Blue Label Telecoms is preparing a claim to try to recover an unspecified amount of damages it says it has suffered after losing an exclusive contract with Telkom’s failed Nigerian operation, Multi-Links.
Africa Prepaid Services (APS) Nigeria, a company effectively 36,7% owned by the JSE-listed Blue Label, signed a 10-year contract with Multi-Links in 2008 for the exclusive distribution of its products to the Nigerian market.
However, Telkom’s Nigerian operation cancelled the contract last November, a move which Blue Label at the time said was “unlawful”.
The company said it would institute a claim against Multi-Links in a bid to recuperate its losses in the market.
According to Blue Label’s interim results for the six months ended 30 November 2010, the Nigerian segment went from contributing R8,4m to group profit a year ago to just R2,6m in the latest six-month period.
Blue Label co-CEO Mark Levy says the company has started to prepare the claim against Multi-Links for the losses. He says a final claim amount has not yet been settled on and the process is likely to be a lengthy one.
Once the claim has been presented to Multi-Links, Levy says Blue Label will begin looking for an arbitrator to help settle the matter. “Multi-Links could never decide on its strategy and it was strange that it tried to blame us for the problems it was having,” says Levy.
Telkom last year said if it couldn’t renegotiate the contract with Blue Label, Multi-Links could face bankruptcy.
However, Levy says the arrangement with Multi-Links was commission-based. “The more we sold for their distribution, the more customers they had. But they never looked at the fixed costs with no income to revise those, like expensive towers and so on,” he says.
Levy says that in spite of the Multi-Links reputational and financial damage, Blue Label’s Nigerian segment is picking up new customers. It has now signed agreements with several other operators in the market, including Zain, Globacom, Etisalat and Starcomms. — Candice Jones, TechCentral