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OnMobile Q3-FY12 Concall Live: Mouli Raman Is CEO; TRAI MVAS Relaxation?

OnMobile’s had a tough quarter, with a significant 28% decline in India revenues, but a significant growth in International business across markets, with more deployment, more revenues. More on that here. Here are our notes from the conference call:

1002 hrs: Reasonably satisfied with the results, with the uptake of services in Latin America and Africa. There’s an increase in RBT in Europe. Coming to India: Indian business in under stress, and we expect it to continue for 1-2 quarters before it moves in the positive directions. There have been meetings with operators and TRAI. Everybody is converging on the solution, and which will be not be as onerous as the september directive. We are continuing to work on making the initiatives focused. There’s a minor impact on the current quarter, but it will increase with time. International business has contributed 54% of revenues. Latin America is robust, up 105%. Africa revenues are predominantly coming from RBT. In Europe, we have secured 2 major contracts for marketing services, and have seen good revenue growth. India continues to be depressed, and it contributes 36% of our overall revenues. The degrowth between Q3 and Q2 is because of one operator, where some circles, we were replaced by another party, and regulatory issues. We’ve started derisking, and launched a proof of concept with the government of Karnataka.

1008 hrs: Emerging markets have gone up to 40% of revenue, and developed markets to 20 percent.

1009 hrs: Mouli Raman, has been unanimously selected by the board as the CEO of OnMobile.

1010 hrs: We’ve had decline in manpower cost, and the full impact will be seen in Q4.

1015 hrs: Three more operators are coming live over the course of this year in Europe. We’re agressive on the sales effort on RBT, and we’ll see more revenues from RBT going forward.

Africa revenue for the quarter is Rs 13.2 crore

1018 hrs: Effective tax rate will be ~35% as we close the year, but the improvement will not in excess of 2-3 percent.

1021 hrs: We expect a drop in India revenues over the next 1-2 quarters, and stabiliziation in the first quarter of next year. Factors driving the growth in India, there will be consumer trust with these policies, so they will experiment more. Services will be consumer friendly, so we will see better services. Operators have realized that we need an open ecosystem. It won’t be just the operators providing mobile services, like the government services. India should grow 15-20% (CAGR?) in the next three years.

1024 hrs: Lat Am operations have broken even and are contributing cash to the company.

1025 hrs: IF we get a chance to ask OnMobile questions, this is what we’ll ask them:
– RBT contribution has actually increased. What about derisking on the product side? What is the status of the data products that the company was rolling out
– OnMobile has actually exiting the mobile marketing space, whereas that appears to be an area of growth in India. Why? Will OnMobile look at Mobile Advertising as an opportunity?
– What’s the status of Dilithium’s Unit in the US. Is OnMobile rolling back video services?
We’re in queue, but waiting (waiting, waiting, waiting).

1030 hrs: On TRAI Mobile VAS guidelines being relaxed: It will be possible for services to be provisioned with customer consent, with the second confirmation coming from the operator system. The operator has to independently verify subscription. The first one can come from any VAS provider. When you say ‘buy’, it will take consumers to an operators pipe, where information will be given, and confirmation will be from the operators pipe.

The deadline has been set in. The deactivation guidelines have been implemented. There’s a common number across operators which is being publicized now. The activations should be rolled out in the next week. There is some latitude on the activations.

1034 hrs: No comments on breakup between Continental Europe and America. Emerging Markets is Rs 77 crore, India is Rs 63 crores, and developed markets in 35 Crores.

1043 hrs: The answers to our questions: OnMobile will not play in the mobile marketing space. They’re rationalizing products, and will be in a position to speak about products in the next few quarters, not now. They’ve rationalized some products, among which is one of Dilithum’s, as a part of which there has been manpower reduction.

1049 hrs: (questions on tax and finances)

1055 hrs: Investors calling for a dividend payout or a buyback over the next few quarters. How myopic.

1059 hrs: Mouli: “If we’re able to show 2-3 success stories in Europe, we should be able to get more customers for RBT. On the other front, we have been working on products, and rationalizing product lines. We will focus on fewer initiatives, but will do a great job better and profitable services in the operators we are live with. That is what makes us confident that over the next 2-3 years, we can see good growth. We are working on improving the profitability. “…”We’re looking to bring in more efficiencies, especially on the hardware, to make them more efficient. This should give us better profitability.”

On working capital cycle: What we directly influence is our content costs, which we can push payment cycles. As far as the end customers are concerned, the focus is on improving the collections cycle. It is our view that as we increase our international footprint, our international customers follow a better payment cycles, this will help improve receivables. It’s a continuing effort.

As far as buyback is concerned, the board will take a call on this, as we’re able to repatriate money held up in Bangladesh and LatAm.

1103 hrs: Perspective on 2-3 years, and capitalizing on data? Mouli avoided answering the question when we asked it. Mouli avoids the question again, saying they’ll announce new products soon.

1104 hrs: Last question is on tax rate. Meh.

1105 hrs: Last (last) question is on developed markets. “The increase in revenues in developed markets is because the RBT deployment has seen more revenues, and on the data products side, we’ve had licensing revenues come in.” So is this growth sustainable? “The revenues coming from RBT is sustainable, but on licensing, it goes up and down. On emerging markets, LatAm is showing robust growth, and Egypt and Africa have been decent. It’s a combination of new rollouts, and penetration among current customers. Growth will continue.”

Amen. On that positive note, the call ends. I’ll stop typing now.

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