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OnMobile Concall: Data & Cloud Service Plans, On DND Blacklisting, IT Competition, Restructuring

OnMobile CEO Arvind Rao declined to comment on the companys plans for restructuring during its conference call: sources had informed MediaNama that OnMobile is moving from an operator/customer centric structure to a regional structure for India, has appointed regional heads for at least two regions, and is considering appointing a country manager. Rao had declined to comment on the restructuring on email and reiterated this view when we asked on the conference call, saying that these are internal company matters.

He also said that OnMobile’s business has not been impacted significantly by TRAI guidelines (we asked specifically about Ringback tones), saying that the impact is largely due to subscribers churning out of telecom operators, and “that churn not finding replacement subscribers.”

On our question of whether Rao believes that there might be an impact on existing VAS players if IT majors like Infosys and TCS begin looking more aggressively at the Indian VAS market, Rao said that he doesn’t see any any threat or issues to worry about. “If you think about VAS and the Mobile Internet, almost every research is showing that this industry will be larger than the Internet”, and that if it is an open garden, anyone can enter, with new products. Onmobile plans to bring in new data centric products from its France R&D unit (VoxMobili) over the next six months. Rao said that many of the companys cloud services and data apps are live in North America and pointed towards its deployments with T-Mobile (in USA and Europe) and Rogers (in Canada) as indication of the type of mobile products they intend to roll out.

Rao said categorically that they are not looking at any acquisitions in the data space.

Notes from the concall (somewhat paraphrased):

11:04 PM: (Arvind Rao) We’ve approved a 10% dividend, which translates into 133 million rupees. The key thing to look at is the growth in our International revenues, because we’re in the early stage of a long growth cycle. There is a material shift from India to International. Telefonica is extremely happy with our performance. Our business in Africa and North America are also showing gains. In the last year, India was 73% of our revenue, and in the current year, it is 55%. Emerging markets went up to 28% of topline, and developed markets went up to 15% of topline. International revenues grew 94%

The India growth is being affected by the regulatory outlook and the uncertainty. Operators are going through a massive change in the business, in addition to the regulatory concern. On the positive side, we have launched a number of data services in the last year – WAP, USSD, Rich Alerts, which are showing good growth. We are planning to import from our France R&D Unit (Voxmobili) some data products, and will go live with cloud and connect apps services in India over the next six months.

11:09 PM: (Financials being shared. We’ve covered them here ) Spent Rs 58 crore during the year on CAPEX

11:12 PM: The largest customers for us are Airtel and Vodafone, and we have two things going on – the number of countries we’re launching in is increasing. The bulk of our business is concentrated in the older larger telecom operators – Airtel, Vodafone, Idea and Airtel. Even if certain licenses of new telecom operators are cancelled, the subscribers have to go somewhere.

11:17 PM: The India business is going through a structural shift between 2G and 3G, whereas overseas, there is a function of how fast we can execute.

11:18 PM: (On content fee) When we launch with an operator, the content either flows through us or through the operator. Because the operator deals with multiple VAS companies, as they grow larger, they prefer to deal with content themselves, but in some cases, we have seen the reverse model. We’ve seen different models in India and overseas. In India, we had a case where content flowing through us is now flowing through the operator.

11:26 PM: We met TRAI, and explained to them that it was a machine and technical error. One of our machines hung, and the files that were being used for scrubbing wasn’t being used. It happened over a holiday weekend, and we’re talking to TRAI about it. They’re understanding. The bulk of the promotions associated with that business are not being done by us. This is a business that over the last three years, we have consciously taken a call to get out of. I don’t see a material impact of this.

11:30 PM: The real turnaround in terms of domestic will be the launch of our data services. But right now, because of the regulatory outlook and the operators focus of making this transition to 3G, and there is some concern about how much spectrum there is for 3G VAS and Voice services.

11:32 PM: We’re working on the stake sale in Ver Se.

The share buyback is still on and will continue.

Have three R&D Units: in North America, France and Bangalore. We will always have multiple products and technologies.

No plans for an ADR

11:43 PM: There will always be situations where we make tradeoffs when someone comes with a much lower price. There have been cases of win-backs and some losses. The number of losses over the last six-seven years have been very small.

11:44 PM: We will complete the buyback program, and make an assessment on whether we do an additional buyback or not. There are rules that after you buy back, you cannot start another for a certain period of time.

11:46 PM: I’m not holding my breath on 3G, and we took a call two years ago, that we wont make our business contingent on this switch. We’ve been focusing diligently on our international efforts. If I look at the service penetration and adoption in our international markets, they are more mature. As we put more people in a market, the experience of our team tends to lower the risk. It’s taken less than four years to build an international business.

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