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OnMobile Updates: Argo Capital; On Tanzania Operations; Arvind Rao Sells Shares

Update: In response to an emailed query from MediaNama, HH Haight, President and CEO of Argo Capital, and Chairman on Onmobile’s board, has said that “Argo Capital is not selling any OnMobile shares.” Argo Capital is the majority shareholder in OnMobile. MediaNama had heard from reliable sources that Argo Capital was looking to sell its shares, but OnMobile had denied that to Mint. Now Argo Capital had denied it too.

Updates (6th August 2012):
– Onmobile has issued the following clarification to MediaNama on its Tanzania operations:
“Our operations in Tanzania have not been affected by any stricture by the concerned Telecom Regulatory Authority and we continue to serve our customers there. Based on the advice from reputed counsel, we are of the view that white-labelled VAS players, who are not dealing directly with the end subscribers, do not need an operating license. The onus is on the operator. We are in touch with the regulator and if they believe that we need a license, we will comply with the same.”
– Onmobile’s former MD and CEO Arvind Rao has sold 18 lakh shares of the company at Rs 40.68 apiece, the total transaction valued at Rs 7.32 crore, according to bulk data available with the stock exchanges, reports the Economic Times

Earlier (31st July 2012): OnMobile Global has assigned the Mumbai-based investment bank Avendus Capital to assess its value for a possible sellout, reports Livemint. The report claims that several Indian corporations are vying for the company and that at least one company was prepping up to bid for it, however both OnMobile and Avendus Capital refused to share any details on the assignment that Avendus Capital is currently working on, to the publication.

The report also states that atleast two shareholders who have more than 10% stake in the company, have appointed another Mumbai-based domestic investment bank, to sell their stake in the company.

This development follows the resignation of OnMobile’s CEO and MD Arvind Rao and one of the company’s promoters and the appointment of Mouli Raman, OnMobile’s co-founder and Executive Director as an Interim Managing Director, while the company looks for a new CEO. At the same time, the company had also acknowledged that a special review completed by its legal advisors, Amarchand Mangaldas & Suresh A. Shroff, Advocates, duly supported by KPMG, has identified “weaknesses in some processes”. While the company didn’t clarify what these weaknesses were, it informed that it has taken steps to rectify these weaknesses.

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Tanzania Operations Cut Down: In a related development, the Tanzania government has cut down OnMobile’s business in the country after it found out that the company was doing business in the country without having a trading license, reports allAfrica. Tanzania’s Deputy Minister for Communications, Science and Technology, January Yusuf Makamba said that OnMobile had applied for a business license but the company had started trading in the country before even receiving the licence and it had already partnered with telcos like Vodacom and Airtel for its operations. Makamba said that the government has now instructed OnMobile through Tanzania Communications Regulatory Authority (TCRA) to wait until the company receives a legal trading license.

OnMobile Problems: According to a recent Forbes India article, OnMobile had 100 million subscribers and Rs 500 crore revenue by 2010, up from Rs 2 crore revenues in 2002. The company apparently had more than 20% profit margin and had presence in 52 countries. During the same time, Arvind Rao borrowed money by putting up nearly half his company shares as collateral, to buy company shares since he believed that OnMobile was heavily undervalued, according to the article.

However, OnMobile’s share price continued to dip further, and his personal interest payments started shooting up, worsening his personal finance situation. In order to arrest the dip in the share price, Rao launched a share buyback plan with a maximum buyback size of Rs 25 crores last year which was closed earlier this month, with the company buying 4 million shares at an average price of Rs 59.40 and a total value of Rs 23.76 crores, approximately 95.1% of the maximum buyback size of Rs 25 crore.

While the company posted a 19% annual growth in its revenues, its net profit declined by 6.8% YoY. For the quarter ending March 31, 2012 (Q4-FY12), it posted profits of Rs 4.79 crore, a significant 73.1% decline from its Q3-FY12 profits of Rs 17.80 crores and a massive 82.16% decline from its Q4-FY11 profits of Rs 26.85 crores. Adding to this, The Telecom Regulatory Authority of India (TRAI) had also blacklisted OnMobile for violating telemarketing regulations in April 2012 and its largest clients had started rolling their own service delivery platforms which can handle customer subscription and billing, reducing OnMobile’s position to a just another content provider, as indicated by the Forbes article.


Sandeep Ganguly, OnMobile’s Business Head Of Latin American Ops, Resigns
OnMobile Updates: Govt Seeks Report; Promoter Group Co Details
OnMobile CEO & MD Arvind Rao Resigns; Mouli Raman Is Interim MD
Updated: OnMobile Probing Fraud By CEO Arvind Rao: Report; Company Denies
OnMobile: On The Status Of Arvind Rao, Mouli Raman & Sanjay Uppal
OnMobile Ops Committee To Oversee Company Affairs; Arvind Rao To Look At International

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