OnMobile Global CEO Arvind Rao began the companys conference call on a positive note, saying that though the last year was a bad year for the Indian VAS market (TRAI directive, price competition between telcos), “We’re beginning to see a turnaround: their (telcos) attention to VAS is swinging back in a very strong fashion.”

International Developments

– Telefonica has signed a contract with OnMobile for services in Spain, after the initial response to Latin American deployments,and are in talks for extending deployment to all markets. Their network in Spain is extremely advanced and market domination is extremely high, upwards of 50%. “We’ve had to upgrade our RBT product, such that we can interface with their network. We expect the revenues to only kick in the next fiscal year, but when they do, it will be very big.”
– Average revenue share in case of Telefonica and Voda will be higher than what has been seen in India
– Telefonica contract is exclusive for 5-7 years from services going live.
– Deployment in Latin American region has continued to grow, with deployments in Columbia after Ecuador last quarter. “The initial penetration in the first two-three months is in the range of 1-3%. While it may appear low in absolute terms, it is almost 10 times the penetration that they had with existing services before we came in. Our expectation is that over 3 years, the LatAm market will have roughly the same penetration as the Indian market. We’re targeting somewhere in the range of 10-15% penetration by end of year three.”
– An office has been set up in Miami, US, where Telefonica has a large data centre
– Services will be live across all countries before the end of the year. There are some delays in some countries because of local regulations, but we’re on track and will be live on time, if not early. Initial stages, but we’re happy with the hunger of the marketing folks from these countries, after RBT. So far, we’ve only done below the line marketing. (Mouli)
– Number of employees has increased, but more in the international area.
– “International CAPEX: Most of the time, we operate from customer premises. Only in case of LatAm, which is large and logistics are different, we are co-locating with Telefonica. In the rest of the countries, the investments are on-site. The people part of the investment is quite light.
– Vodafone romania RBT penetration is 5-10%. Vodacom south africa is in initial stages.

Indian market developments

RBT Trends, and Variations

On being asked on the call about whether India’s Ringback Tone penetration will increase beyond 15-20% market penetration, and revenue share fall below 15%, Rao said that it’s unlikely that the RBT penetration will increase beyond 15% at the current price points, so the company is launching RBT variations – Reverse RBT, Social RBT, Ad-RBT, RBT-Light (unbranded content, lower price point). Over three years, he added, this could take penetration to almost double the current level. “On revenue share, there is a little bit of pressure, but at our scale, we’re at the low end of the revenue share. There won’t be much more pressure from the (telecom) operator, because they also know that price pressure will mean slower innovation on our part, and therefore, slower growth in the overall topline, which is not conducive for everyone.”

There are instances, however, wherein telecom operators enter into direct contract for sourcing content, and and paying for content royalties themselves. On a positive note, OnMobile believes that the contract it won back with a CDMA telecom operator (RCOM, we believe) will take some time to ramp up to the levels it was at, but they hope the revenue will be higher this time due to more RBT variations available for launch.

On Mobile Application Stores

“Mobile application stores have a large number of apps, a majority of which don’t make money. Our belief is that if we focus on narrower applications, which require the operator network to be in the middle, they can be monetized.” (Uppal)
“A disproportionate share of apps are free apps, and a bulk of the remaining are one time paid, single user apps, so the revenue is limited. The average lifetime of an app download is 7-8 days. We don’t want to be in that space. We’re launching a large “widget factory”, geared up towards serving Vodafone and Telefonica, which drive services and have recurring revenue streams. ” (Rao)

OnMobile gave the following responses to questions MediaNama posed to them on the conference call:

– What kind of rollouts & the revenue contribution should we expect from ODN? “We’re seeing a lot of interest from a lot of small companies and innovations. ODN is not an easy platform to roll out across all operators. The onus is on us to get it deployed so that whoever comes on board gets 100% of the market reach. The initial results have been good.”…”The revenue contribution from ODN will not be material, not until we have 100-200 partners on ODN. The reason is because we believe that if VAS has to grow, it won’t come out from OnMobile alone – it will need a bunch of small companies, in terms of verticals like m-banking or telemedicine, or a local product that works in a particular region of India. Our unique position in the market, given our cross-operator presence allows us to give these small companies a jump start.” (Rao)

“Mobile Antakshari has done very well. On the operator side, it is taking longer than expected for enabling ODN. In this quarter and next, there will be more operators coming on board, but it’s getting delayed, because we’re setting up the ecosystem.” (Raman)

How do you see the impact of one of your competitiors launching a $100 million fund? They’re offering access and funding.
What sets us apart from One97 and SAIF is…one of the unique things is that we have presence in a wider range of products, with expertise in SMS, Voice, WAP and 3G. That’s the first differentiator that we offer – we can handle products across all channels. Secondly, we have a larger presence across operators, than any other company in India, which other people cant. The biggest one is, which we’ve proven with Ver Se Innovation, we have a large global conracts with Vodafone and Telefonica, which these partners can piggy back on to. (Rao)

When will we see a rollout of BIG FM deal, and what’s holding it up?
We expect it will be deployed in this quarter, and in terms of anything holding it up – we needed to make sure that all the product programming rights were in place. (Rao)

What will be the impact of regulation of Mobile VAS (as proposed by the TRAI) on OnMobile and the VAS ecosystem?

“We see a positive impact. There is a mis-perception in the financial community that if TRAI decides to license VAS, it would imply some sort of a licensing fee (whether 10% of the top-line). We have met the TRAI, and explained to them, and so have industry associations, that, we are paid our revenues from gross revenues of the operator from which the license fee has already been deducted. So you cant double tax the revenues. They have assured us that there wont be a license fee particularly for players that are on deck.

TRAI wants to exercise some control over matters like telemarketing and spam calls, and making sure that the VAS companies that are emerging are solid, not flybynight operators, with making unauthorized content available to subscribers. It has nothing to do with us, and it will only be a positive change for the ecosystem, in terms of cleaning it up, better transparency, and stronger players.” (Rao)

Related:
OnMobile Global Standalone Net Profit Up 22.2%; Content Costs Down