The Content Costs
When asked about the increase in content costs, which we’d pointed out in our analysis of their Q2 earnings, OnMobile Global CEO Arvind Rao said that this is a “fixed monthly fee that we’re paying is to a third party which is giving us some services which are used for launching a new project or a new product that a very large, but will not be rolled out until next quarter. That is a line item, which has no link to our existing revenues. It’s fixed on a monthly basis, based on certain parameters and results that they have to deliver to us.” Our sense (this is not officially confirmed) is that these are payments being made to the content partners that OnMobile has signed up in South India, and it corresponds with two significant deals they’ve struck – for powering the Ringback Tone (RBT) platform for Airtel in South India, and for du in the UAE.

Revenue Split
15-20% from data products
35-40% from voice portals etc
35-40% from RBT etc

AdRBT
Very little on the AdRBT: OnMobile expects to complete the test launch of AdRBT with Vodafone by the end of November and declined to share details of the results in the interim. They’re going slow on AdRBT in order to iron out the bugs, based on usage trends from the pilot. Results are encouraging, says Rao – “the numbers, based on consumer recall, are better than for the Internet.” Mobile Marketing SBU has around 20 odd people, who are working on two very large projects.

Impact of the slowdown?

 “We’re seeing unique opportunities to invest to expand internationally, and expand marketshare. We have increased investments in products and internationally in the last 6 months.” International revenues are up from 15% to 21% of revenues, but “we are seeing slower deployments”. No slowdown in signups, but deployment is slower – from 6 months up to 8-9 months. Revenues have been pushed out a little bit.” There’s not been much of a change in demand from end users and operators, though “There are some cases where operators may have promoted our services less due to market conditions.”

M&A
Potential targets: have gone back and made offers at substantially lower prices than what we may have done 6-9 months ago. But we’re using our cash (around Rs. 200 crores) more cautiously. But just because the company is cheap, doesn’t mean we’re going to buy it. We’re looking at M&A for for products, markets and raw technology. We are looking at market access acqusitions, whether in eastern Europe, China or Africa. But we have to be careful since in each market there’s enough junk out there.

VoxMobili
— has been largely responsible for our revenue from data services growing from 15 percent to 21 percent.

Deployments
 — Large investments have been made in AdRBT, MSearch, RBT replacement, and press * across operators; Revenues will take a quarter or two.
— Launched USSD services with one operator, and it’s getting us Rs. 50-60 lakhs per month, with hardly 5 people working on the product.
— In discussions with 3-4 Vodafone operators. Typically, operators have a very long sales cycle. Tied up with one very large Vodafone operator, and one large win in Africa, while others are in Europe.
— Have been chosen to be the strategic VAS partner for one operator out of Asia.

MSearch:
Other launch is mobile music search on SMS. Launched in 1 operator, now have order for 3 more operators. Mobile music search on voice across 3 operators deployment as well. Plan to deploy Local Search next
RBT:
— Had undertaken the largest RBT swap towards the end of the 1st quarter. Within a short period of 3 months, there’s been an increase in subscriber penetration, and ARPU. There are 2 large orders for RBT replacement out of India.
— Powering RBT for Aircel in South India
— Have a project for enabling cross-operator copying of RBT
MRadio:
have launched MRadio for the largest operator in Bangladesh. Already powering MRadio for Aircel
Phone Backup: Have gone live with phonebackup, with which has huge potential, but there’s a lag in revenues.

Telisma Replacing Nuance?
Have developed Malay and Thai language models for Telisma, and are currently developing 4 African language capabilities. On being asked about replacement of Nuance, he said that the primary rationale wasn’t for Nuance replacement. “The cost we’re paying Nuance are under our margin structure. The primary rationale was reducing time to market for other languages. What we could do with nuance in 8-10 months, can do with Telisma in 3-4 months, and at a fraction of the cost, and we own the IP. That said, we’ve started to replace Nuance in certain of our Indian businesses. We’ll do it tot he extend we can be effective with Nuance.”