8/8/2019 3G WAVE

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RAM PRASAD SAHU

The launch of 3G andbroadband wirelessservices in the cur-rent financial yearcould see value-

added services take off. On theback of applications such as mo-bile TV, video, music downloads,as well as ringtones, the mobile

value-added services (MVAS)

market is expected to grow byabout 17 per cent annually from2009-10 through to 2015-16, be-lieves Frost & Sullivan.

This translates to a growthof over two-and-a-half times, toRs 12,900 crore, over this pe-riod. While there are a host ofcompanies in the sector, amongthe listed ones who stand to ben-efit from the MVAS growth sto-ry are Dish TV, OnMobile Glob-al, Tanla Solutions and Sarega-

ma, as well as UTV Software,which derives about a fifth of itsrevenues from games content.Notably, the individual com-panies should be able to growahead of the industry. Says San-tosh Sinha, industry analyst, ICTPractice, Frost & Sullivan, Ex-pect a 17 per cent CAGR overthe next five years, with the rev-enue of content providers ex-periencing faster increase, dueto improving revenue share.

Advantage VASThe MVAS providers can bebroadly split into twocon-tent providers (music, gaming,

videos) and technology enablers.The telecom operator that offersthe services gets to keep about60-70 per cent of the revenuesgenerated, while the rest is splitamong the enablers and contentdevelopers. Within the VAS seg-ments, SMS services account

for about 25 per cent of the mar-ket, while music-based contentsuch as ring tones tend to be themost popular, accounting forabout half of the market. Games,music downloads and videos to-gether account for only about aquarter, due to the lack of highspeed networks.

The 3G launch is likely to

change that. The potential canbe gauged by the fact that Chi-na Mobiles mobile internet traf-fic on its network tripled afterit launched 3G services last year.In India, post the launch of 3G,analysts expect the share of themobile VAS market as a per-centage of overall revenues tomove from just under 6 per cent

now to about 10 per cent by 2015.Even in the interim, the im-proving outlook is good newsfor most companies, given thata lot them had gone through atough 2009-10.

BeneficiariesDish TV is Indias largest DTHplayer with a 33 per cent mar-ket share. The company had en-tered into a tie-up with India-times last year to offer inter-

active services which wouldallow users to preview and down-load content (ring tones, wall-papers, text alerts and contests)on to their mobile handsets. Withdigitisation of cable services ex-pect this segment to improvesharply going ahead. The com-panys stock is trading at 5.3times its 2012-13 EV/Ebidta and

should post handsome returnsover a two year period.

OnMobile Global: The com-pany is a leading applicationservice provider, with a market

share of around 35 per cent. Af-ter a flattish performance overthe first half of 2009-10 in thedomestic market due to regu-latory issues, OnMobile Globalregistered a six per cent se-quential growth in the Marchquarter. Operating margins fell220 basis points due to highercontent costs. Given the pres-sure on the India business dueto rate pressure concerns,growth could depend on how

its international operations (25per cent of revenues), especiallyits deals with Telefonica and

Vodafone, pan out. The stock istrading at 22 times its 2010-11earnings and could be consid-

ered at dips.Tanla Solutions: This tele-

com infrastructure solutionscompany operates in the prod-ucts, network aggregation (SMS,

MMS), infrastructure manage-ment and mobile payment seg-ments. While its March quarterresults are encouraging, withrevenues growing about sevenper cent sequentially and mar-gins improving on account oflower sales cost, the near-termoutlook depends on the growthprospects of its key market ofthe UK. Post its five-year deal

with Nokia, it is focusing on mo-bile payment solutions. The com-

pany has also tied up with In-dian telecom operators andbroadcasters to offer pro-grammes on the handset. Whileits valuations are not demand-ing (six times 2010-11 earnings),concern over growth prospectsin its core UK operations maycap any upsides.

Saregama: Music downloadsand ringtones are among thefastest growing segments ofSaregamas businesses. The

company is launching new for-mats to leverage the strength ofits vast music catalogue. As mostof the growth in mobile VASis music-based, expect Sarega-ma to be a major gainer.

Other companies that, ana-lysts say, could also come intoplay are Balaji Tele, broadcast-ers like TV Today, Sun Networksand Zee News.

Launch of 3G services should boost fortunes of companies in themobile value-added services market

RIDING THE 3G WAVE

BINAY SINHA