onmobile identity

Mobile VAS and ring back tone (RBT) company, Onmobile Global reported a net loss of Rs 7.63 crore for the quarter ended December 31, 2015. Here we list the key takeaways from the call with analysts:

On revenues:
Rajiv Pancholy, MD & CEO, “The situation in which we are operating today in many geographies is very challenging…see the utter unpredictability of what’s happening in markets of the world over. It’s nothing to do with OnMobile.. Legacy business is operating in various geographies where the economic outlook is anything but stable. Currency fluctuations are the norm and consumer behavior is very volatile… hence we are seeing more than the usual variability in performance in almost all the geographies in which OnMobile operates..”

On Telisma sale:
– Full divestiture of Telisma speech business unit for the purpose of getting speech recommendation technology. Pancholy, “Today as a set of customer base moves towards users’ adoption of smartphones, this technology is no longer critical to our future offerings.”

– Pancholy, “It was more of a technology acquisition, and over the last few years it has helped us get into multiple geographies a bit more faster and in easy manner. We acquired this around at Rs 70 crore way back in 2007, and right now we have sold it off for a nominal amount.”

Company highlights:

– Renewed relationship with BSNL for 3 years with an option to renew for a further 1 year.

– Selected by the Reliance Communications to offer our RBT service on a national basis.

– Latin America (LatAm) prone to the currency fluctuations, along with 1-2 high risk countries. Turnover of LatAm and Africa, excluding Europe markets: about 30% of the overall turnover.

– Pancholy: “Today we have a depreciation of roughly about Rs 38 crores per quarter. And this is going to come down by half; it’ll exactly come down by half. So it’ll be somewhere around Rs 18 crore per quarter.”

– CVAS got good traction in the developed markets.

– “The service is based on connectivity with the operator’s networks. So, that will remain fundamental.”

– North America percentage of revenue today is just 3-4%.

On new products:

– Pancholy: “On implementing new products, the revenues should significantly shift from the legacy products to the new products for a period of next 3 years.”

– Pancholy: “In RBT it’s difficult to say that there’s nobody else who has exactly the same thing or who doesn’t have.. our new products will in fact focus on some spaces which have historically not been taken. We have taken two different paths: one is extensive market research along with prototypes and mockups in principal markets, one of them being India.. And I think one of the key highlights is there is needed a shift in demographics when we go with the new products. We are looking maybe a different class of users than the historical RBT users.”

On revenue mode:
– Pancholy, “It’ll be a mixture of subscription-based, monthly, yearly because we’re not talking of one specific product, a blueprint basically envisages multiple apps, and within those apps there are many different scenarios, there is certainly a subscription-based scenario, there is also a per user scenario, there is a premium scenario. So, there is no one single formula that applies across all the apps.”

On revenues going down:
– Pancholy, “..One is year over year the revenue share that we have historically had with operators has gone down, which is the principle set of things. The consumption of the service has not come down but our revenue share contractually has gone down… If you look at the number of paid user base, they continue to climb, and yet the recorded revenue continues to drop..”

Praveen Kumar, Chief Financial Officer, “In terms of not being able to generate cash, I don’t agree with it, because we have been saying that effectively our EBITDA minus what the taxes what we generate, so we have been generating cash quarter after quarter, you can look at the historical numbers, add the capital payouts like the dividends and all that, and it is very clearly evident.

On revenue model:
– Pancholy, “… On RBT, our set of relationships with the operator was based on a revenue share agreement. Now, when you actually talk on the consumers and the research we’ve done, when you go beyond the traditional RBT service, the subscription-based model is not necessarily the preferred model. What the consumer is saying is that basically in certain cases like to have a pay per use model.”

Pancholy, “In certain cases they prefer premium model where certain basic features are available for free and then people pay. So there’s a variety of new models that are coming to play with the new offerings in addition to the traditional subscription model.”

-Kumar, “Around 50% of revenue comes from RBT. Around 30-35% comes from CVAS, and the rest from the traditional models of infotainment, etc… I mean we don’t bifurcate anything called data. It is the legacy infotainment products that we have.”

– Pancholy, “In initial phase, RBT was a bigger contributor. But the last 1.5 years, CVAS has seen some remarkable growth in terms of the weight of growth at this moment. There’s no question, CVAS has a higher rate of growth for OnMobile than RBT, to the point it has become a fairly significant chunk of our business.

On buying back 55 lakh shares:

Pancholy, “We believe this is the most equitable way of using a cash reserve while maintaining sufficient amounts for future use and for introducing the new offerings. It also fundamentally underscores our confidence in the future of our company.”

– Pancholy, “Our position has been very clear, that first of all we’re very fortunate that we generate cash quarter after quarter. The second thing is our cash is basically to be used primarily for basically fueling growth and any growth initiative… any cash that we do not require for fueling of growth in the future we will basically use in some way, shape, or form to pass back on to the shareholders..”

On cannibalisation of revenues by RBT/CVAS:

Pancholy: “I think it’s a very, very complicated answer. And that’s why I’m not going to answer that question. To give you a clear answer, you have to constraint the rollout into one country, one geography and say here new product is a legacy product and therefore here is the cannibalization, here is the cross impact. And the second reason is it’s a single product that somehow replacing a traditional RBT business either. I talked about the fact that it will be multiple apps.”

– Pancholy, “And in fact there’s definitely cross play between all these apps. Second part which makes it complicated is that we go through a period of time where the certain geographies will have new products and certain geographies won’t. And that’s going to be a conscious decision… and these new geographies will be running purely on a legacy model.”

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