tell a story worth listening to and one that will no doubt serve as inspiration to all entrepreneurs who dream of making it big. Looking at the wall, you’d be forgiven for thinking you were in the company of ardent whisky-lovers, but this is not necessarily the case.

The Blue Label bottles are important because of what they signify. “The bottles are part of a company tradition that started at our inception. Brett and I decided that every time we signed a deal, we’d buy a bottle of Johnnie Walker Blue Label whisky and write the details of the deal on the back.

It’s not so much because we love whisky (although we’ve both drunk our fair share of what that wall represents), but rather because Blue Label is such an exclusive and aspirational brand. It symbolised success to us,” Mark explains.

From that tradition came the company’s name, which today has brand equity of its own. And thanks to the many deals signed, it produces and distributes a wide variety of pre-paid secure electronic tokens of value and transactional services, including pre-paid airtime, pre-paid electricity, bill payment, electronic funds transfer, gift vouchers, loyalty programmes, stored value cards, location based services and other pre-paid tokens of value (both physical and virtual) that are allied to the telecoms, utilities, insurance, financial services and transport industries.

On listing in November last year, Blue Label Telecoms which has a global presence, bought out its minority shareholders, raised R1,3 billion and entered into a strategic partnership with Microsoft’s Unlimited Potential Group. So, it’s unsurprising that the Levys are currently riding the crest of a wave. But rewind a couple of years and you’ll find them selling radios out of the boot of a car. “We’ve always been traders.

Our mother used to joke that if something wasn’t nailed down, we’d sell it. So while I was studying and Brett was still at school we used to drive to Pretoria to buy stock and then sell it from the boot of the car,” recalls Mark. After building up some capital, the brothers registered the company as Sounds Alive, operated out of a house and then eventually owned their first store.

“They were humble beginnings but we learned two things that have remained important. Firstly, consumers are generally lazy so if you make it convenient for them, they’ll buy from you. Secondly, we learnt about the importance of building and interacting with a distribution network and to this day, that remains one of our strengths,” he says.

Within a short while the brothers started bringing in their own products to sell to chain stores. Over time they built up a national distribution footprint which was to stand them in good stead in 2001 when they tendered for a nationwide Telkom distribution license for public payphones.

“We already had some experience in the pre-paid environment and had started trading in handsets and pre-paid vouchers through what was then The Prepaid Company. So when we landed the Telkom deal, the distribution network was in place. We were at an advantage because no one else was really interested in focusing on Telkom,” says Mark.

Even in those early days, Blue Label was starting to innovate. “We realised early on that the physical world is very limiting when it comes to things like pre-paid cards and the like, and there are a range of challenges that physical cards pose,” he explains.

Among these, the brothers identified as key issues, card pilferage at both a manufacturer and merchant level, the logistics and cost of moving and distributing stock (especially to small-time merchants) and stock management. So they came up with a solution that no one else had thought of and did away with the physical card altogether.

“If you think about it, the card was just a vehicle to get the secure PIN to the customer and we realised that there were better, more efficient ways of doing that, and if we could bypass the physical world we could save on costs and logistics and pilferage, and all those other hurdles,” explains Mark.

It was the tipping point of a business that today is built on providing a range of different enablers that get a pre-paid product from a supplier to a customer, all in the virtual space. The devices vary but all have in common the fact that they bypass the physical world.

For one application, Blue Label developed software that could be integrated into the mainframe solution of chain stores, allowing them to print pre-paid airtime PIN numbers from their till points, thus obviating the need for pre-paid cards. Another application is built into an ordinary credit card machine, turning it into a vending device that connects to Blue Label’s own back-end, thus providing smaller merchants with the ability to sell pre-paid products.

The company also pioneered the development of virtual vending machines that print pre-paid airtime PINs but don’t stock any physical cards. “The beauty of these is that you never miss a sale because you never run out of stock as you ordinarily do with a regular pre-paid vending machine,” explains Mark.

South Africa’s pre-paid market holds almost unlimited potential, particularly in the emerging sector and it was here that Blue Label turned its attention next, developing an application for informal pre-paid public phone street vendors. Mark explains:

“We wrote software for a very inexpensive handset that would allow a pre-paid vendor on the street to resell pre-paid minutes, decide how much he wanted to charge for them so he could make a small profit and tell him how much change to give a customer. The only thing it couldn’t do was print, but that wasn’t important because the customer writes the PIN down and uses it immediately.” The next major breakthrough came with the development of a bulk printing solution for pre-paid PIN numbers. “Still focusing on the emerging market, we developed a printing solution for wholesalers that allowed them print pre-paid products on demand. Because there is no physical stock and the numbers are printed only as and when they are required, there is no pilferage risk for the wholesaler, and they can sell the pre-paid PIN numbers in bulk to smaller spaza shop owners,” he explains.

But while Blue Label was first out the blocks with innovation, it had to wait for the market to catch up. One of the biggest challenges the Levys faced was how to re-educate the market about virtual pre-paid products. As Mark says: “People were used to a physical card that they felt held a store of value, and it has been a constant re-education process to convince customers that the value is held in the PIN and that it doesn’t matter what format the PIN comes in. We also had to gain the confidence of the merchants.”

But importantly, he goes on to add that once the market had accepted the new method of transacting in pre-paid, the sky was literally the limit. “It enables you to sell other things in the same way and when it comes to pre-paid, we haven’t even started,” he says.

Blue Label’s view is that the world will move increasingly towards greater use of pre-paid applications and that South Africa is a prime market. “There are tens of thousands of South Africans with cash who don’t have bank accounts or credit cards and they are willing to transact in First World products if you only provide them with the opportunity to do so. And we believe there’s no reason why they shouldn’t, so we’ve developed things like pre-paid funeral insurance in partnership with Hollard, and there are other opportunities in pre-paid electricity or pre-paid tickets to events such as soccer games. Although telephony is where pre-paid started, the future is in no way limited to that sector. Once you’ve built the environment, the doors start to open and in cash dominant emerging markets, the possibilities are almost endless,” he says.

The First World too is increasingly making use of pre-paid products. “In the UK for example, you can buy pre-paid bus tickets.” Where pre-paid buyers were once penalised because they weren’t loyal to a particular service provider, this practice is becoming less frequent, particularly when it comes to products that are not loyalty dependant.

Going global has been both exciting and challenging. “The challenge has been to find the right partners in the countries where we have a presence but in all instances we’ve been very lucky in this regard. I believe in the laws of attraction and I think that we’ve managed to attract the right people because of what the company is,” says Mark.

Undoubtedly one of its most important partnerships is the one with Microsoft. The relationship will further the company’s strategy of establishing a global transactional services platform in emerging markets and with Microsoft’s support, it aims to increase its global footprint of contact points with customers.

Microsoft will provide the company with advertising services, and access and licenses to various web-based and mobile technologies and services. “They’re a fantastic partner to have on board and we intend making the most of the synergies that exist,” says Mark.

The deal came at the time that the company listed in November 2007, a development that Mark says has definitely lent it credibility and weight in the global arena. The listing was, however, somewhat marred by reports and an investigation into directors’ contraventions of the JSE Limited Listing Requirements.

Three directors of a major subsidiary were found to be in contravention of the requirements and have been since been disciplined. The company has accepted the JSE’s findings and points out that the trades did not take place during a closed period or in respect of which there were any insider trading irregularities. The brothers are confident that the matter is now behind them.

Mark describes the listing process as very positive, particularly because of the growth opportunities it has created. “A number of factors influenced our decision to list, including the desire to eradicate some debt, create additional visibility on the global stage, incentivise staff, buy out some of our minorities and create a bigger coffer of expansion and organic growth funds,” he says.

R450 million is now available for growth, and he indicates that the company will be looking at different vertical growth opportunities and strategic acquisitions, both locally and internationally, that dovetail with what it hopes to achieve across a number of markets.

“I think the biggest challenge now is to manage that growth, but what’s exciting is that we’re not under pressure to do anything yet. The R450 million has not been earmarked and there’s no need for it to burn a hole in our pockets. We need to grow for the right reasons.”

Growth and innovation has been the company’s hallmark since its inception. In a few short years, the Levys have created a global company worth billions (its interim results for the year showed pro-forma revenue of R6,17 billion). Looking to the future, Mark concludes:“We’ve only just begun.”

Learn cash management early on

Blue Label’s business has always been about cash management, says Mark Levy, and the company’s accountants still run a tight financial ship. He believes that the best time to learn effective cash management and good financial habits is early on.

“When you’re making big money, you don’t notice if you lose money here and there. But when you’re small and you’re making small margins, those losses hurt you, so you learn to manage your money wisely,” he says. “Because we didn’t have money and our margins were small, it really taught us to watch our money, because every missing buck was a big one. That culture and mind-set is now a part of the company and has filtered down everywhere. What we’ve lost in stock in seven years of trading is minimal because of that culture,” he concludes.

Juliet Pitman is a features writer at Entrepreneur Magazine.

Entrepreneur Profiles

6 Lesson Gems From Appanna Ganapathy That Helped Him Launch A High-Growth Start-Up

Twenty years after first wanting to own a business, Appanna Ganapathy launched ART Technologies, a business he aims to grow throughout Africa, starting with Kenya thanks to a recently signed deal with Seacom. As a high-growth entrepreneur with big plans, Appanna spent two decades laying the foundations of success — and now he’s starting to collect.

Nadine Todd

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Vital Stats

Like many entrepreneurs before him, Appanna Ganapathy hadn’t even finished school and he was already thinking about his first business venture. A friend could secure the licensing rights to open Nando’s franchises in Mozambique, and they were very keen on the idea — which Appanna’s mom quickly dampened. “You can do whatever you want,” she said. “As long as you finish your degree first.”

Unlike many other entrepreneurs however, Appanna not only finished his degree, but realised that he had a lot of skills he needed to develop and lessons to learn before he’d be ready to launch the business he wanted.

“We launched ART Technologies just over two years ago. If I had started any earlier, I don’t think I would have been as successful as I am now,” he says.

Here are six key lessons that Appanna has learnt along his journey, which have allowed him to launch a high-growth start-up that is positioned to make an impact across Africa.

1. You don’t just need a product – you need clients as well

Business success is the ability to design and execute a great product and solution, and then be able to sell it. Without sales, there is no business. This is a lesson Appanna learnt while he was still at university.

“I was drawn to computers. I loved figuring out how they worked, playing computer games — everything about them,” he says. “My parents lived in Mozambique, and during my holidays I’d visit them and a friend who had a computer business. I helped him assemble them and thought I could do this too while I was studying. I convinced my dad to buy me a car so that I could set up my business — and never sold or assembled a single computer. I delivered pizzas instead.”

So, what went wrong? The simple truth was that at the time Appanna had the technical skills to build computers, but he lacked the ability to sell his product.

“If someone had said, ‘I’ve got an order for 30 computers’, I would have filled it — but to go out and get that order — I didn’t really even know where to start.”

2. Price and solution go hand-in-hand

As much as you need the ability to sell your solution, you also need a market that wants and needs what you’re offering, at a price point that works for everyone.

In 2007, Appanna was approached by a former supplier whom he had worked with while he was based in Mozambique. The supplier had an IT firm and he wanted to expand into South Africa. He was looking for a local partner who would purchase equity shares in the company and run the South African business.

“I loved the opportunity. This was something I could build from the ground up, in an area I understood well,” says Appanna. The firm set up and managed IT infrastructure for SMEs. The value proposition was simple: “We could offer SMEs a service that they could use for a relatively low cost, but that gave them everything an enterprise would have.”

The problem was that although Appanna and his team knew they had a great product, they were competing on price with inferior products. “If we couldn’t adequately unpack the value of our solution, an SME would choose the cheaper option. It was a big lesson for me to learn. It doesn’t matter how good the solution is that you’re offering — if it’s not at a price point that your target market accepts, they won’t choose you.”

It was this understanding that helped Appanna and his team develop the Desktop-as-a-Service solution that ART Technologies now offers the SME market.

“While I was developing the idea and the solution, I needed to take three key things into account: What do SMEs need from an IT infrastructure perspective, what is the most cost-effective way to offer them that solution, and what will the market pay (and is it enough to cover our costs and give us a small profit margin)?”

Appanna’s experience in the market had already taught him how cost-conscious SMEs are, and so he started developing a solution that could deliver value at a price point SMEs could accept. His solution? A unique Desktop-as-a-Service product that combines all the processing power and Microsoft products a business needs, without any capex outlay for servers or software.

“It’s a Cloud workstation that turns any device into a full Windows computer,” Appanna explains. “We hold the licences, and our clients just access our service. A set-up that would cost between R180 000 and R200 000 for 15 users is now available for R479 per user per month.”

It took Appanna and his partners time to build the solution, but they started with the price point in mind, which meant a solution could be designed that met their needs as well as the needs of the market.

“Too many businesses set everything up, invest in the solution, and then discover they can’t sell their product at the price point they need. My time in the market selling IT and infrastructure solutions gave me invaluable insights into what we needed to deliver on, and what we could realistically charge for our service.”

3. Get as much on-the-ground experience as you can

appanna-ganapathy-art-technologies

The time that Appanna spent building the IT firm he was a part-owner of was invaluable. “I started as a technical director before being promoted to GM and running the company for three and a half years. Those years were very, very important for me. They’re where I learnt everything about running a business.

“When I started, I was responsible for sales, but I didn’t have to actually go out and find clients, I just had to meet them, compile quotes and handle the installations. Everything I did was under the guidance of the company’s CEO, who was based in Mozambique. Being the guy who did everything was the best learning ground for me. It set me up for everything I’m doing today. In particular, I learnt how to approach and deal with people. Without people and clients your business is nothing.”

Appanna didn’t just learn by default — he actively worked to expand his understanding of all facets of the business. “At the time I wasn’t planning on leaving to launch my own business,” he says. “I was a shareholder and I wanted to grow that business. That meant understanding as much as possible about how everything worked. If there was something I wasn’t sure of — a process, the numbers, how something worked — I asked. I took personal responsibility for any errors and got involved in every aspect of the business, including areas that weren’t officially ‘my job’. I wanted to really grow and support the business.”

4. Stay focused

Interestingly, while the experience Appanna has accumulated throughout his career has allowed him to build a high-growth start-up, it also taught him the importance of not wearing too many hats as an entrepreneur.

“I’m glad I’ve had the experience of wearing multiple hats, because I’ve learnt so much, but I’ve also learnt that it’s important to pick a lane, not only in what you do as a business, but in the role you play within your business. I also race superbikes in the South African Kawasaki ZX-10 Cup; through this I have learnt how important it is to focus in the moment without distractions and this is a discipline I have brought into the business.”

“If you’re the leader of an organisation, you need to let things go. You can’t be everything to everyone. When I launched ART Technologies, I knew the key to growth would be the fact that although I’m technical, I wasn’t going to run the technical side of the business. I have strong technical partners whom I trust, and there is an escalation framework in place, from tech, to tech manager, to the CTO to me — I speak tech and I’m available, but my focus is on strategy and growth. I believe this is the biggest mistake that many start-ups make. If you’re wearing all the hats, who is looking at where you’re going? When you’re down in the trenches, doing everything, it’s impossible to see the bigger picture.”

Appanna chose his partners carefully with this goal in mind.

“All the partners play a very important role in the business. Ruaan Jacobs’s strength is in the technical expertise he brings to the business and Terry Naidoo’s strength is in the support services he provides to our clients. Terry is our technical manager. He has the most incredible relationship with our customers — everyone wants to work with Terry. But there’s a problem with that too — if we want to scale this business, Terry can’t be the technical point for all of our customers.

“As partners we have decided what our blueprint for service levels will be; this is based on the way Terry deals with clients and he is developing a technical manual that doesn’t only cover the tech side of the business, but how ART Technologies engages with its customers.

“Terry’s putting his essence down on paper — a step-by-step guide to how we do business. That’s how you build a service culture.”

5. Reputation, network and experience count

Many start-ups lack three crucial things when they launch: Their founders haven’t built up a large network, they don’t have a reputation in the market, and they lack experience. All three of these things can (and should) be addressed during start-up phase, but launching with all three can give the business a valuable boost.

Appanna learnt the value of networks at a young age. Born in India, he moved to Zambia with his family as a young child. From there he moved to Tanzania and then Mozambique, attending boarding school in Swaziland and KwaZulu Natal. At each new school, he was greeted by kids who had formed strong bonds.

“I made good friends in those years, but at each new school I recognised how important strong bonds are, particularly as the outsider.”

Appanna’s early career took him back to Mozambique, working with the UN and EY on various projects. When he moved to South Africa, as a non-citizen he connected with his old boss from the UN who offered him a position as information officer for the Regional Director’s team.

His next move would be to the tech company that he would run for just over three years — also the product of previous connections. “Who you know is important, but how you conduct yourself is even more so,” says Appanna. “If your reputation in the market place is good, people will want to do business with you.”

Appanna experienced this first hand when he left to launch his own business. “Some key clients wanted to move with me,” he says. “If I had brought them in it would have settled our business, but I said no to some key customers who hadn’t been mine. I wasn’t ethically comfortable taking them with me.”

One of those multinational clients approached Appanna again six months later, stating they were taking their business out to tender and that they were hoping ART Technologies would pitch for it. “Apart from the Desktop-as-a-Service product, we also provide managed IT services for clients, particularly larger enterprise clients. Due to the client going out on tender and requesting for us to participate, we pitched for the business and won. The relationship with this client has grown, allowing us to offer them some of our services that they are currently testing to implement throughout Africa.”

“I believe how we conduct ourselves is essential. You need your own personal code of ethics, and you need to live by it. Business — particularly in our environment — is built on trust. Our customers need to trust us with their data. Your reputation is key when it comes to trust.”

Interestingly, although Appanna and his team developed their product based on a specific price point, once that trust is built and a certain standard of service is delivered, customers will pay more.

6. Start smart and start lean

Appanna was able to launch ART Technologies with the savings he and his wife, Kate, had put aside. He reached a point where he had ideas he wanted to take to market, but he couldn’t get his current business partners to agree to them — and so setting up his own business became inevitable.

Although he was fortunate to have savings to bootstrap the business, it was essential for the business to be lean and start generating income as quickly as possible. This was achieved in a number of ways.

First, Appanna and Kate agreed on a start-up figure. They would not go beyond it. “We had a budget, and the business needed to make money before that budget was reached.” The runway Appanna gave himself was only six months — highly ambitious given the 18-month runway most start-ups need. “Other than my salary we broke even in month three, which actually extended our runway a bit,” says Appanna.

Appanna had a server that he used to start with, and purchased a second, bigger server four months later. He also launched another business one month before launching ART Technologies — ART Call Management, a virtual PA services business that needed a PABX system, some call centre technology and two employees.

“I’d been playing around with the idea for a while,” says Appanna. “We were focused on SMEs, and I started noticing other challenges they faced. A lot of entrepreneurs just have their cellphones, but they aren’t answering them as businesses — it’s not professional.

“In essence we sell minutes — for R295 you get 25 incoming calls and 50 minutes of transferred calls. We answer the phone as your receptionist, transfer calls and take messages. How you use your minutes is up to you. For example, if you supply the leads, we can cold call for you. ART Technologies uses the call management business as a reception service and to do all of our cold calling. It’s kept the business lean, but it’s also brought in an income that helped us with our runway.” In 2017 ART Call Management was selected as one of the top ten in the SAGE-702 Small Business Awards.

The only problem with almost simultaneously launching two businesses is focus. “It’s incredibly important to know where you’re putting your focus,” says Appanna. “The call management business has been essential to our overall strategy, but my focus has been pulled in different directions at times, and I need to be conscious of that. The most important thing for any start-up is to know exactly where your focus lies.”


Into Africa

Thanks to a distribution deal signed locally with First Distribution, ART Technologies was introduced to Seacom, which has available infrastructure in a data centre in Kenya.

“It’s a pay-per-client model that allows us to pay Seacom a percentage of every client we sign up,” says Appanna. “First Distribution will be our sales arm. They have a webstore and resellers, and we will be opening ART Kenya with a shareholder who knows the local market.”

From there, Appanna is looking to West Africa and Mauritius. “We have the product and the relationship with Seacom gives us the foothold we need to grow into East Africa.”

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Entrepreneur Profiles

Kid Entrepreneurs Who Have Already Built Successful Businesses (And How You Can Too)

All over the world kids are abandoning the traditional notion of choosing a career to pursue until retirement. Gen Z aren’t looking to become employable job-seekers, but creative innovators as emerging business owners.

Diana Albertyn

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Do kids have an advantage or disadvantage when it comes to starting and building a company? It depends on how you look it. Juggling school, friends, family and other aspects of childhood and adolescence comes with its own requirements, but perhaps this is the best age to start.

“Being an entrepreneur means having to learn, focus, and connect to people and these are all traits that are valuable throughout life. Learning this when you are young is especially crucial, and will set you up for success and to be more open to other opportunities,” says billionaire investor, Shark Tank personality and author Mark Cuban.

Here are some of the most successful kidpreneurs who have cashed in on their hobbies, interests and needs to start and grow million dollar businesses borne from passion and innovation:

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Entrepreneur Profiles

30 Top Influential SA Business Leaders

Learn from these South African titans of industry to guide you on your entrepreneurial journey to success.

Nicole Crampton

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Entrepreneurship is said to be the answer to South Africa’s unemployment challenges and slow growth, but to foster entrepreneurship we ideally need business leaders to impact grass root efforts. Business leadership is vital to improved confidence and growth. These three titans of global industry say:

  • “As we look ahead, leaders will be those who empower others.” – Bill Gates
  • “Leaders are also expected to work harder than those who report to them and always make sure that their needs are taken care of before yours.” – Elon Musk
  • “Management is about persuading people to do things they do not want to do, while leadership is about inspiring people to do things they never thought they could.” – Steve Jobs

Here are 30 top influential SA business leaders forging the path towards a prosperous South African future.

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