Ladies and Gentlemen, good day and welcome to the Net1 Second Quarter 2012 Review Conference Call. [Operator Instructions] Please note that this conference is being recorded. At this time, I'd like to hand the conference over to Dhruv Chopra, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Harry. Good morning, and good afternoon to our investors around the world. Thank you for joining us on our Second Quarter Fiscal 2012 Earnings Call. With me today are Dr. Serge Belamant, our Chairman and CEO; and Herman Kotze, our CFO. Both our press release and Form 10-Q are available on our website www.net1.com. As a reminder, during this call, we will be making forward-looking statements, and I request you to look at the cautionary language contained in our press release and Form 10-Q regarding the risks and uncertainties associated with forward-looking statements. In addition, during this call, we will be using certain non-GAAP financial measures and we have provided a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures. We will discuss our results in South African rand, which is a non-GAAP measure. We analyzed our results of operations in our 10-Q and in our press release in rand to assist investors in understanding the underlying trends of our business. As you know, the company's results can be significantly affected by currency fluctuations between the U.S. dollar and the South African rand. With that, let me turn the call over to Serge.

Thank you, Dhruv. Good morning to all our shareholders. I'd like to begin with an update of the key trends in the business, before I will hand over to Herman, who will discuss our financial performance in more detail. I'm very pleased with the momentum in our second quarter 2012 results. We reported revenues of $92 million, which is a year-over-year increase of 3% in U.S. dollars and 22% in constant currency. Fundamental EPS for the second quarter 2012 was $0.39, up 2% in dollars and 20% in constant currency. We posted modest growth in our pension and welfare business during the second quarter of 2012, driven by double-digit increase in our rural acquiring business and operational efficiencies on the cost side. As of December 31, 2011, we have $81 million in cash on the balance sheet bringing our net debt position to $25 million. Operating cash flow during the quarter was negative $6 million, which is consistent with the seasonability of our cash flows given it usually takes payments made in the second quarter. This quarter, I will deviate slightly from our regular communication strategy and focus my discussion on our largest businesses, key developments and overall corporate strategy. As a reminder, our core established businesses, which include CPS, KSNET and EasyPay, together in quarter 2 2012 accounted for approximately 82% of our revenue, as well as a majority of our profits today. These larger and more mature businesses either are or have the potential to generate at least double-digit growth consistently over time. The second subgroup is our growth businesses, which are smaller. But in our view, have the potential to grow the rate materially faster than our established businesses over time. This group, which is also strategic in nature, includes Net 1 UEPS, MediKredit and FIHRST, and collectively account for approximately 7% of our revenue. The final subgroup is classified as starter businesses and currently includes Net1 Virtual Card and XeoHealth. In our view, this category has the potential to grow into material drivers for the company over time. Let me now move on to 2 of the most significant events in our company's history. First and foremost, we are delighted to have been awarded a contract by SASSA to provide the distribution of social grants to approximately $9.6 million unique beneficiaries across all 9 provinces in South Africa. We completed our service level agreement earlier this week, and are now actively preparing to commence executing against those agreements. The distribution of grant on such a scale is indeed a brilliant task, but one that Net1 is well positioned to deliver on. The contract will take effect on April 1, 2012 and we have 2 main deliverable to begin term. The first is that by the end of the March, we would have to have issued MasterCard branded debit card to all the beneficiaries we do not currently serve, as a bridge until we are able to enroll all beneficiaries with our combination EMV UEPS smart cards, including the capturing of biometric images and performing a One to Many biometric search to eliminate duplicate registrations. By September, October of this year, we must be fully prepared to distribute grants to all beneficiaries across all towns, cities and villages and across all distribution channels on our EMV UEPS cards. To service this important constituency, we have to build a comprehensive state-of-the-art distribution platform. While we have a number of the key ingredients already in place, with our 10,000 pay points in the rural areas, 50,000 EasyPay terminals and a further 5,000 rural point-of-sale terminals, we have to tie all these together on a national basis, including ubiquitous biometric verification and service delivery. To achieve these objectives, we anticipate to have to spend USD $45 million to USD $50 million in capital expenditures on cards, terminals, biometric readers, back-end servers, back-end processing system, voice biometric technology, call center, cash dispensers, vehicles and many other technological and logistical products. I will let Herman discuss the financial implications in more detail. But on a normalized basis, we expect our pension and welfare business to be accretive in absolute terms to our current profitability from our own contract. The second landmark event was a broad-based black economic environment deal with Mososmo Holdings, with CEO, Brian Mosehla, has now joined our Board. In our view, we have no doubt this transaction will lead to substantial improvement in our BEE rating, announce a long-term sustainability of our South African operation and drive incremental business opportunities both locally and in other developing economies, specifically in Africa. Some of you may recall from our listing that our mission is to provide an alternative payment system to the majority of citizens within a territory. Specifically those that are normally excluded from the economy and those that have little or no access to competitive financial and all retail products. To this end, we have spent many years developing a technological platform in order to service all citizens, including those who reside in deep rural, semi-rural or urban areas regardless of their financial status, the absence, reliability or performance of the infrastructures, such as electricity, communication, financial services, retail outlets or any other delivery channel. Our solutions comprised of very latest technological breakthroughs in terms of biometric verification, using both voice and fingerprint. Our new Version 16 EMV compliant UEPS suite of transactional products, as well as our new announced NUETS network One to Many process identification system. Our solutions can now provide interoperability across our and all traditional payment systems, thus ensuring ubiquity of transacting for all without the need for any hardware or software changes to be made by any of the existing or any of the new participants. The combination of these technologies ensures that we can provide the tools that are required to announce service delivery, protect the frail, disabled and the most vulnerable, and eliminate avenues for fraud and the abuse of our customers and consumers. It is often believed that our systems platform and technologies are designed to only service social welfare recipients. Nothing can be further from the truth. Our infrastructure, which will undoubtedly reach economies of scale because of the SASSA initiative, was designed to service not only those in need but also those that have been excluded from participating in economic activities due to the existing rules as set by financial service providers. We do believe that our solutions will transform these markets and their rules as the risk guarantee intrinsic to this product will be considerably reduced or eliminated if our technology is utilized. Net1 is now positioned in such a way that it can continue to provide SASSA with the most efficient and effective payment system on a national basis, but also poised to utilize the same systems and platform to service all other citizens that are all in desperate need for affordable, safe and cost-effective products and services. We are able to realize the above strategic plan whilst keeping the highest level of social responsibility, the preservation and fueling of rural economies and most importantly, to ensure financial inclusion to offer African citizens. While we focus on these challenging project, we also seek to capitalize on our International opportunities in Korea, new international UEPS deployment, our Mobile Virtual Card and of course, our XeoHealth initiatives. Let me now briefly address some of asset material businesses and developments. For KSNET, one of the leading providers of card processing in Korea. For the calendar year 2011, the business generated a 14% adjusted revenue growth and 13% operating income growth, which was in line with our expectation. We continued special promotions for sales agents to further penetrate the small- and medium-sized merchant market. And we expect to see the benefits of those investments over the remainder of fiscal 2012 and of course, beyond. For EasyPay, during the second quarter 2012, we continued to refocus the business towards higher margin value-added services and away from low margin transactions processing, such as hosting for certain financial institutions that generated roughly ZAR 0.01 per transaction. Additionally, in the second quarter, one of the EasyPay's large sets of customer also started to move its basic EFT switching business in house. But we have retained all of the value-added services we provide to that customer, which is still the majority of our volume. As a result, we expect some but largely immaterial impact on the operating income of the business with an improvement in its margins over time. In Quarter 2, we also closed our strategic acquisition of the South African prepaid electricity and Aton [ph] businesses at Eason & Son, which further enhances EasyPay's portfolio and scale of value-added services. Part of EasyPay's strategic plan is to have a seamless multichannel network ranging from physical point-of-sale location, web, kiosk and mobile. And we are making very solid progress in this regard. And our EP kiosk initiative is now being integrated into EasyPay. We have now deployed approximately 150 of our kiosks in various environment, and as part of our broader South African strategy, there is real demand and opportunity to increase this footprint dramatically. To reiterate what I said last quarter, value-added services volume at EasyPay is more than double that of traditional card switching and is the real competitive differentiator in this specific business. NUETS has developed a new limited investment Software as a Service business mobile, aimed to reduce upfront capital investment, a potential developing country customers, while accelerating time to market. NUETS remains actively engaged with a number of countries in Africa. And we expect them to roll out the new business model in a couple of new countries during fiscal 2012. XeoHealth, our health claims processing subsidiary in the U.S., signed its third deal in the U.S. within a very short space of time, as a subcontractor to Cognosante to provide recovery order contractor services to the state of Missouri for Medicaid, very similar to the one announced last quarter in North Dakota. Our claims processing contract with CBH in Pennsylvania began generating revenue, recurring revenue in September and we expect the other 2 contracts to begin contributing over the next 2 quarters. Lastly, on Mobile Virtual Card, we have delivered a substantial portion of the hardware and software to Banamex in Mexico, and are currently in testing phase. We expect large deployment within the next 3 months. Our MVC deployment in the U.S. with MetroPCS continues, and continues to grow, although still of a very relatively small base. However, the advisors we appointed last quarter are actively drafting a more comprehensive strategic plan to expand the winners in adoption of our technology in the United States. Given the rapid increase in traditional credit and debit card for in South Africa, we also recently did a soft launch with MVC locally and expect a more meaningful rollout during 2012. To conclude, I believe that the new SASSA award will, once implemented, provide greater visibility, profitability and therefore confidence to our existing and new shareholders. And in turn, reflect a true valuation of the company. I believe that our management, our technology and our diversification strategy in terms of currency, country and market segmentation will allow Net1 to regain its initial appeal with a lower risk profile and thus, deliver improved returns for its stakeholders. I realized we are long overdue a visit to meet with our shareholders and we expect to honor that obligation around mid-May, by which point, we should have delivered on the very aggressive beneficiary enrollment deadline laid out in the agreement with SASSA. With that, let me turn over to Herman. Herman, over to you.

Thank you, Serge. I will discuss the key results and trends of our significant operating segments for the second quarter of 2012, compared to the second quarter of 2011. As Serge mentioned, I will also discuss the financial implications of our new SASSA contract, as well as explain the recent change in South African tax law. My discussion will be based on our results in South African rand, as this provides the best indicator of the group's actual operating performance. For Q2 of 2012, our average rand-dollar exchange rate was ZAR 8.18, compared to ZAR 6.94 a year ago and negatively impacted our U.S. dollar base results by approximately 18%. The comparability of our financial results for Q2 2012 was impacted by the inclusion of KSNET for a full quarter and our Eason acquisition. On a consolidated basis, for the second quarter of 2012, we reported revenue of $92 million, an increase of 22% in constant currency and 3% in U.S. dollars. Fundamental EPS year-over-year was flat at $0.39, however, in constant currency, it increased 20%. We measure the group's profitability by looking at operating income and margin by segment. We recorded a tax benefit during Q2 of 2012, as a result of a change in South African tax law. The change has been expected for a number of years, and primarily impacted the way that we report our income taxes. On December 20, 2011, there was a change in South African tax law to impose a 10% dividend withholding tax, a tax levied and withheld by a company on distributions to its shareholders, to replace the 10% STC release which was a tax related directly on the company on dividend distributions. As a result, the company has recorded a net deferred taxation benefit of approximately $20 million in the second quarter. The payment of dividend tax is effective for all distributions made after April 1, 2012. Any distributions made prior to March 31, will still subject to STC. Currently, we intend to permanently reinvest our undistributed South African earnings as of December 31,2011, in South Africa. However, should there be any change in our intention to externalize any of these undistributed earnings, we will be required to record a taxation charge related to those actions. Therefore, our tax rate may fluctuate depending on our intention regarding undistributed South African earnings, and the timing of any such payments. We would expect our effective rate going forward to be between 36% and 41%. However, as discussed, there could be fluctuations in this rate. Within our segments, South African transaction-based activities posted revenue of $46 million during Q2 2012, which is 17% higher in local currency and down 1% in dollars, driven by modest growth in pension and welfare, double-digit gains in merchant acquiring and improving performance at MediKredit, as well as the inclusion of Eason. In constant currency, statement operating income excluding amortization increased by 3% from Q2 2011 due to modest revenue growth in operating efficiencies, but offset by the loss of the switching business of the large EasyPay customer. Our operating margin declined 500 basis points to 38%, primarily due to the inclusion of Eason's prepaid Eason business which has, by its nature, a high volume and low margin. Our international transaction-based activities posted revenue of $29 million during Q2 2011 and includes KSNET for a full quarter. Revenue grew by 95% in constant currency and 66% in U.S. dollars. Segment operating income includes additional startup expenditure related to the launch of our Mobile Virtual Card and XeoHealth initiatives in the United States and Mexico. For Q2 2012, KSNET generated revenue of $28 million and an EBITDA margin of 27%. For our financial services segment, revenue in Q2 2012 increased 39% year-over-year in constant currency to $2 million, principally as a result of an increase in the number of UEPS loans provided. As highlighted last quarter, segment operating margin was expected to be under pressure. And for Q2 2012, it decreased to 53% from 62% in Q2 2011. The change is due to startup expenditures at SmartLife and to change in the insurance provider for UEPS-based loans, which resulted in a no claim period of 3 months. We are now self-insuring these loans through SmartLife. And therefore, we believe that this will reduce our cost to ensure the loans going forward. Our Q2 2012 interest expense decreased by 31% in U.S. dollars, as our Q2 2011 expense included the majority of the amortized facility fee of $1.7 million. I will now provide some additional detail of the anticipated financial implications of our new SASSA contract. Our new contract becomes effective on April 1, under which we will be required to enroll approximately 15 million ground recipients and issue approximately 9.6 million payment card initially. We will be paid ZAR 16.44 inclusive of VAT beneficiaries paid, which translates to approximately ZAR 158 million revenue per month net of that, or approximately a 35% increase over our current contract. Once we are fully phased in, we expect at the very least to maintain our operating income on an absolute basis that we generate from our current contract. We currently expect to be fully phased in by the second quarter of fiscal 2013. We anticipate capital expenditure of $45 million to $50 million during the next 12 months. Over half of these investments relate to infrastructure, such as payment vehicles and equipment and branch network, while the majority of the remaining innovations relate to payment cards and terminals. The bulk of the investments will take place in Q4 2011 and Q1 2013. Our operating expenses will increase due to higher headcount as we employ additional people who will be responsible for initial enrollment and issuance of cards, as well as ongoing payments, as well as higher variable expenses related directly to the distribution of grants. As of December 31, 2011, we had $81 million of cash and equivalents on our balance sheet. Q2 2012 is seasonally our lowest cash flow generation quarter, given amongst other things, the timing of South African tax payments. During Q2 2012, cash flow used in operations was $6 million and capital expenditures were $5.1 million. The change in our cash position from September 30, 2011, was due to a $7 million scheduled principal debt repayment, $5 million for the acquisition of Eason and $3 million related to fluctuations in exchange rates, offset by a net $5 million settlement received from the former shareholders of KSNET. Our fully diluted weighted share count for Q2 2012 was 45 million shares. We have not yet granted the option deal, however, assuming that the option is exercised in full, we would receive proceeds of $18 million and issue 9 million shares. Therefore, our diluted share count would be approximately 54 million shares, assuming we use none of these proceeds to buy back our stock. In the quarter, we grant this option under U.S. GAAP. We will be required to book a noncash stock-based award charge. Our priorities for uses of cash remain capital expenditures, strategic acquisitions, buybacks and debt repayments. To conclude on guidance. The next 3 quarters are difficult for us to predict at this time given the timing and magnitude of investments required in any of these quarters, however, we anticipate still being profitable on a fundamental earnings basis for the second half of fiscal 2012. With that, we will gladly take your questions.

[Operator Instructions] Our first question is from Dave Koning of Baird.

My first question just revolves around -- the last 5 years and so, there's been so much focus on this contract that I know its probably been quite distracting internally. Is this really free up now the next 5 years with your ability to go out and have many more conversations with other countries of other institutions? And have you -- are you already seeing progress on that front?

It's Serge here. Actually, your question is a very, very good one, a very valid one. And I think very few people and obviously, it's understandable, if you do not understand the amount of management bandwidth that we have spent over the last many, many years to arrive at this junction, where we are now being appointed as the basic international welfare payment instrument for SASSA. And you are quite correct in stating that I would think that over the next 6 months or so, the bandwidth that we have spent in focusing on SASSA will now be moved down to a next level of management where, operationally, people are going to start getting involved with this particular project and really make it work and try to optimize our investment and try to rebuild or build our margins which, obviously, is not going to be taking as much of our time as it used to do in the past where we are really trying to work out what we should do to convince SASSA that in fact, we are going to be the right company to facilitate these payments across all of the country. So there is absolutely no doubt that our focus, apart from obviously delivering on SASSA, is now going to be focusing on the businesses that need our attention, could do with the attention and certainly the businesses that we believe can grow the company at a much, much faster rate. During my little discussion or speech, I did mention VCC which, personally, I still believe is something that can grow at a substantial rate, I think there's a demand for that worldwide. And currently, I haven't seen anything that remotely looks as interesting, as secure or as simple to use as ours. So that is something that we certainly want to spend a lot of time on. I think XeoHealth is something that we wanted to experiment within the U.S. -- is a very difficult market and we've been very successful very quickly by signing 3 contracts. And that is something that is showing huge amount of potential, not only in the U.S. but elsewhere. So to conclude, there is absolutely no doubt that during the next 2 to 3 years, we intend to ramp up either businesses and opportunities in South Africa and outside South Africa at a much greater pace than what we've done in the past.

Great. And then just one follow-up. You mentioned how EBIT will likely be a bit stable under the new contract. But separately, I guess, from the core contract with the government, you're going to have 3x as many cardholders. Would you expect just all the services around having those extra cardholders to generate kind of meaningful incremental revenue? And I guess, kind of a corollary to that question is just, the next 2 years, obviously, there's a lot of cost going in to ramping the contract, but did you have kind of a goal out there for fiscal 2014? I'm just throwing a number, but like maybe $2 of EPS by 2014 if some of the new revenue streams kick in and just kind of looking at long-term profitability goals?

I'm not going to answer the financial question because it's Herman's department. But if you -- and perhaps I haven't been that clear in my -- and it's very difficult to put it in writing. But I think I read clearly in your question that you've obviously understood the power of having to deploy a payment infrastructure across all of the 9 provinces of South Africa. And at the same time, to have the power of having indirectly because, after all, our beneficiaries are SASSA's customers, but they are also, to some extent, become ours. And there is absolutely no doubt that having 10 million customers, which is more or less 20% of South Africa's population must give us a massive opportunity. Not necessarily to try to sell products directly to people that are poorer, but certainly, to utilize the infrastructure that you need to pay grants to those beneficiaries in order to lock up many other customers that can deliver would be able to use the same infrastructure. And for us to target those customers with a range of other products as well. So there will be, without a shadow of a doubt, on an equal playing field basis, there is no reason why our 10 million pensioners should not be able to buy products from whoever they want, including us. But more importantly, I think the real money, in my view, would come out, out of the customers that are not necessarily beneficiaries. That are going to want to use the same functionality that we are providing to beneficiaries, simply because it is safer, faster and better than anything out in the market today. And I think that's really where the game plan is going to happen. So I think in a way, reading between the lines and reading your question, I think you've probably read it correctly in terms of what could be a potential upside for us in the South African market.

It's Herman. You have a question you asked regarding our long-term profitability goal. Obviously, we intend to increase our profitability in the long-term, it goes without saying. And the fact that we will have this expanded infrastructure once established, obviously, will make it a lot easier for us to do so. I think a key takeaway point is that the infrastructure that we're rolling out, now that we have a EMV stroke UEPS card, obviously, implies that their infrastructure is accessible not only by our own cards, but by other EMV cards as well. Which obviously creates a state of opportunities for us to derive additional benefits from it. And if we look forward to 2014, obviously, it's difficult for us to put our goal out there like $2 a share, whatever the case may be. There's simply too many variables including the exercise of the options or not. That, obviously, would have an impact on the share count and the EPS calc in itself. But our long-term goal, I think -- our medium-term goal is to simply maintain the quantum of the absolute quantum of the operating profit that we've generated in the past from this contract. And we, obviously, have a plan to convert the national infrastructure that we will build and all the facilities that will be at our disposal into a higher earnings power by 2014.

Our next question is from Eric Almarez of Apis Capital.

A couple of questions. Just the first question as you start to make some of these expenditures over the next couple of quarters, will you be able to show us the underlying performance of the business or is that going to be difficult to separate out? So that we can just see the underlying performance is still tracking.

We certainly intend to have a look at our segmental disclosure going forward in terms of what this new contract means to us and, obviously, how the decision makers in the business look at it and there's no doubt will pay very close attention to this project and how it translates initially and obviously into the capital expenditures and sort of big volume of startup costs that we expect. So we believe that we will probably be in a position to give you a fairly good indication on a quarter-by-quarter basis as to how this business will track and what our progress is specifically, in relation to the initial period where we anticipate the significant CapEx and the significant startup costs.

You guys talked about your average price per beneficiary per month of, I think, around 16.5 and -- including and VAT and around 14.5 without the VAT. I think the rough math on the existing business today is something in the mid- to high-20, so the price is falling quite a bit. Do you think that the existing business, the existing beneficiaries that you serve, will those continue to be profitable under the new contract? Or are you going to see something more like a loss there in order to recapture those new urban beneficiaries that may be more profitable?

Yes. I think the way to think of that is that our current beneficiary base of 3.2 million, sort of cardholders. We, obviously, will continue to serve those as we have over the last 8 or 10 years in most provinces. What we need to understand though is that we are reissuing cards, new cards, to all 9.6 million beneficiaries. So we will have to incur the costs of issuing new cards even to our existing cardholders. And while those provinces should be on a stand-alone basis, more profitable for us than the new ones that we have to service, we still have to reinvest quite a substantial amount of money in upgrading our infrastructure in these provinces where we were before. Simply because we've run that infrastructure for the last 8 to 10 years in some cases. We've, obviously, been anticipating an outcome to this tender award for the last 3 years. And we've been very careful in the amount of investment that we've made. Now that we know what it is, we obviously plan to make sure that we modernize all of our existing points, in addition to modernizing or incorporating the new areas into what we do. And I think the other thing that one has to keep in mind when you try to work out the relative economics of this contract, service delivery in the rural area, which is predominantly where we are today is, from an operational expense point of view, traditionally, a lot more expensive than it would be for us in an urban area. So as we rollout the urban areas, these are the initial startup costs that we have to incur. But traditionally, the distances that we have to cover and the volumes that we serve are much greater at a specific point. So there are pros and cons to the new areas that we will get, there are pros and cons to the existing areas that we have. But obviously, we believe that when we take a blended view of the rural and the urban areas, we should be able to at least maintain the quantum of our operating profits.

What do you think the relative cost is for beneficiary? I mean is it like 1/2 the cost in the urban versus the rural, or some order of magnitude different from there?

Eric, it's Dhruv. We, at this time, at least cannot give that kind of granularity. But if you have additional questions, also, if you don't mind just jumping into queue so we can give everyone else a chance.

Our next question is from Daniel Baldini of Oberon Asset Management.

I have 2 questions related to that contract. It mentions in the 10-Q that a couple of losers are disputing the award. And I'm wondering if you could describe what the procedure is for, I don't know, adjudicating these disputes. And then the second is, the term of the contract is 5 years and you're investing, I don't know, $50 million of capital to fulfill the obligations under the contract. And do you anticipate getting an adequate return on that capital invested over 5 years? Or are you assuming that profits would be generated beyond that in order to provide an adequate return? And part of the reason for asking that question is, there is an article back in June in Business Day talking about SASSA. And it mentioned that Virginia Petersen, the CEO, commented, at some point, that the agency itself planned to introduce an automated system of grants payments 5 years from now. So that implied to me that there is a possibility that this whole thing could revert to the government at the end of this contract.

These are 2 very, very good questions. The first one, one, it's not surprising that you called them the losers. So I didn't say it, you said it. But in a sense, if we had lost it, we will also be called the losers. And we probably will also go to court. We're talking about sizable contracts here, both financially and in terms of profitability and in terms of image. So there's absolutely no doubt that I think 1 or 2 companies or 3 companies will definitely go to court and they're going to follow the normal legal process to try to get information in terms of how was this contract awarded? What processes were followed? Did SASSA follow the correct procedures? And from our point of view, we're not SASSA, but certainly, we believe that everything that was done, was done with the highest form of integrity. So all it, yes, they will be going to court, there will be people that will try to get other information or injunctions or try to sort of just scuttle the project or delay it or whatever the case might be. What I'm really, personally, and I'm not an attorney, but I'm really not that concerned about what we have seen, that there is any real effects or evidence in their attacks that can be possibly taken seriously by anybody. And of course, I would say that. But certainly, I can comment on some of the technological areas that were sort of talked about. And from that point of view, I know that there is absolutely nothing that can be attacked in terms of what we can provide. So they'll follow the normal course, we will have, unfortunately, to spend quite a bit of time defending these because we will be automatically a respondent. The good thing that I'm really looking forward to is that we will now be working together hand-in-hand with SASSA. Rather than sometimes in the past when we used to be the ones on the other side. So from that point of view, I really look forward to be able to build a strong relationship with our SASSA partners. And I'm sure that between the 2 of us, which will be in the position to certainly win any wars, which are simply based on, as you called it, losing contracts, which were significant. So on that side, I think -- let it run its course and I think it will go according to the law. Your second question is probably more an interesting one. Obviously, there has been a number for many, many years now, SASSA has always looked at saying what was the purpose of SASSA and its formation and what was SASSA going to do in the long-term? And we've always known that over time, there is no doubt that SASSA would like to play a more conforming role over the distribution of payments of social grants. One, is to try to understand however what that statement means. Today, we know that the card we are issuing is actually a bank card because it's a MasterCard branded EMV compliant card. Which happens to also have a UEPS application, which is completely integrated into the EMV and chip product. So it's quite an interesting hybrid of what MasterCards and chip product look like. It does add biometric, it does add all sorts of other functions, which do not exist in the EMV at all. So it makes it quite a powerful EMV system. The beauty, it works everywhere in a country. And it could work, it could in fact work anywhere in the world. So from that point of view, we certainly do not see SASSA going forward and saying, "They are busy working really hard on inventing their own payment system." That is not what we believe they mean. They mean that today, for example, when we provide a function, like proof of life, when we provide a function like proof of payment, these are the type of functions that the system was designed to actually be performed by SASSA. Because what exactly is the point of us telling SASSA that we have proof of payment, if in case SASSA themselves, cannot check or are not in control of checking that the proof of payment was, in fact, the proof of payment. So the way we read the situation is that SASSA wants to almost through a PPP, for a lack of a better word, what we call a public, private partnership, want to be able to be control the processes around payment, which today, we control. But we still firmly believe that unless the technology fails, there is no way SASSA are going to get into the One to Many matching algorithms for biometrics being it on voice or fingerprint. So we would become through a PPP, let's call it more of a technological partner, rather than operational partner. Which between you and me, as I'm getting older, which suit me well, because we probably will make a similar revenue, without actually picking up the most difficult part of everything, which happens to be already operating in rural areas. So you are quite right. I think, one, I think SASSA's intention is certainly not to say, "Well, we're going to do everything and we will not need companies such as CBH." And 2, more importantly, the infrastructure that we are building, that infrastructure will continuously be used because it is not designed, and it was not going to be implemented purely for recipients. That's going to be implemented for everybody, it's open. Which means, that infrastructure will be used by new customers, as well as beneficiaries. So we believe that regardless of SASSA does in 5 years, that infrastructure will continue to be used by SASSA and also by any other customers, which candidly might be from other banks or from our own of course banking underwriting. Does it makes sense to you?

It does. If I may, can I ask 2 questions about KSNET. The first is, did you say that for Q2 the revenues were USD $28 million with a 28% EBITDA margin?

Correct. $28 million and 27% EBITDA margin.

27%. Okay. Great. And my second question is in the 10-Q, you mentioned a couple places that you got $4.9 million from the sellers of the company. And the words are, "in final settlement of any and all claims and contractual adjustments between us and the former shareholders." I'm just curious, did you have claims against the former shareholders or is this sort of a release from Escrow or something?

It's really a combination of these things. In any major acquisition of this nature, obviously, there is an amount of money that goes into Escrow and that's supposed to cover, during a period of time, any claims in terms of the warranties provided. There was also a very specific -- a working capital adjustment provision in our agreements with the sellers. And over the last year, we've been working through the issue that we identified after we took control of the business, both from looking at the warranties provided on the one hand and calculating what the working capital adjustments could be. There were certain tax issues that were also -- that needed clarification. And finally, in November, we reached an amicable settlement with the sellers. And the net result of that was a payment of $4.8 million net to us. So net of the working capital adjustments, net of the tax liability claims, et cetera that we had. And so going forward, the acquisition of KSNET in terms of determining the purchase price and any claims or counterclaims that may exist is now terminated.

Our next question is from John Zaro from Bourgeon Capital.

You answered my question on Korea. Okay. The option that's given for the 9 million shares, is that a period of time in which, I mean, is there a period of time in which you think that they will come together and exercise that option? And my assumption is, they will exercise the option.

Obviously, we can't talk on behalf of our new partners. But the structure of the option is quite simple. It is an option that is granted over a 12-month period. From the date that the actual option is issued, and we expect that to be in the next week or so, once we've received all the regulatory approvals required. So from that point onward, the clock starts ticking. Our partners have 12 months to really raise the capital required to exercise the option. We have no reason to believe, at this point in time, that they don't have any intention of exercising this option. But it's very difficult, obviously, for us to pinpoint any specific quarter when this will happen.

Is it easy for them to raise $80 million in capital?

It depends. Obviously, largely it's a function of what the share price does, on the one hand, which is the underlying asset. Also, it's a function of some of the other assets that our partners have and can offer as collateral. It's a function of the other businesses and what they generate from those. So in the South African context, this is not an unusual transaction. And most companies go through these motions, so I don't have any reason to believe that they...

Yes. I didn't know how often they exercise them. And is your contract with SASSA transferable? i.e., if someone were to come in and try to buy you or you were to sell yourself, could you transfer that contract in 5 years?

You mean at the end of the 5 years?

No. During that 5 years?

During the 5 years.

If there was an event that took place, is that actually -- does that put it back up for...

My view is, right now, that at this point in time, any change in ownership would certainly would have to be looked at and agreed to by SASSA, not to create any real impediment. South Africa works very much, not only on the subject basis but they work as...

Yes. We've watched that for 5 years, I know exactly what you're talking about.

All right.

Okay. And then the last thing which I asked you about last year. And now that you've got this settled, there's obviously a lot of work to do and a lot wood to chop to get this thing done and it's going to be pretty massive. I'm assuming that you had some planning, but you didn't have total planning because you didn't know if you were going to win all of them or some of them? The question is with all these other things that you're always talking about that you'd like to do, and part of your earlier conversation, do you have too many things that you're trying to focus on? In other words, we have this one that finally we've all been waiting for to get some sort of finality to. Now we're trying to shoot for let's get it accomplished and make sure it works and you make money, and let's try to make money somewhere else. Do we really need to have all these other things that we have? I mean, I love the fact that you're so excited about all these other things, but I mean, you can only do so much.

I think your point is valid and is something that was discussed at the last board meeting a couple of days back. And there is no doubt that we're going to have a good look at -- or review all of the different businesses we have. And when we got in to these business there was a reason, obviously, at a time. We have to review from time to time if those reasons still apply after the event of SASSA. There is no doubt that anything around South Africa, SASSA, EasyPay, the banks, the insurance company, all of that were always part of the same puzzle anyway. So that is going to become, for lack of a better word, one picture. And then it's more a question of reviewing what do we intend to do internationally? What products do we want to really focus on? Where do we really believe that we can spend time on growth, for example, like VCC, which I mentioned before is my own little pet. And that's something that, personally, I want to pursue anyway. But you are quite right, that there may be 1 or 2 other of our businesses that we might look at and simply say, "They're old-fashioned and they're not cool." And that we certainly do not want to stretch either our resources financially or our management bandwidth chasing something that we might have made a decision 2 or 3 years back. But today, that decision we wouldn't make it again, knowing the fact that we now have the SASSA contract bedded down. So I think there will be, in my view, a few changes taking place over the next couple of months.

Our next question is from Leonard DeProspo from Janney.

I just had a question with regard to the incremental beneficiary given that the ones in urban locations will be more profitable than rural.How do you see the breakout of those incremental beneficiaries? I mean, the 6.5 million new ones, is that going to be more heavily weighted to urban versus rural or vice versa? I mean, just any visibility you can give us there.

Once again, that's another good question. We know exactly today what is rural across all country and what isn't. So for us, if we're looking at -- let's call it 10 million, although it's not 10 million, I think it's 9, -- at the moment, it's 9,763,000 something like this. And by the 1st of April, of course, it will be slightly over. So let's call it $10 million. I would think, right now, at the rough rule of thumb, if is we say that 5 million likely to be remaining rural or semi-rural and the other 5 million are going to be more urban. Now sometimes people call urban because you happen to be within a city, but you can be living in Johannesburg. And if you happen to live in Soweto you're really urban, but you're really rural. Because Soweto is a rural area inside an urban area. So the beauty of the technology and the product that we've now got, is that it doesn't really matter because it can be used in one or the other. The question is how much more money do we have to spend because it is rural rather than it is urban. And Herman talked about between I think you said USD $40 million to USD $50 million. Obviously, a lot of that money is actually going towards developing rural pay points. Now what we must understand here is that rural areas in South Africa are actually quite large. And developing rural pay points, like we used to do before for the sole purpose of paying beneficiaries, was at very, very high-cost. With the new technology, with developing rural pay points, of course, to pay beneficiaries. But also, to be able to provide services to people that are not beneficiaries. Which means, suddenly you found that these rural pay points, although initially are very expensive to put together, become cheaper and cheaper simply because they are used to generate other income streams from other people that we could not service before. And that's going to be, to be the crux of the matter. We already have 10,000 of those pay points, we might actually find we could land up with 15,000 or 18,000 by the time we finished. Not because it makes financial sense, if they will only going to be used for beneficiaries, but because it would make a hell of a lot of sense to use the beneficiary business to actually leverage the rest of the business around where the beneficiary live. For every beneficiary, there's another family of people that are not beneficiaries. And these are the target market for us as well in rural areas. So to me, the fact that it is rural or urban, having this more potential probably enough in generating higher revenues in urban areas -- I'm sorry in the rural areas than there are in the urban areas, which is quite an interesting model. But we will see how that goes over the next 3 to 6 months.

Okay. Just one more question to make sure I heard correctly. It sounds like you're mandated to have this program rolled out by the September, October time frame, but you're going to shoot for a mid-May launch, did I hear that correctly?

Well, the main launch has to be the 1st of April. And we have -- it's a duel launch. And that was what's happening on the 1st of April, as we said we've got to do a hybrid system in order to ensure that we can replace our existing competitors completely and basically remove them from the market, because otherwise SASSA would have to negotiate some form of an extension with them. And that will take about 1 month to 2 months, let's call it, April and May. And 1st of June will be what I would call is the proper rollout of the new technological platform, and specifically the new biometrics smart card. So from 1st of April, we are taking over the entire payment of all beneficiaries in South Africa, regardless of how they are currently being paid.

Our next question is from Steven Wu [ph] of Alliance.

Given what you just said and your comment on trying to be core and focused. How should we view the Korean transaction when it seems like it's sort of really out there, but the SASSA contract is so much more exciting and significant and prospective? I wonder if you can comment on that.

Well, once again, like I said this is a very, very good question. We always saw Korea as, for us, the gateway to, let's call it, to other countries around that area of the world. And we certainly did not know how we should try to attack those territories. So for us, the Korea acquisition generated many things. One, it was diversification against the rand, diversification against the actual country itself, country risk. And it gave us an income in a currency which as you know is very, very strong. Korea have been actually quite -- more than just simply a developing country but basically reaching first to a country status. So for us, that was the idea of the Korean switch. If you look at purely the Korean business, which today is really, for lack of a better word, is really a switching business. It's certainly taking transactions between merchants and banks. There is absolutely no doubt that we all know that the pressure on margins on those particular business is very high. We're experiencing the same thing with EasyPay. So there is no doubt that unless we're going be able to refocus the Korean business, to doing the type of thing that we are doing here and doing it in a different way and creating new avenue for high-level or high-margin businesses, we probably would have to review and just say, "Well, hang on. Is this something that we want to spend our money and management time on?" So certainly, this is one of the businesses that we are -- we believe is doing very well and is growing at a fast pace. But like any of our other businesses, except for CPS, is something that we will be keeping an eye on in order to make a decision going forward.

Very good. And very good luck with the rest of that because I think every country is going to be looking at this and saying great work here. This is an opportunity that we all hope that you'll be able to capitalize on and the rest of the continent.

We very much hope so.

Our final question is from Sean Cain [ph] of Morgan.

I've been on board with you guys for about 10 years and it seems like over this timeframe we just have SASSA overhang. We've lost a lot of attention in the investing public. And I'm just wondering what if any marketing efforts you guys are going put forward to make Net1 a household name, number one. And number two, what are the strategic plans have you all considered to unlock shareholder value? And then lastly, now that the SASSA deal looks to be -- soon to be behind you, what is going to be your next big focus? I mean, you didn't comment on Iraq at all or any of the pilot programs or spare bank [ph]. What is going to be the next big target-rich environment for Net1?

I'll try to sort of answer all of these in one go, if possible. I think, one, the SASSA thing for us is the real watershed. Like for many of our investors as well that probably had lost a lot of patience, for lack of a better word, and also, probably, realized that in fact, the investment was not getting the return fast enough from the timing point of view. Unfortunately, there are certain things you can do and some thing you cannot do. Now we've put that behind us, which I think will buy us back the credibility that I think we've always deserved, to be quite honest. But more importantly, we've just mentioned that this particular contract will, without a shadow of a doubt, I believe give us what we need to move into the African continent. And also to move into other developing areas, the South America being one of them. And the intention is certainly to make sure that we can take the same solution and offer it to many other places. I believe that with our new black environment partners, there is absolutely no doubt that, that has already been in the table. And this is where we see a lot of the growth taking place in the type of similar business in other large countries. When I say large countries, countries with a large number of people. And all we would have to do is to penetrate or to hit 1 or 2 of those countries and candidly, Net1 will be in a different position and on a different scale. That's without even mentioning as I say 1 or 2 other critical businesses, which I also firmly believe, will and can get Net1 into a different bracket of return for shareholders.

Okay. Just one other question, real quickly. Concerning the SASSA deal, now that you've captured the entire area, I'm not sure I was clear on this, I know this is a question for Herman, but what exactly is the margin compression? I know you've said before if you all ever got the deal that you knew that your margins would have to get skinnier to capture the bigger piece of the pie. Do you have any idea what that margin compression is?

Sean [ph], it's Dhruv. I mean, to the extent of the information we've given is, we've given the new kind of revenue run rate. We said it's been -- it's likely to be at least as profitable on an absolute basis. So I think if you run the numbers, you may be able to get to some kind of ballpark number. But we haven't been able to provide that information.

Okay. Great. Well, I look forward to seeing you guys in May when you make it back to this way, Serge.

It will be with pleasure. And at least, this way we can talk about, now that we have SASSA, rather than to get all the questions about when do you think you're going to get SASSA. I look forward to it myself.

Thank you. Ladies and gentlemen, on behalf of Net1, that concludes today's call. You may now disconnect your lines.