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Q1-10 Call: OnMobile Global: TRAI Impact; AdRBT 100k Subs; Comviva; Social Phone Backup

Notes from the OnMobile Global Q1-10 Conference Call:

Indian VAS Market Outlook: “The Rural market is value conscious. People have around Rs. 50 balance on an average. Challenge is in pricing and packaging. Ad-RBT is an example of a product for that market, where users have limited revenue. You have to look for wallets beyond the consumer. Is there going to be a temporary effect of surge from a move to the rural market? yes. In the long run, we’re not worried. Second thing is, we’re seeing a large takeup in terms of smart phones. The price points for these smartphones are going down. Once data plans are affordable, there will be an explosion of data usage. That will be a mitigating factor.”

Pace of Deployment: “We’re witnessing unprecendented customer demand. There’s an explosive demand for VAS: Telco ARPU is falling and the pressure has mounted to a point where we are seeing receptiveness. We’re not going to feel shy of making that investment now because next year those deals may not be there. That’s the advantage of being a listed company, that we have the capital. If people wanted us to deliver on margins, we could do that. This is a growth story, and we wouldn’t do that from a business and competitive standpoint. We will not shy from going after customer contracts on a long term basis. We realized we’re working on 53 simultaneous deployments worldwide. This year will be a heavy investment year, given Telefonica.”

How does the outsourcing deal between Bharti and Comviva affect OnMobile: “That’s an outsourced management of the VAS nodes. It does not involve much IT. The difference is – we would not go and manage services. Our competitive basis is product IP, and we would not manage. That is something that we would leave to the likes of Infosys and Wipro. We’re not looking to do labour arbitrage and operate on a cost-plus basis. Our model is to focus on IP. It does not affect anything we are doing. We will compete with Comviva in cases where their product IP competes with ours, but we would not compete with them on a services basis.”

AdRBT: is in beta, is live in 80% of Vodafone India circles and the company has signed up 100,000 subscribers. We have to be extremely cautious while rolling it out.

TRAI Impact: The industry is working together on the TRAI regulations (on out-bound dialers and subscription services). The interpretation of the impact of the regulation has varied from operator to operator. We hope that soon the interpretation will be uniform across all operators, and we hope it will reduce in terms of impact across the industry.

Vodafone Global agreement: first operator launched in Europe, on time and on budget. Looking to deploy one more customer in the next quarter. Vodacom will go live in October.

Phone Backup & Social Address Book: Allows sharing of phone contacts between various users, and we are looking at it as an entry point into providing a lot more services. Embedding in handsets helps increase activation. If you get in as a default solution, you have a larger chance of being there when rest of the Android phones are deployed. Phone backup deployments in India are with Airtel, Vodafone India, Idea. Indian operators are looking to launch at Rs. 35/month, and OnMobile get 25-30% of that.

Social Address Book for Android is an advanced version of phone backup, and has seen 256,000 downloads. The Address Book is the core product, and it is a strategic product for a telecom operators, as a means to launch their own social network.

Deployment With European Operators, Impact on cost: When we do a deal with a European operators, we have to deploy almost immediately. We’ve had to deploy some people from our own team, and had to get specialists in place. This had a cost of Rs. 3-4 crores this quarter. Revenue kicks in next 3 quarters. This European Operator deal is different from Vodafone and Telefonica.

Material impact from India: slowdown and restructing with two operators: network rollout was slowed down with one, and in another, it was internal restructuring

M-Radio: Signed on one operator in the SAARC region for M-Radio and have signed up 1million subs for mobile radio for one country in SAARC region.

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