Tecnomen Acquires 96.6% In Mobile VAS Co Liftree Convergence For $44M

In one of the largest deals in the Mobile VAS space in India this year, Mobile VAS company Lifetree Convergence has been acquired by Tecnomen, a Finnish supplier of messaging and charging solutions for telecom operators, for EUR 33.2 million (around $44 Million). Tecnomen CEO Jarmo Niemi will be the CEO of the combined entity Tecnomen Lifetree, while Atul Chopra, MD and CEO of Lifetree will be its COO and President. Lifetree is headquartered in New Delhi,and has software development centers in New Delhi and Bangalore. The company has around 400 employees.

They provide operational support systems and business support systems software, as well as content management and delivery platforms. Before Buongiorno took over from them,  Lifetree used to power Indiatimes’ 8888 service. African telcom operator MTN is among their biggest clients.

The Deal

We’re told that Lifetree was looking to raise funds, and ended up being acquired. Tecomen will take 96.6% stake in Lifetree Convergence for EUR 21.4 Million in Cash and EUR 11.8 Million in Tecnomen shares. The payout is being financed, in part, with a long term loan, and own funds. The Tecnomen shares will be issued to the management of Lifetree, subject to a 3 year lock-in period. The International Finance Corporation, a Lifetree shareholder, will become a shareholder in Tecnomen holding about 6.17% shares and 5.65% on a fully diluted basis.

Lifetree Financials (at Rs. 63 to the Euro)
– For the financial year ending March 31st 2008: Lifetree reported net sales of EUR 11.3 million, profit after taxes of EUR 3.4 million.
– For Jan-Sep 2008: Revenues of EUR 11.9 million, Operating profit of EUR 4.4 million, and an operating margin of 37.4%
– As of 31st Oct 2008: Lifetree reported no debt, net assets of EUR 8.4 million and a cash balance of EUR 9.5 million, and had an enterprise valuation of EUR 37.4%.

Combined Revenue:

Benefits:
– Higher Operating Margins: Lifetree has a higher operating margin than Technovate - 37.4% as compared to 11.7%, so the operating profit is comparable (EUR 6.5 Million vs EUR 4.4 Million) even though Tecnomen has around 4.66 times the revenues.
– Customer Base: Tecnoven has operations in more countries (59 vs 16) and has more customers (over 100 vs 18), but while Tecnomens major accounts are in South America and Europe, Lifetree has accounts mainly in Middle East and Africa.
– Lower Costs: Over 50% of the employees will be leveraged for reducing development and delivery costs. 47% of the combined entity’s employee base will be in Bangalore
– Larger portfolio of services: take a look at the chart below. More in the presentation here.

Thoughts on the deal: It’s quite surprising to see Lifetree Convergence sell, given their profitability and the scale of operations. The platform services and white labeled solutions part of the Mobile VAS services business has a higher barrier to entry, longer sales cycle and consequently fewer players than the direct to consumer space. Perhaps it was a question of scaling…what’s your take?

Xing Acquires SocialMedian For $7.5M; Payday For Pune’s True Sparrow Systems

Update #2: Jason Goldberg, founder of Social Median, in an emailed response to MediaNama has said that “Truesparrow has been a tremendous partner for socialmedian. They have had a considerable equity stake in socialmedian and will be a Xing shareholder as part of this transaction. As a shareholder they are a party to all aspects of the deal.” Which means True Sparrow gets both cash and equity.

Update #1: Nishith Shah of True Sparrow Systems has confirmed to MediaNama that they did have stake in Social Median; he declined to comment on how much stake, though. Shah said that they don’t have any concrete plans yet, but they will continue to work on Social Median, and will explore doing other things as well.  Almost the entire TrueSparrow team was working on Social Median

Original Story: European professional networking site Xing has acquired SocialMedian, a social news aggregator founded by Jason Goldberg. Goldberg will be joining Xing in Germany, as VP for Xing Applications Platform. SocialMedian services will be launched within Xing as well.

Techcrunch reports that Xing is paying $7.5 Million for acquisition - $4 million in cash and EUR 0.5-2.5 million payable over three years.

SocialMedian was developed entirely in India, by Pune based True Sparrow Systems, which also had a stake in the venture. According to what Goldberg wrote in August “…we have made our Indian team shareholders in socialmedian, so we are one company building one product. It’s an offshore situation, not an outsourcing relationship.”

The entire social median team (Goldberg was apparently the only US employee) will be joining Xing. Social Median is Goldbergs second startup: he had earlier founded Jobster in 2004, only to step down as its CEO last year.

It’s a fairly early exit for Goldberg. The site was launched a few months ago: I signed up for SocialMedian on July 21st, while it was still in closed alpha, and frankly, never got around to using it extensively because it was too cumbersome to navigate. Hopefully, it will be made more user friendly now. 

P.s.: Thanks for the headsup Shyam: XING’s SocialMedian acquistion: Thoughts, conclusions

Sify Communications To Merge With Sify Technologies, Combining ISP With NLD/ILD Licenses

The board of Sify Technologies Ltd has approved the merger of its subsidiary Sify Communications into the company. Sify Communications, earlier known as SafeScrypt, was essentially an enterprises services company. 

Interestingly, according to the SEC filing, Infinity Satcom, an entity controlled by Sify Technologies CEO Raju Vegensa, is a minority stockholder of Sify Communications. According to a 2006 story in the Hindu, Sify had sold 26% stake in Sify Communications (then Safescrypt) to Infinity Satcom for $3.1 Million. 

As we had reported during the announcement of the VoIP recommendations, Sify and Sify Communications stand to benefit significantly if the Indian government accepts the recommendations, and a policy is announced: Sify Technologies Ltd has an ISP license in India, and Sify Communications has an NLD/ILD license. With the merger, a single entity will own both the licenses, and hence will not have to pay any carriage fee. Sify can offer calling cards and VoIP services, or even offer VoIP as a significant value-add over its WiMax/Broadband services. Sify’s access business has been on the decline.

The impact the announcement of the merger is not insignificant: Sify’s share price had gone to $0.42, but following the announcement, has recovered to $1.75, and is currently trading at $1.16. Interestingly, the Sify board had deferred the merger earlier this year, but decided to go ahead given the financial crisis. This also means, that Sify will not be raising funding separately for Sify Communications.

Do note that while the TRAI has been, well, announcing recommendations and discussions as if on steroids, over the past month, the government still has a number of issues related to telecom to resolve - most importantly, the 3G Auction. So it’s likely that VoIP will be taken up after the next elections, and if a different government is elected, the process may take even longer.

Related:
– Sify Consumer Business Revenue Down 7% To $7.5 M; Drops Broadband Rates To Stem Decline
– Impact Of TRAIs Internet Telephony Recommendations; Sify To Benefit
– Regulator Recommends Unrestricted Internet Telephony In India; Separate Numbers For VoIP

Confirmed: Infibeam Acquires Picsquare.com

Bangalore based photo printing portal Picsquare.com has been acquired by online retail firm Infibeam.com. We’d received a tip-off regarding the same a week and a half ago, and though it had been denied then, Picsquare co-founder and CEO Manish Agarwal has now confirmed to MediaNama that the deal is done. Update: Picsquare, which has around 10 employees, will continue to work as a separate brand, and will share technology and offerings with Infibeam. Agarwal declined to comment in the details of the deal - whether there’s cash involved and the Picsquare founders have a lock-in period, or whether there’s stock involved, and they’re going to work with Infibeam.

Startup acquires startup
What, really, is Infibeam? According to an old release, Infibeam was launched as an automobile portal in 2007, by a software development firm of the same name. It featured car reviews, industry news, finance options, EMI calculator, used car listings and a car rental service. It then expanded its portfolio to include a mobile section, and followed up with segments on watches, fitness equipment section, Jewellery, Apparels, Books etc…it diversified. Photo Printing and the customised gift printing knowhow that Picsquare brings, will be another addition to the portfolio.

(more…)

IMI Mobile Acquires Music Distributor DX3 For Entering The European Market

Is the content aggregation and distribution the most vulnerable space in the Digital Content Business?

Hyderabad based Mobile VAS co IMI Mobile has bought London based digital music distibutor dx3, reports ContentSutra. Dx3 provides legal digital downloads, and in 2004-05, added a mobile content delivery component as well. The company will serve as a gateway to the European market. DX3 will be renamed IMI. A couple of months ago VR Vishwanath, Chairman and CEO of IMI Mobile had told MediaNama that the deal size is around $10 million, but we wonder if it’s been revised downwards given recent trends. Neither the report nor the press release mention the size of the deal or the percentage acquired, some reports suggest it’s a 100% acquisition. We’ll confirm and update.  

Content or Marketing?

Well, both. dx3 has a content marketing platform, which can be used to deliver promotional premium content that is free to users. IMI Mobile appears to be more keen on dx3 for marketing services.  According to Vishwanath, this gives them the opportunity for media campaigns on both Internet and Mobile, given dx3 strength in the web domain. Frankly, apart from the clients and distribution network that dx3 will bring to the table, we’re not sure of what else there is to this deal. 

DX3 distributes music for clients like EMI, MTV, Universal, Warner Music Group, Sony BMG, and has tie-ups with Virgin Mobile, Smash Hits, Sony Ericsson, among others. 

This appears to be a backwards integration for IMI Mobile - which is more of a platform service provider. As DX3 CEO Anu Shah put it - “It’s very difficult for pure digital music providers to make money in the space“. Aggregators and distributors get squeezed from both sides - by operators and music labels, and this is essentially a means of combining revenue share which was earlier divided between content aggregator and platform service provider.

This appears to be an acquisition that is similar to Motorola’s acquisition of Soundbuzz, though Soundbuzz had branded services as well, not just a white labeled solution. In the past year, we’ve seen other significant moves in this space - when Nokia entered the content services space with Ovi, and OnMobile inked content deals in South India.

So…Is the content aggregation and distribution the most vulnerable space in the Digital Content Business?

Satyam Buys Motorola’s Malaysian Software Development Center

Well, Motorola’s been in a lot of trouble, and were earlier reported to be in talks with Videocon for selling their handsets business. It appears that the company has sold its sofware development center in Cyberjaya to Satyam. The Kuala Lumpur based center has 128 employees, and will strengthen Satyam’s capabilities to cater to Network Equipment Providers and telecom operators, according to Nishith Mathur, head of Satyam’s Technology Infrastructure business unit.

The center was part of Motorola’s $2.4 billion Home and Networks Mobility business, which produces digital entertainment devices for HD/DVR and IPTV. This sale is a part of a restructuring at Motorola, wherein the business is also being split into broadband home solutions, broadband access solutions and cellular networks.

The deal should be completed by December 31st, after which, Motorola will contract Satyam for development services for its network management software. The US based handset manufacturer had reported a 15 percent decline in sales for Q3, and net loss of $397 million (pdf).

Live: Telenor-Unitech Not Keen on 3G Services In India

We were on the Telenor India investment call which took place in Norway, and were updating this post on the fly. Telenor today announced the acquisition of 60 percent stake in Unitech Wireless for $1.07 Billion. According to Telenor, Unitech Wireless has an enterprise value of $1.1 Billion. From the conference call:

The Deal
– $250 million of primary equity upon closing
-– Remaining $820 million in three additional tranches by end of September 2009

Fundraising
– The deal will be financed by additional fund-raising, by a rights issue
– Tower Sharing will reduce capex by 50-75 percent. When it comes to operational cost, it adds a fairly marginal increase in OPEX.
– Will be a $2 billion CAPEX in India for the first three years, so the fundraising will not cover the negative cashflow from India in the beginning of the project.
– The Government of Norway is a majority shareholder in Telenor, and the approval for fundraising has to go through the Parliament of Norway, which will take 2-3 months.
– Open to selling existing assets to raise funds for India

No to 3G, To Begin With
– Telenor is concentrating on 2G business model, in the 900 MHz band. “3G is not a part of our common sense. We are reluctant to throwing ourselves into the 3G auction, as it stands today.” Significant negative cashflows in the first year.
– 3G as a differentiator: the customer segments and the market segments in India will probably be not as inclined to 3G as a differentiated offering. If we see how it’s evolved in Europe, it’s taken quite some time for it to evolve. It was used more as a capacity enhancer.
– 3G auction process will have a circle approach, not a national approach, so operators will be selective with their approach to 3G.

Spectrum
– Unitech Wireless currently has spectrum for 13 circles, and expects spectrum for the remaining 9 circles within the next 12 months

Targets for India, not including 3G:
– EBITDA breakeven in approx three years from launch
– 30% EBITDA Margin
– 20% Operating Cashflow Margin
– More than 8 percent marketshare in India in the long term, but not giving an opinion on how the market is going to evolve.

Control
Telenor gets management control from day 1: will occupy 4 of 7 board seats. Telenor will nominate Managing Director, CFO and CMO, and the overall management will be appointed by Managing Director, in consultation with the board.

Partner Conflicts
(with reference to Videocon-Nahata conflict over Datacom) When you embark on a partnership, like with Unitech, challenges is not the highest element to discuss. There is paperwork around conflict resolutions with Unitech. We have used our extensive experience in partnerships, and have necessary devolution mechanisms, have a firm majority on the board

Brand: The brand of wireless services that Unitech intends to launch by mid 2009, has not been decided yet.

Is there an opportunity in India with 7-10 operators?
The presence of existing players is very differentiated from circle to circle. The impact of more players will vary from circle to circle. We’re looking to differentiate our offering.

Tower Sharing
– Access to 30,000 – 50,000 existing sites through tower sharing agreements
– Towers used by us doesn’t necessarily give quality. We do see that traffic volumes are being hampered in certain areas because of multiple areas. This will be compensated by an increase in frequency eventually, like in Dhaka. We have not said we’ll not deploy our own towers, but we will have access to existing towers which will take down the capex levels significantly, and speed up roll-out.