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OnMobile Q3FY12 Concall: 3G Will Take Time; Direct To Consumer; Telcos vs OEMs; Airtel Africa

We were reporting on the OnMobile Q3FY12 concall live. For the results, click here. Notes from the concall:

11:03 am: The India part has decreased in terms of (revenue) contribution, and a part of that is relfected in terms of a change in scope for a very large customer of ours. In the emerging markets, LatAm, SEA, AsiaPac, we’re extremely happy on that. In the North America market, very large customers have been launched in the last one or two quarters.

In terms of organizational changes, in terms of the OnMobile 2020 plan: we’ve had a board change, with Harit Nagpal coming on board, who has extreme depth in the market, in terms of consumer marketing and brand building, as we move towards direct to consumer business.

Amit Rastogi: (Introduces himself)

Praveen Kumar: Financial info being shared.

Q&A begins

11:11 am: (In Latin America) we would get 15-20% adoption rate over the course of the contract, and it is now around 5%, which is higher than 1% that it was when we took over. There is an upside. The contract requires us to deploy 15-20 products, whereas we have only deployed 2-3.

11:13 am: There has been no change in pricing in the LatAm market. The ARPU to Onmobile is significantly higher, around 3-3.5 times of that in India.

11:14 am: Will be investing in large projects in North America and Africa, but it will be significantly lower in terms of investment required (as compared to LatAm).

11:15 am: Four deployments on a revenue share basis in India, and there is good traction in Africa for the Dilithium products.

Arvind Rao: “I’ve said it before, and I’ll say it again. I dont expect a material contribution from 3G VAS for 3-4 years.”

11:17 am: Mobile Internet is nothing more than VAS services accessed through the data channel. By that extent, in our overseas markets, in Europe and North America, we are already a mobile Internet company. 10-15% percent of our revenues are from mobile address books, backup, deployed with Orange, AT&T, Rogers (Canada). From a product standpoint, we’re going to be more and more a mobile Internet company, but from a revenue standpoint, it won’t be the same. For Mobile VAS, there has to be active users, and high quality network. These things take behavioral change, and not many use it as a data access. There are structural industry issues. We have deployed our platforms and our products are ready, and as soon as we see the core usage, we can participate in the Indian story.

11:22 am: The Indian VAS market, 5 years out, it would be 2-3x the size of the Indian market today. It won’t be a linear growth, and there will be a little bit of a flat growth, the TRAI issues are not going away, and 3G issues of quality of network, and services like video calling will take time. This is why we are derisking. I don’t see it turning for another 1-2 years. In terms of products, the biggest are is video, and we have infrastructure products and platforms. We have network compression technology, where we can compress bandwidth requirement by 30-40%. That’s what Dilithium brings to OnMobile. In terms of IVVR, video Portals, and Person to Person communication, like rich alerts, video calling.
Sanjay Uppal: the management of your personal data will move to the cloud, and we’re gearing up for that change and that shift.

11:25 am: Arvind Rao: The increase in data revenues that telcos are seeing is for access, things like dongles and fixed wireless. That is the first stage of the mobile Internet. There is very little role for OnMobile to play in the dongle phase, and the infra players and telcos benefit. The bulk of it will happen in a year or two years.

11:27 am: Because of the price differential, the ARPU in North America and Europe is high. We have got a large customer in North America and in Europe, we have signed customers, and we can announce them only when we go live. (ED: during the call, the company mentioned AT&T, which sounds like the new customer in North America, but we can’t be too sure)

11:30 am: The quality of the new subscriber base being added in India doesn’t make it an attractive market in terms of growth. The promotional and management bandwidth of telcos and operators has been moved away from 2G and 3G.

11:35 am: The promotional ability in terms of SMS and dialers in LatAm is limited, so regulatory action there is unlikely.

We’ve had some rumblings from customers, we’ve had feedback that they would not like their names talked about until they’re well established in their market. In the overseas markets, there are 2-3 large gorillas, and it is a very competitive market, and it’s a marketshare game because these are saturated markets.

11:40 am: (On tying up with telcos vs tying up with handset manufacturers) “Right now our emphasis contineus to be on telcos. In particular we look at our North American and Europeam units, and this these are cross device, and the product works on iphone, symbian and different OS.

The RBT subscriber base has been more or less flat, and not gone up significantly following the TRAI guidelines.

(On the language piece) 80-85% of speaking population in India is covered. In Africa, the rollout with Airtel covers adapting services to local languages, and language search has been deployed with Telefonica in LatAm.

11:45 am: We’re doing multiple services for Bharti in multiple countries. As far as the scope of contract that has been awarded to us, we’ve launched certain services in certain countries. The full impact will be 2-3 quarters down the road.

11:49 am: We’re of the opinion that the content deals are such that deals are directly done between the telco and the content supplier.

This company has been a telecom operator based managed services business model, and we’ll continue pressing as hard on the accelerator as we can. There are services that are cross operator, and the market would not be served if a company like onmobile did not launch direct to consumer services. Over the next year, we will launch 1-2 direct to consumer services, whether in domestic and international markets. Most of these require high speed data, so International markets.

11:53 am: Employee costs are up due to investments in Latin America and Africa. We have a team of 70-80 people on the ground (in LatAm).

11:55 am: chances of not renewing the LatAm contract are very low.

11:57 am: going for overseas debt for reasons of arbitrage. We raise funds in our international locations, and excess cash balance in India is deployed.

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