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Beyond Voice: VAS companies look to leverage 3G opportunity

April 29, 2011
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With the launch of high speed data services through 3G and broadband wireless access technologies, the mobile value-added service (MVAS) market is expected to generate revenues of over Rs 550 billion in the next four years. In light of this, VAS companies in India are aggressively scaling up operations, and consolidating and building their technology platforms.

“It is time for India to evolve from the well-established mobile messaging and commoditised voice play to focus on customer segmentation-based data play,” states the recently released PricewaterhouseCooper (PwC) report, Value Added Service: The Next Wave.

According to Sivarama Krishnan, executive director, consulting, PwC India, the country has various consumer segments based on socio-economic, cultural and linguistic diversity. This diversity, coupled with a young and affluent population and the fact that India is yet to reach its potential in terms of broadband penetration, are indicative of the huge opportunity that mobile VAS offers in the country.

In India, which is the world’s fastest growing telecom sector, the VAS market size is valued at Rs 97.6 billion. According to research firm IMRB International, this market is expected to witness an annual growth of 70 per cent till 2014-15.

The major VAS players in this market include OnMobile, IMImobile, Spice Digital, Comviva, One97 Communications, Mobile2win, Mauj Telecom, mChek and Roamware.

tele.net takes a look at the current status as well as future plans of some of these companies...


In 2000, when OnMobile raised $13 million in the first round of funding, the company was valued at under Rs 2 billion. Over the years, with several rounds of funding and a successful market listing, which provided the company funds for expansion, the Bangalore-based MVAS provider has grown to become an over Rs 15 billion firm.

Today, OnMobile is India’s largest MVAS company with revenues of over Rs 4 billion and the only VAS operator to be listed on the bourses.

An early entrant in the Indian VAS space, OnMobile has a portfolio comprising telecom VAS, mobile content distribution, interactive media portals and m-commerce solutions.

The company sells unbranded products such as ringtones and phone back-up services to telecom operators. This approach seems to have worked, with the company serving about 100 telecom operators across 22 countries.

Its clientele includes all major mobile operators in India and several large global service providers. It has a tie-up with Vodafone to provide VAS offerings like ringback tones, a voice portal and speech-enabled services across the operator’s global operations.

The company’s growth so far has been both organic and inorganic. In December 2006, OnMobile acquired ITFinity Solutions with funding from Deutsche Bank, Goldman Sachs and Polygon Investment Partners.

In September 2007, it acquired French telecom software company Voxmobili for Rs 1.5 billion. The acquisition enabled OnMobile to expand its portfolio, which had been focusing primarily on voice-based VAS products, to include VAS data products. It also provided OnMobile a springboard for entering Europe and North America, where Voxmobili’s customers included major players like Orange Communications SA, TMobile International AG, the Vodafone Group and AT&T.

By acquiring French speech recognition company Telisma SA in July 2008, the company expanded its voice-based services to cover languages like Spanish, Thai and Arabic. The Euro 11 million acquisition provided OnMobile access to Telisma’s technology. Funds for this acquisition were raised through an initial public offering (IPO) in 2008. The 10.9 million equity share IPO was oversubscribed nearly 11 times (the issue received bids for over 119 million shares). The company had earlier raised around $30 million through a pre-IPO placement. George Soros’s Quantum Fund, Bessemer India Capital and the Wardferry India Reconnaissance Fund picked up 3.54 per cent, 0.9 per cent and 0.95 per cent stakes respectively.

Currently, the company is expanding rapidly in overseas markets following deals with some of the world’s largest telecom operators including the Vodafone Group in April 2010 and Spanish operator Telefonica SA in July 2010. The company also launched services in three Latin American markets in the quarter ended December 2010, taking the total number of markets in the region to six.

The acquisition of the US-based Dilithium Networks in October 2010 added 3G-based products to OnMobile’s portfolio. With global operations accounting for about 31 per cent of its revenues (compared to 23 per cent a year ago), OnMobile is expected to become a key global player in the near future. The company’s overseas business is expected to account for 50 per cent of its total revenues in the next three years.


Founded in 1999 by Vishwanath Alluri, IMImobile has emerged as a key VAS player in India and is set to make a mark in the global VAS space as well.

Within a year of starting operations, the company raised funds of $1 million. In 2005, it raised about $3 million from NewMedia Spark, a UK-based venture capital fund, for the expansion of local development teams, setting up its research and development unit, and for overseas expansion. In 2006, the company raised another $10 million from Pequot Ventures. In yet another round of funding, in 2009, IMImobile raised $13 million from Sequoia Capital and First Mark Capital. These funds were mostly used for acquisitions. Following this, it acquired WinPLC for $26 million in October 2010. This was the company’s first major overseas acquisition for which it also raised a debt of $9 million.

The acquisition provided the combined entity access to major European mobile operators as Win already had technical and customer relationships with Tier 1 European operators. The combined entity has a workforce of about 650 and provides managed mobile services to over 100 operators and businesses in 70 countries.

In November 2008, IMImobile acquired dx3, a London-based digital content delivery service provider. With a presence in 40 countries across Asia, Africa, Latin America and the Middle East, IMImobile’s acquisition of dx3 was its first step towards business expansion to Europe. In February 2009, IMImobile bought the Music2You service earlier provided by Nokia Siemens Networks.

The company has been active on the domestic front too. In June 2010, it partnered with Bharti airtel to introduce the Cell Shakti service for rural Indians. The voice-based service offers information (such as weather forecasts) as well as education on issues such as health care, and law and order. IMImobile has also powered airtel Live, a comprehensive WAP portal with content on movies, music, sports, news and mobile games.

Prior to the Cricket World Cup 2011 and the Indian Premier League 2011, the company tied up with krishcricket.com in February 2011 for providing cricket-related information through operators across the globe.

Currently, the VAS operator is also looking at the opportunities offered by the launch of 3G networks in India. “With 3G, VAS offerings are going to scale new heights as it will boost mobile broadband penetration and enable high speed data transfer, video downloads, video streaming, etc. Video-on-demand is expected to rule the roost now,” says Alluri.

The Hyderabad-based value-added infrastructure and service provider has tied up with operators such as Aircel for providing 3G services in India. It has also provided the platform for Aircel’s 3G experience zone in Chennai.

Alluri believes that 3G has a huge potential in rural India. “Videos and pictures of 3G services will play a critical role in pushing 3G adoption in the rural market. It will make up for the low PC penetration,” he says.


A Bharti Enterprise subsidiary, Comviva (formerly Bharti Telesoft) develops software that allows operators to provide services such as music and video on mobile phones. While Bharti airtel, another Bharti Enterprise company, has traditionally been Comviva’s main client, today, the VAS operator has customers in more than 85 countries.

The company’s key focus area has been business expansion in emerging markets in Africa and Asia. According to Manoranjan Mohapatra, chief executive officer, Comviva, “Though mobile penetration in many developed markets has crossed 100 per cent, there is significant scope for growth in emerging markets, where just one-third of the population uses mobile communication services.” In September 2010, Comviva signed a deal with MTN Ghana for providing virtual SIM solutions. The solution allows users to make and receive calls, send and receive SMSs, and make payments virtually, through others’ phones. Earlier, Comviva’s next-generation PreTUPS electronic top-up platform was deployed by Vodafone Egypt to provide e-recharge services to its 24.6 million subscribers.

More recently, Comviva signed two content deals – with Africa-based content aggregation and platform company Inmobia, and Starfish Mobile – for content on ringback tones. Inmobia’s content portfolio includes games, music, ringtones, video shows and clips, wallpapers, news and sports. Its platform is used by over 20 telecom operators across the globe.

Comviva is likely to announce another three-four content deals in the region in the near future. Currently, Africa contributes over 30 per cent of the company’s revenues.

The company is also working with all major mobile operators in Bangladesh. In January 2011, the VAS provider formed a strategic partnership with airtel Bangladesh to provide messaging solutions like Unstructured Supplementary Service Data, Short Message Service Center and Bulk Messaging Gateway. In October 2010, it partnered with Banglalink, the second largest cellular service provider in the country, to deliver mWallet services on its mobiquity m-commerce platform. The platform enables the mobile channel to create a flexible, far-reaching financial services delivery network using the mobile phone as a cash-free and card-free transaction medium.

Like most VAS companies in India, Comviva has received private equity investments in the past. While Bharti Enterprises owns a majority share in Comviva, in 2005, private equity fund Sequoia Capital and Cisco Systems, Inc. bought an unspecified stake for $13.5 million.

However, Bharti Enterprises is now looking to sell a controlling stake in its mobile software development unit. Market estimates value the firm at $300 million-$400 million. This would be the second largest sellout in the Indian technology industry in 2011-12 after the founding family of Patni Computers decided to sell its stake to US-listed outsourcing firm iGate Corporation in a deal valued at about $1.22 billion.

Bharti has appointed a merchant bank for the sale and offered to sell Comviva.

Spice Digital 

Incorporated in 2000, Spice Digital, a Spice group company, has emerged as a key VAS player in India. Its large product portfolio, which comprises mobile radio, content uploading, mobile advertising, background music, select caller lists, voicemail, missed call alerts, etc., is designed to cater to the needs of multi-cultural and multilingual subscribers. Its voice-based services include technologies like R2 signalling, ISDN signalling, SS7, interactive voice response, automatic speech recognition and text-to-speech, while its data-based services include technologies like USSD, WAP and GPRS.

The company’s customer base in India is diverse and covers verticals such as telecom, media and entertainment, transportation and banking. Its key clients include Bharti airtel, Bharat Sanchar Nigam Limited (BSNL), Vodafone Essar, Aaj Tak, Dainik Jagran, Air India, ICICI Bank and ABN Amro.

The company has been preparing for the launch of 3G services for the past two years. In December 2010, Spice Digital acquired Malaysia-based Beoworld, another VAS company. The $2 million acquisition will help Spice promote and monetise third-party applications and content for mobile devices. According to a media statement by B.K. Modi, chairman, Spice Group, “With the growth of smartphones, the mobile device today has become more application oriented. This acquisition will help the company prepare for 3G.”

Spice Digital has tied up with several major operators offering 3G services. Apart from private telecom companies like Bharti airtel and Vodafone Essar, it has been working with both Mahanagar Telephone Nigam Limited and BSNL since 2009, when the two government-owned operators launched these services.

In addition, the company has entered into several industry alliances in order to diversify its portfolio. Spice has signed  content deals for music streaming services with Phonographic Performance Limited (PPL) and Hungama Digital Media, which holds licences for content for T-Series. The agreement has provided the company access to Hungama’s large music content for mobile radio streaming services. The Spice-PPL deal covers three mobile operators – Bharti airtel, Idea Cellular and Vodafone Essar.

Spice has also tied up with a couple of big regional brands like VeeGee and SurMandir. In a related development, Mirchi Mobile, a product designed by Radio Mirchi and Spice Digital, which was launched for Bharti airtel’s subscribers a few months ago, will now be available to Reliance Communications and BSNL subscribers as well. 

The company is now planning to launch an IPO in 2011-12 and raise over Rs 2 billion. Spice Digital, which is valued at around Rs 16 billion, may dilute a 20-25 per cent stake. The company plans to use the funds for improving its research and development facility, setting up a design studio, brand building and entering foreign markets including South Africa, the Middle East and Southeast Asia.

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