OnMobile Q3 Profit Down, International Biz Now Comprises Half Of Total Revenues

Bangalore-based mobile value added services (VAS) company OnMobile Global Ltd biz has reported Rs 17.8 crore consolidated net profit for the third quarter ended December 31, 2011, down 62.6 per cent sequentially over the three months ended September 30 and 14.8 per cent lower compared to Q3 FY11.

This was partly because of a one-time gain in the previous quarter (due to sale of investment that buoyed Q2 bottom line) as also shrinking margins on a year-on-year basis as total expenses rose faster than total revenues during the quarter compared to Q3 FY11.

OnMobile, which offers various mobile products on SMS, Voice, Video, WAP, Web, USSD and On-Device Portals, saw revenue growth of 13.6 per cent year-on-year to Rs 168.83 crore during Q3 FY12. Sequentially, total revenues rose 8.7 per cent. Revenue growth was led by its international operations.

Highlights`

· International revenues contributed 48 per cent to topline revenues in Q3 as against 42 per cent in Q2. It was at 50 per cent of topline in the month of December.

· OnMobile's Telefonica LatAm project has recorded its first positive quarter on an operating basis. The project had turned cash-flow positive in the last quarter and is now operating-profit positive. OnMobile has launched with three more countries during the quarter taking its reach to 11 countries and 98 per cent of the addressable subscriber base in that market.

· Geographic derisking strategy continues and the firm's revenues from emerging markets outside India, now comprise a quarter of total for the nine months ended December 31, 2011.

· Amit Rastogi has joined as the new CFO after Rajesh Moorti quit last month. Rastogi moves in from GE after spending 15 years working in India, Asia and US. He has also worked in ANZ Bank and PwC prior to GE.

· OnMobile's India business has shrunk 10 per cent in revenues for the last four trailing quarters(2011) which should be a cause of concern. While it aids its derisking strategy and 75 per cent growth in international business has aided overall revenue growth which is well poised to cross the $100 million annual revenues mark this financial year ending March 31, 2012, analysts are keenly watching how OnMobile spruces up its Indian operations.

· For the last four quarters on a trailing basis operating profit margin has shrunk from 11 oer cent to 10 per cent even as EBITDA grew 15 per cent as depreciation costs jumped 36 per cent.

On the Bombay Stock Exchange, shares of OnMobile Global Ltd were trading at Rs 78.8, up over 2 per cent in a weak Mumbai market on Monday. The company's results were announced during the weekend.

The results include numbers of its subsidiaries and erstwhile associates such as OnMobile Singapore Pte Limited, PT OnMobile Indonesia, OnMobile Europe BV, VoxMobili SA, VoxMobili Inc., OnMobile SA (erstwhile Telisma SA), Phonetize Solutions Private Limited(under liquidation), OnMobile USA LLC, Servicios De Telefonia OnMobile SA DE CV, Ver se Innovation Private Limited (subsidiary upto September 29, 2009 and associate till February 7,2011), OnMobile Global SA (incorporated on April 10, 2010), OnMobile Brasil Sistemas de Valor Agregado Para Comunicacoes Moveis Ltda (incorporated on April 19, 2010), OnMobile DE Venezuela C.A (incorporated on November4, 2010), OnMobile Global for Telecommunication Services (incorporated on December 12,2010) and OnMobile Bangladesh Private Limited (incorporated on June 21,2011).

Waiting for 3G to take off:

In an earnings conference call, Arvind Rao, co-founder & CEO, OnMobile said the almost non-existent usage of 3G in India is holding back the company from unveiling its new product range for mobile Internet segment.

"In our overseas markets, in Europe and North America, we are already a mobile Internet company. 10-15 per cent of our revenues are from mobile address books, backup, deployed with Orange, AT&T, Rogers (Canada). From a product standpoint, we're going to be more and more a mobile Internet company, but from a revenue standpoint, it won't be the same. For Indian market, we have deployed our platforms and our products are ready, and as soon as we see the core usage of 3G taking off, we can participate in the Indian story," he said.

Talking about the product portfolio for the Indian market Rao said: "In terms of products, the biggest area is video."

He also referred to opportunities in network compression technology (where it can compress bandwidth requirement by over a third). Other areas of interest would include video portals and P2P communication.

But he stressed on his view that it would be another 3-4 years before 3G takes off in India and till then it will a period of downturn or flat growth for OnMobile in Indian market.

Sanjay Uppal, president & COO, OnMobile said the company will also be foraying into the managing users' data space. "The management of your personal data will move to cloud and we are gearing up for that shift in the mobile space," he said.