| The Indian wireless telecommunications market aptly reflects the macroeconomic growth as well as the dramatic demographic shift that the country has witnessed over the past decade. The number of wireless subscribers in India has grown from a meagre 13 million in March 2003 to 221 million in November 2007. |
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| Even then, telecom penetration in India is lower than international standards, in spite of growing from 12.7 per cent in 2006 to 20 per cent in November 2007. Telecom penetration in India is likely to grow to 38.6 per cent in 2011, according to Gartner’s Forecast: Mobile Connections, Asia/Pacific, 2002-2011. Gartner estimates the number of cellular connections in India to surpass 400 million by 2011. The opportunity is humongous, and there are plenty a taker. |
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| Apart from cellular operators, there are companies that provide telecom equipment, tower companies and those providing support services to run the cellular networks. |
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| Talking business |
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| Fitting in the latter category is OnMobile Global, a telecom value added services (VAS) and software provider to cellular operators, internet as well as media industries. OnMobile functions as a content aggregator, provides software application services and delivery platforms for various value-added services that telecom operators globally offer to their users. |
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| Examples of its services include providing ringback tones, voicemails and missed call alerts, voice–based short messaging services, interactive information and entertainment solutions on mobile phones such as alerts and updates, and mobile commerce solutions like mobile ticketing and bill payments. “OnMobile’s services are white-labelled under the telecom operators’ brands, which helps us achieve economies of scale by having all the leading operators on our client list,” claims Arvind Rao, chief executive officer, OnMobile Global. |
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| Being one of the very few VAS players in India, OnMobile claims to command a whopping 95 per cent of this market. Telecom operators too, are shifting focus from traditional services to offering value added services, in order to tackle gradually falling average revenue per user (ARPU) in the wake of pressure on tariffs. Since the share of VAS revenues in a telecom operators’ pie, which is roughly 10 per cent, is likely to rise going forward. |
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| Stepping on |
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| From being an Infosys incubated startup in 2000, to growing into a Rs 100 crore plus global VAS content aggregator in 2007 with two acquisitions, OnMobile has had an impressive trajectory. It is now proposing an initial public offering (IPO) in the range of Rs 463.30-490.50 crore by issuing fresh shares amounting to 19 per cent of its fully diluted post-offer equity capital. |
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| This translates into a post-offer market capitalisation of Rs 2,440-2,583 crore. The price band for the issue is fixed between Rs 425-450 a share. From the issue proceeds, OnMobile plans to deploy Rs 180.50 crore to purchase equipment, while the rest will be used to repay loans. |
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| Growth trail |
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| Since its VAS solutions are telecom technology agnostic, OnMobile can have clients in all arenas including telecom players from GSM, CDMA and wired-line as well as media and internet companies for its voice, text and GPRS-based service offerings. OnMobile receives a share of its client companies’ revenues for the services it provides to the telecom operators’ users. |
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| Its clientele includes all the leading telecom operators in India, and a few from Australia, Bangladesh, Indonesia and Malaysia. “Once implemented, our solutions and equipment become an integrated part of telecom operators’ networks, which makes it difficult for the operator to change vendors,” claims Sandhya Gupta, head, M&A, investments and strategy, OnMobile. |
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| OnMobile has grown its top line at a 100 per cent compound annual growth rate (CAGR) over FY04-FY07, and delivered operating margins in excess of 45 per cent, and net margins of over 20 per cent. “Since our investment in developing the technology which is deployed at different clients is fixed in nature, every incremental rupee added to the top line brings about a more than proportionate increase in our bottom line,” says Rajesh Moorti, chief financial officer, OnMobile. OnMobile has carried out two acquisitions so far – Mumbai-based Itfinity in December 2006, and Voxmobili in France, in September 2007. |
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| Valuation |
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| The OnMobile issue is priced at 33 and 35 times estimated FY09 earnings at lower and upper end of the price band, respectively. Although there is no similar listed player operating at OnMobile’s scale in India to compare it with, Tanla Solutions operates as a content aggregator in developed telecom markets like the UK and Singapore. Tanla Solutions trades at less than 13 times estimated FY09 earnings. |