BK Modi’s Spice Group has acquired around 18.81 percent in Singapore based Internet Telephony and Data company MediaRing. In addition, Spice can also acquire 1.34% shares if MediaRing employees choose to exercise that option. This will take the the Spice groups total shareholding to 20.14 percent, and will cost them around S$60.16 million – approximately $41.76 Million or Rs. 203 crores.
Products & Services
MediaRing is a Singapore Stock Exchange listed Voice, Data and Computing service provider, and through Internet Telephony, enables Voice services for carriers, enterprises, service providers and consumers. Among MediaRing’s products is a Skype-like free Internet telephony service MediaRing Talk. In July last year, Singapore Airlines had advertised on MediaRing Talk.
Other products Voice over Internet Protocol (VoIP or Internet Telephony products), including consumer facing services and products like Mobile VoIP, Calling Card, MediaRing Talk,an Internet Telephony Phone, PC Phone, among products for carriers and enterprises.
The company also offers Utility Computing for enterprise customers, IT Infrastructure Hosting and Outsourcing, Broadband Access, Managed Network as well as various network based services are within the scope of this unit. The company was formed in 1993, headquartered out of Singapore, and has offices in Kuala Lumpur, Tokyo, Shanghai, Beijing, Hong Kong, Cape Town, Cambodia and Sunnyvale (USA).
MediaRing reported a profit of $410,000 on turnover of $ 57.57 million for the half year ended 30th June 2009, down 11.8 percent from a profit of $465,000 on a turnover of $68,803,000 for the corresponding period last year. According to MediaRing, it was impacted partly by the global economic situation, and partly by price erosion for the voice business. The company has been focusing on reducing operating expenditure costs this year.
The Spice Group will pay S$60.16 million for the acquisition of 256,912,767 shares, which amounts to around 20.14 percent of MediaRing. It has acquired shares from MediaRing investor Venture One Finance, and directors of the company. Shares from employees are yet to be acquired:
— Venture One Finance: MediaRing had raised around $15 million from Venture One Finance Limited in 2005, at S$0.1608 per share. Spice group company Spice Innovation Technologies Pvt Ltd is buying 187,912,767 ordinary shares (14.73% of total) from Venture One Finance Ltd for S$0.21 per share, a total of S$39,461,681.07 (around $27.385 Million)
— MediaRing Directors: Spice Global has acquired around 52,057,276 (4.08% of total) from MediaRing Directors Koh Boon Hwee (18,061,833 shares), Walter Sousa (14,632,951 shares) and Khaw Kheng Joo (19,362,492 shares) for S$0.30 per share. That’s a total of S$15,617,182.80 (around $10.847 Million). Following the sale, Walter Sousa, Khaw Kheng Joo and Thomas Ng have resigned as directors of MediaRing.
— ESOPS: Spice has the option of acquiring 16,942,724 (1.34% of total) Employee Option shares at S$0.30 per share, for a total of S$5,082,817.20 (around $3.530 Million).
Spice Takes Managment Control
What’s most interesting about this deals is that the Spice Group has taken management and board control of MediaRing. Following the sale, BK Modi, Divya Modi and Ashok Goyal have been appointed as directors. BK Modi has been appointed as Chairman of the Board, while Ashok Goyal has been appointed as the CEO, replacing Khaw Kheng Joo. Suramya Gupta has replaced Yeo Siew Chai as the CFO of MediaRing.
The synergy is greatest with Spice Televentures, which includes Spice Mobiles, Spice Retail, Spice BPO, Spice Digital and Spice Labs. MediaRing hasn’t listed any clients, but this acquisition of an Internet Telephony business will help in two ways: assuming that MediaRing has relationships with carriers and enterprises in the South East Asian market, it will provide a route to market entry for Spice Groups VAS company Spice Digital (formerly Cellebrum). Apart from this, MediaRing brings with it significant Internet Telephony and global calling card capability for Spice Digital.
Just a hunch, but I think Spice is likely to rework the product portfolio; I wouldn’t be surprised if unviable businesses like the free, ad-supported VoIP business MediaRing Talk, is scaled down, and push is given to enterprise and carrier businesses.