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OnMobile moving from a network-centric 2G service provider to the app space

OnMobile Global

Editor’s note: We’re a little late with this, but in the context of recent developments at OnMobile, we thought that it’s important to give readers an overview of what was discussed during the company’s earnings conference call, at the end of May.

OnMobile Global introduced its next generation RBT (Ringback tone) product in March 2015, managing director and CEO Rajiv Pancholy said during the company’s Q4-FY15 earnings conference call. He mentioned that it is fundamentally a different kind of product and makes several new features available to the users of the RBT service, especially for smartphone users who are able to use newly designed application to interact with the new service.

This, Pancholy said, was the first introduction that OnMobile has made in its “transition away from a network-centric 2G service provider to an organization that generates applications in the smartphone space and today’s mechanism.”

The company claimed that it currently has a global customer base of over 1.5 billion, and that it witnesses around 500 million RBT plays per day.

RBT as a platform

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Responding to a analyst question Pancholy said that the RBT product which was conceived many years ago is not keeping pace with the current trends, in terms of mobile services consumption. “Here is a product or service which  fundamentally the person is paying for, but never gets to see the benefit. It is for the entertainment of somebody calling you. So it’s a very unusual kind of a thing, and that in many ways limit the benefits the payee is actually getting from the service. You can call it a fundamental flaw.”

According to Pancholy, OnMobile identified that they actually have “an even more richer asset in this company, which is we have the ability to leverage 8 to 10 seconds every mobile call by 1.5 billion people every day.” OnMobile is currently looking at RBT as a platform, and not just a service. “It’s a platform that allows us to exploit 8 to 10 seconds. I just want to reinforce that this 8 to 10 seconds is a monopolistic space. It’s not like the Internet where anybody can access it. So you’re looking at, based on today’s statistics, 1.5 billion addressable base of OnMobile, on average 6 to 7 calls per day, multiplied by 8 to 10 seconds. It’s a fantastic amount of real estate in which we can create a whole bunch of experiences and a whole bunch of services.”

Need to control pricing, B2C plans

Answering an analyst about what OnMobile has learnt in the few months since the next generation RBT product was launched, Pancholy said that one “key learning is that it is one thing to create a great product, but if you don’t control the entire cycle and normally include the element of pricing, you could have a great product but users will not take it because of the pricing. In today’s business relationships, that is one thing OnMobile does not control. So, I just want to go back to the initial comment I made that one of the models that we will unveil in addition to our traditional B2B model is that we must be able to go directly to the consumer and control that very important element of not only great product but commence a great pricing.”

Converged VAS (Value Added Service) product

In response to an analyst question, Pancholy said that the “Converged VAS product is an engine of growth especially for us in Europe. I cannot give specifics but we are indeed looking at both the initiatives expanding the reach of the product into new geographies, as well as going back to the traditional customers who are using RBT but not Converged VAS, and introducing them to OnMobile Converged VAS product. So both the activities are going on. I think as we see success, you will read about that. We
will be announcing and sharing that information.”

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Latin America deal renewal

Last month, OnMobile renewed its partnership with Telefónica’s Movistar operators in Latin American Spanish speaking countries for four more years. The company will power Ringback Tone services for Movistar across 13 countries, a potential user base of 132 million. The company had first inked a partnership with Telefonica in 2010, a five year deal, with a renewal clause built in (more here).

The Latin America deal is critical to OnMobile’s global expansion: where India once dominated the company’s revenues, the growth in international revenues and the decline in India revenues since 2010 has meant that the global business now accounts for 76% of OnMobile’s revenues. Following the LatAm deal, Onmobile had also inked a partnership with Telefonica in Spain.

US operations (OnMobile Live)

“We have succeeded, and I think this was achieved not now but I would say sometime back, an EBITDA break-even performance of that unit. We are trying to see some interesting market trends in the US where some of our principal customers actually having gone through a stage of decline, we are seeing basically a turnaround of the business. At this point in time, it’s modest. Nevertheless, the interaction of the revenues has changed in the US market place. The benefit of OnMobile Live is that it brought to us certain platforms that we are using to basically trigger growth particularly in Europe. If you look at the third quarter and the year that’s gone by, it has become a big source of growth and a big growth engine for us in OnMobile. We have done extremely well in Europe. And I would say in large based on the successive utilization of the platforms, we have got through the Live acquisition.”

OnMobile had acquired caller ringback tone services provider Livewire Mobile in June 2013 for $17.8 million.

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OnMobile Global had posted a net loss of Rs 14.59 crore for the quarter ended March 31, 2015, as compared to a loss of Rs 139.2 crore in the same quarter last year, and a profit of Rs 7.4 crore in the previous quarter. Note that the company didn’t report its India revenues for this quarter, which had accounted for 23% of Onmobile’s topline in the preceding quarter. Its International business accounted for 76% of the total revenues or Rs 162.64 crore, which would mean India revenues represent 24% of the total revenues or Rs 51.36 crore.

Headcount: Manpower cost has further reduced by around 5% from the previous quarter. The headcount has come down from 1180 at the end of Q3-FY15 to around 1147 at the end of Q4-FY15.

Download: Transcript

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