Market Research Report : Mobile Value Added Services (MVAS) in India 2012

Mobile Value Added Services in India

March 2012

Executive Summary

Drivers:

Market

Drivers &

Challenges

�Mobile Value Added Services (MVAS) market size in India was around at INR x1 bn in 20--

�With low call and SMS charges, Telecom companies in India are increasingly getting dependent on revenues from MVAS for higher profitability

� Revenue earned from MVAS are shared amongst body1, body2, body3 and, body4 in y1:y2:y3:y4 ratio for content1

Challenges:

� Low Penetration in Rural Areas

� Low Average Revenue Per Unit

�Rising Mobile Device Adoption and

Colossal Wireless Subscriber Base

� Increase in Disposable Income and

Economic Advancement

2MOBILE VALUE ADDED SERVICES IN INDIA 2012.PPT

Trends & Developments

Competition

� TRAI Proposes proposal1

�Mobile VAS Program1

�MVAS for segment1

Major Players

ACL Wireless Ltd. CanvasM Technologies Ltd. Geodesic Ltd.

IMI Mobile Pvt. Ltd. One97 Communications Ltd. OnMobile Global Ltd.


� Introduction and Availability of Next

Generation Cellular Networks

� Extensive Usage of Plastic Money

•Introduction

•Market Overview

•Scope in India

�Vendor Opportunity

•Drivers & Challenges


•Drivers & Challenges

•Major MVAS Players

•Trends & Developments

•Strategic Recommendations

•Appendix

Introduction

Mobile Value Added Services (MVAS) Overview

• Mobile Value Added Services (MVAS) are the services provided by telecom operators directly or indirectly, beyond standard voice calls

• Majority of the MVAS products have the following common characteristics,

� It is not a form of basic service, rather adds value to total service offering

� Stands alone in terms of profitability

� Stimulates incremental demand for core service(s)

� It may stand alone operationally

� It does not cannibalize basic service(s)

� It may provide operational or administrative synergy among other services and it is not merely for diversification


Source:

Fundamental MVAS Value Chain

Element1 Element2 Element3 Element4 Element5

• The content1 of the product1 which will be served to consumers, are provided by element1

• Element2 create the product2 using tool1 and tool2

• Element3 provides technology1 for the product2 for operation1

• Element4 host the product3 on platform1 and offer the product to elemen5

Next generation telecom network and MVAS usage are

expected to grow side-by-side, helping each other mutually

• Mobile Value Added Services market size in India was valued at around INR x1 bn in 20--

• With low call and SMS charges, Telecom companies in India are increasingly getting dependent on revenues from MVAS for higher profitability

� Around x2% of the total revenue from mobile services, come from MVAS as per 20-- - --

� Telecom operators, investing heavily on technology1, is leveraging on product1 to generate returns and overcome cost of technology2

• Element1 in India is at a growth phase currently wherein operation1 has slowly started picking up along with product1 consumption, mutually benefiting each other to grow significantly

� Considerable adoption is expected between 20-- and 20-- and element2 will attain maturity phase afterwards

• Penetration of product1 in rural areas of the country is still low, standing at around x3-x4% as in 20--

Market Overview – India


• Penetration of product1 in rural areas of the country is still low, standing at around x3-x4% as in 20--

MVAS Market Size – India

INR bn

0

+Y1%

20--20--20--20--20--

Source:

Major MVAS Components & Revenue Sharing Model in India

MVAS Components

Operator

Services

• Product1

• Product2

• product3

Mobile Media• Product7

• Product8

• product9

Location-Based

Services

• Product16

• Product17

• product18

News and

Informative

Contents

• Product10

• Product11

• product12

Communication• Product4

• Product5

• product6Mobile Apps

• Product13• Product14• product15


Source:

• product9 Services• product18

MVAS Revenue Sharing Model

Content Type Body1 Body2 Body3 Body4

Content1 X1% x3% X5% x6%

Content2 x2% X4% x6% NA

• Revenue earned from MVAS are shared amongst body1, body2, body3 and, body4 in y1:y2:y3:y4 ratio for content1

• For content2 the revenue is split amongst body1, body2 & body3 in z1:z2:z3:z4 ratio

SWOT Analysis of MVAS Market in India

SWOT

Strengths

• Strength1

• Strength2

• Strength3

• Strength4

Weaknesses

• Weakness1

• Weakness2

• Weakness3

• Weakness4


SWOT

Analysis

Opportunities

• Opportunity1

• Opportunity2

• Opportunity3

• Opportunity4

Threats

• Threat1

• Threat2

• Threat3

• Threat4

Source:

Scope in India - Potential Verticals (-/-)

• Sector1 consists of segmentx1, segmentx2, segmentx3, segmentx4 and segmentx5

• Market size of the sector can be presented in the combined form of INR x1 tr and x2 mn unit consumption per

annum as of 20--

• MVAS can be implemented by processx1, benefitx1, usagex1 and applicationx1

Sector1

• Various services of different verticals can be delivered via Mobile Value Added Services

• MVAS not only ensures format diversity and delivery flexibility but also maximum reach due to the

presence of mammoth wireless subscriber base in the country


• Sector1 consists of segmenty1, segmenty2, segmenty3, segmenty4 and segmenty5

• Market size of the sector can be presented in the combined form of INR y1 tr and y2 mn unit consumption per

annum as of 20--

• MVAS can be implemented by processy1, benefity1, usagey1 and applicationy1

• Sector1 consists of segmentz1, segmentz2, segmentz3, segmentz4 and segmentz5

• Market size of the sector can be presented in the combined form of INR z1 tr and z mn unit consumption per

annum as of 20--

• MVAS can be implemented by processz1, benefitz1, usagez1 and applicationz1

Sector2

Sector3

Source:

‘Service1’ & ‘Service2’ segments in the

product1 market are of high relevance to m-commerce

Vendor Opportunity (2/5)

Mobile Commerce (m-Commerce)

• Mobile Commerce is the activity of commencing commercial transactions between both B2C and B2B entities via mobile devices

� It is a part of the broader, e-commerce market which accommodates any commercial transaction via internet

• Increasing tendency to save time and energy, especially amongst the working population will further intensify the e-Commerce market by a large extent

• Market size of e-Commerce is estimated to grow at a dynamic growth rate of x1% to reach INR x2 tr in 20-- from INR x3~ tr in 20--


x3~ tr in 20--

• Amongst all the e-commerce market segments, ‘Service1’ and ‘Service2’ are specially of high relevance to the m-commerce market

0

1

2

3 +y1%

20--20--

e-Commerce Market - Growth

0

50

100

20--

+y2%

20--

Service1 Market - Growth

0

50

100

20--

+y3%

20--

Service2 Market - Growth

Source:

Product1 Value ChainB

ran

d R

ep

rese

nta

tive

(Cli

en

t) Element5

Element1

Element2


Bra

nd

Re

pre

sen

tati

ve

Element4

Cellular Phone Tablet PCPortable

Media Player

Element2

Source:

Drivers & Challenges – Summary

Drivers

Rising Mobile Device Adoption and

Colossal Wireless Subscriber Base

Increase in Disposable Income and


Introduction and Availability of Next

Challenges


Introduction and Availability of Next

Generation Cellular Networks

Extensive Usage of Plastic Money

Soaring Enterprise Demand

Growing Demand for Rich Mobile

Contents

Low Penetration in Rural Areas

Low Average Revenue Per Unit

Public: Domestic Company – Company1 (-/-)

Company Information Offices and Centres – India

Corporate Address

Adress line1

Adress line2

City. Country

Tel No. +91- --- - -----

Fax No. ++91- --- - -----

Website www.------.com

Year of Incorporation 19--

Ticker Symbol ------

City Name

Head Office


Key People

Products and Services

Stock Exchange Exchange1

Category Products/Services

MVAS Products

• Utility VAS Solution

• M-Commerce Solution

• Mobile App development

• Digital Asset Management

Name Designation

Mr. X Chief Executive Officer

Mr. Y Chief Financial Officer

Mr. Z Chief Operating Officer

Head Office

Source:

• The company incurred a net profit of INR a1 mn in FY 20--, as


Financial Snapshot Key Ratios

Financial Summary

Net Profit/LossTotal Income

0

50

100

150

0

2

4

6

8

Profit

INR mn

Revenue

INR mn

20--

c4

20--

c3

20--

c2

20--

c1

Particulars y-o-y change

(2011-10)2011 2010 2009 2008

Profitability Ratios

Operating Margin 2.23 0.74% -1.49% -9.59% -10.70%

Net Margin -34.74 -35.26% -0.51% 1.00% -37.12%

Profit Before Tax Margin -53.05 -53.57% -0.51% -25.32% -12.44%

Return on Equity -10.93 -11.06% -0.14% 0.21% -5.79%

Return on Capital Employed 0.18 0.06% -0.12% -0.55% -0.48%

Return on Working Capital 78.72 77.98% -0.74% 0.18% -3.99%

Return on Assets -2.26 -2.29% -0.04% 0.05% -1.56%

Return on Fixed Assets -2.88 -2.94% -0.06% 0.09% -2.98%

Cost Ratios

Operating costs (% of Sales) -2.95 99.22% 102.16% 112.14% 113.76%


• The company incurred a net profit of INR a1 mn in FY 20--, as

compared to net profit of INR a2 mn in FY 20--

• The company reported total income of INR a3 mn in FY 20--,

registering an increase of a4 per cent over FY 20--

• The company earned an operating margin of a5 per cent in FY 20--,

an decrease of a6 percentage points over FY 20--

• The company reported debt to equity ratio of a7 in FY 20--, an

increase of a8 per cent over FY 20--

Key Financial Performance Indicators

Indicators Value (--/--/20--)

Market Capitalization (INR mn) 10,985

Total Enterprise Value (INR mn) 87,544

EPS (INR) 48.39

PE Ratio (Absolute) 66.9

Improved DeclineSource:

Operating costs (% of Sales) -2.95 99.22% 102.16% 112.14% 113.76%

Administration costs (% of

Sales)1.04 18.03% 17.00% 15.75% 18.00%

Interest costs (% of Sales) 20.57 63.33% 42.77% 45.59% 29.69%

Liquidity Ratios

Current Ratio -54.82% 0.82 1.81 4.42 7.13

Cash Ratio -96.41% 0.19 5.34 2.99 5.66

Leverage Ratios

Debt to Equity Ratio 45.86% 3.82 2.62 2.92 2.72

Debt to Capital Ratio 6.85% 0.75 0.70 0.72 0.71

Interest Coverage Ratio 124.52% 0.01 -0.05 -0.27 -0.46

Efficiency Ratios

Fixed Asset Turnover -9.25% 0.08 0.09 0.07 0.06

Asset Turnover 18.69% 0.06 0.05 0.04 0.03

Current Asset Turnover 5.19% 0.47 0.45 0.11 0.07

Working Capital Turnover -308.15% -2.08 1.00 0.14 0.08

Capital Employed Turnover 58.09% 0.29 0.19 0.16 0.12


Key Business Segments Key Geographic Segments

0%

50%

100%

20-- 20-- 20--20--

0%

50%

100%

20-- 20--20--20--

Product1 Product2 Product3 India Outside India


Key Information

Description Details

Overview

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Extended Product

Portfolio

• It offers products in the areas of m-commerce, entertainment, media portals and interactive television

programming, mobile marketing, user-generated content and social networking, mobile utility, data and

3G, and information and network through mobile access channels, such as voice, SMS, WAP, USSD, voice,

video, on-device portal, and Web

• Music products comprising Ring Back Tones (RBT), M-radio, reverse RBTs, devotional songs

Source:

Private: Domestic Company – Company2 (-/-)

Company Information Offices and Centres – India

Corporate Address

Adress line1

Adress line2

City. Country

Tel No. +91- --- - -----

Fax No. ++91- --- - -----

Website www.------.com

Year of Incorporation 19--

Ticker Symbol ------

City Name

Head Office


Key People

Products and Services

Stock Exchange Exchange1

Category Products/Services

MVAS Products

• Infotainment Services

• Mobile Media Contents

• Mobile Voice Solutions

• Call Management Solutions

Head Office

Source:

Name Designation

Mr. XChief Executive Officer and Chief

Operations Officer

Mr. Y President of Sales and Marketing

Financial Snapshot Key Ratios


Particulars y-o-y change

(2010-09)2011 2010 2009 2008

Profitability Ratios

Operating Margin -5.75 59.76% 65.51% 75.51% 84.64%

Net Margin -0.65 20.94% 21.58% 35.03% 43.42%

Profit Before Tax Margin 4.60 27.02% 22.41% 37.00% 46.07%

Return on Equity -0.44 16.63% 17.07% 44.01% 30.53%

Return on Capital Employed -3.04 57.06% 60.09% 121.39% 108.12%

Return on Working Capital -12.19 22.76% 34.95% 62.37% 51.28%

Return on Assets -0.41 16.59% 16.99% 43.60% 30.45%

Return on Fixed Assets 14.16 93.08% 78.92% 166.10% 98.92%

Cost Ratios

Operating costs (% of Sales) 5.58 36.86% 31.28% 22.96% 11.18%

Profit / Loss

Revenue

2,248,457.8

1,865,274.2

2,467,384.5

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

0

200,000

400,000

600,000

800,000

1,000,000

20102009

Profit

INR mn

Revenue

INR mn

20112008

770,874.4


Financial Summary

• The company incurred a net profit of INR 470,723 mn in

FY 2011, as compared to net profit of INR 402,544 mn in

FY 2010

• The company reported total income of INR 2,248,458 mn

in FY 2011, registering an increase of 20.5 per cent over

FY 2010

• The company earned an operating margin of 59.8 per

cent in FY 2011, a decrease of 5.8 percentage points over

FY 2010

Operating costs (% of Sales) 5.58 36.86% 31.28% 22.96% 11.18%

Administration costs (% of

Sales)-3.68 14.87% 18.56% 18.79% 21.10%

Interest costs (% of Sales) -0.01 0.04% 0.05% 0.00% 0.18%

Liquidity Ratios

Current Ratio 19.05% 5.28 4.44 4.10 2.32

Cash Ratio -19.59% 2.29 2.85 1.75 1.04

Leverage Ratios

Debt to Equity Ratio N.A. N.A. N.A. N.A. N.A.

Debt to Capital Ratio N.A. N.A. N.A. N.A. N.A.

Interest Coverage Ratio 25.57% 1791.20 1426.42 #DIV/0! 488.03

Efficiency Ratios

Fixed Asset Turnover 20.70% 4.21 3.49 4.65 2.17

Asset Turnover -0.12% 0.75 0.75 1.22 0.67

Current Asset Turnover -30.24% 0.83 1.20 1.32 0.64

Working Capital Turnover -33.35% 1.03 1.54 1.75 1.13

Capital Employed Turnover -0.31% 0.75 0.75 1.23 0.67

Improved Decline

20102009 20112008

Source:


Key Information

Description Details

Overview

• Company2 is a mobile media company which offers solutions for discovery, branding and

revenue generation on the mobile platform

• It caters to content destination management, mobile content creation, aggregation and

mobile marketing


Extended Product

Portfolio

• It offers MVAS solutions via SMS including contests, notifications, special offers, alerts,

WAP links, WAP portal development, mobile advertising, and content management and

distribution

• Its MVAS consultancy and support services include concept and ideation for brand

awareness, higher reach, lead generation, engagement, sales, interactivity, targeted

reach, and content delivery

• It also offers mobile online and offline games as direct consumer MVAS product

Source:

Trends & Developments

Introduction of

Biometrics in

Education

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Introduction of

Biometrics in

Education

Trend1

Biometric ID Cards

for Public

Transportation




Biometric ID Cards

for Public

Transportation

Trend2


Source:

Development2




Biometrics

Application in

Customs




Development1

Strategic Recommendations (-/-)

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Strategic Recommendation1

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Strategic Recommendation2

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Source:

Thank you for the attentionThe Mobile Value Added Services in India report is a part of Research on India’s Telecommunication Series. For more detailed information or customized research requirements please contact:

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E-Mail: [email protected]


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Market Research Report : Mobile Value Added Services (MVAS) in India 2012