What Onmobile has to say on current VAS scenario.

No structural impact seen on VAS due to 3G roll outs

OnMobile has deployed its infrastructure to supports 3G products like video on demand & IVVR on several operator networks. However, the initial 3G revenues consists of charges for mobile broadband and operators are yet to cover pan-India, which implies product usage (& hence revenues) would take some time to fructify for OnMobile. Moreover, telcos have diverted a sizable chunk of ad spends towards creating awareness on 3G services which has had an impact on VAS promotional activity. Company has indicated such a phenomenon has a temporary dampening effect on revenues, but is unlikely to lead to any long-term structural shift away from VAS. 

Int’l revs to help diversify India-centric business

OnMobile is now live in 6 Latin American countries, as part of its Telefonica deployment and covers 80-85% of population. It has achieved ~1.5% penetration rate in large markets like Brazil, Mexico & Argentina; encouragingly, Lat-Am RBT ARPUs are ~2-3x that for India. International revenues have also risen from 25% to 32% in the past 4 quarters, which helps diversify what is hitherto an India-centric business.

   

Q4 results an aberration; growth momentum likely to continue

Q4 FY11 domestic revenue fell 12% qoq due to a change in the contractual scope whereby content management was removed from its responsibilities at a major telco, leading to a ~10% qoq contraction in topline; Ex-such change, sequential revenue is flat-company attributed this to a seasonally lean period for capex orders at its European units and newly acquired Dilithium (video products) business as well as weakness in European economy. We believe Q4 results do not form part of broader trend and expect growth momentum to resume as international revs ramp up led by Telefonica deployments.

Attractive valuation supports our BUY

OnMobile is set to report increased traction in revenues driven by leadership in domestic business and upsides from Telefonica and Vodafone deals. It has guided for Rs600-800mn in capex in the current fiscal, comfortably supported by ~Rs1.9bn in operating CF in FY12. Stock trades at 9.8x FY13 PER which provides an attractive entry point, in our view; maintain BUY. 

Valuation summary

Y/e 31 Mar, Rs. m	FY10	FY11E	FY12E	FY13E
Revenues	4,544	5,372	6,598	8,246
yoy growth (%)	11.8	18.2	22.8	25.0
Operating profit	831	1,206	1,544	2,111
OPM (%)	18.3	22.4	23.4	25.6
Pre-exceptional PAT	423	867	1,085	1,383
Reported PAT	428	892	1,085	1,383
yoy growth (%)	(49.8)	108.5	21.7	27.4
EPS (Rs)	3.7	7.8	9.2	11.7
P/E (x)	31.5	15.2	12.5	9.8
P/BV (x)	1.8	1.6	1.4	1.3
EV/EBITDA (x)	14.0	10.8	7.8	5.5
ROE (%)	5.9	11.4	12.2	13.7
ROCE (%)	7.5	11.8	14.4	17.7

Source: Company, India Infoline Research

Three ways Google can work with mobile operators to relieve network congestion

Google’s YouTube consumes 17% of all mobile data traffic, but Google is reportedly willing to help mitigate some of that impact

At some point, carriers and Internet content providers were bound to sit down and have a heart-to-heart over the devastating impact video and other high-bandwidth services are having on carriers mobile data networks. According to Bloomberg, we’ve reached that point: Google is in talks with some of the world’s largest operators about reducing the impact YouTube and other video services have on 3G and mobile broadband networks.

The choice of ambassador from the Internet industry is apt. Google isn’t just a powerhouse when it comes to mobile services and software, its YouTube division is the single largest culprit when it comes to eating up mobile bandwidth. Traffic management vendor Allot Communications’ most recent survey of its wireless customers networks found that YouTube alone accounted for 17% of all mobile data traffic, and 45% of all mobile video traffic in the second half of 2010—and it’s rapidly growing. In Europe and developed parts of Asia, YouTube is now more than 20% of mobile data traffic, according to Allot.

Bloomberg quoted YouTube executive Andrey Doronichev as saying that YouTube is exploring congestion mitigation policies with a number of operators and handset makers, though he declined to name the specific companies. In a separate story, Bloomberg reported that France Telecom was in talks with Google over similar issues.

What will those network bandwidth sparing policies or technologies look like? Bloomberg’s sources didn’t name specifics, but Allot marketing director Jonathan Gordon shared several possibilities with us:

1) The most direct method would be to simply have content providers compensate operators for the traffic they consume on their networks through revenue sharing deals, Gordon said. That’s probably the least likely scenario. Google would set a pretty dangerous precedent if it started paying operators for access, and it could also set itself on unequal footing with content providers who didn’t choose pay carriers for carriage. But operators could make such agreements more appealing to content providers if they offered something in return. YouTube might be exempted from data caps or metering, allowing unlimited use, if Google compensated the operator for every byte consumed. Operators could also prioritize YouTube traffic over other video on their networks to earn their fees, though such policies could easily run afoul of net neutrality.

2) The second method would be to cache YouTube and other Google content closer to subscribers, essentially extending Google’s content delivery networks (CDNs) into the mobile network, Morgan said. Wireless vendor Ericsson is already working with CDN company Akamai on such capabilities (CP: Ericsson, Akamai partner on mobile cloud acceleration). Using CDNs would alleviate a lot of traffic in operators’ transport and core networks, and possibly even the backhaul network if CDNs were pushed to the cellsite or aggregation node, but would do little to help out with the biggest—and most expensive—point of congestion, the radio access network. Customers, however, would definitely experience better video as there would be fewer bottlenecks up to the cell site, Gordon said.

3) The third method is video optimization or traffic shaping, which is still controversial but ultimately inevitable as networks become overloaded. Gordon pointed out that much of the video traffic on the network isn’t optimized for the device it’s being sent to, resulting in a lot of data being tossed out once it reaches its terminus. “The network can recognize the type of device on the fly, and, for example, transmit to an iPhone a lower quality stream than it would, say, an iPad,” Gordon said. . Since the video stream has only been downgraded to the maximum useful resolution of the device, customers would see no difference between an optimized and an un-optimized stream. While bandwidth is being limited, customers might actually experience better quality video, given higher quality streams have to fight their way through over congested networks, Gordon said.

Operators could take optimization one step further—and here’s where it gets controversial—by dynamically upgrading and downgrading video quality as network congestion levels on the network change. In such a scenario, the iPad user might only get an iPhone-quality YouTube stream if the cell it happened to be in was crowded. Operators would certainly face protests on net neutrality grounds, but Gordon said operators could avoid this by making it an opt-in service. Many customers might be willing to agree to such video constriction if it spared their data plans, Morgan said. Why pay full price for choppy video?
But carriers may ultimately implement such shaping policies network-wide, arguing that they benefit their subscribers as a whole. “It’s a trade off,” Gordon said. “Do consumers want high-quality video that stops and stutters, or do they want lower resolution video that streams normally?”

What route Google and the operators take—or even whether their talks amount to anything—remains to be seen. Bloomberg reported that compensation for access is off the table in Google’s discussions with France Telecom. That would mean some kind of network policy or traffic shaping solution is the most likely candidate, unless their exploring alternative access methods like Wi-Fi. Either way, any agreement between an operator and Google to mitigate network congestion would be of enormous import in this industry. It could even head off the almost inevitable showdown between operators and the content providers that use their networks.source

Mobile Service Helping Indian Farmers

A new mobile service is helping Indian farmers weather tough agricultural times, working to lower the suicide rates of those who struggle to make ends meet.

The new service, called "mKrishi," offers farmers in India information on everything from weather and crop diseases to where they can sell their produce, making their difficult lives a little bit easier. Arun Pande of Tata Consultancy Services' (TCS) Innovation Labs and his team are still perfecting mKrishi, which has so far debuted in four Maharashtran villages.

MKrishi enrollees use cameras equipped with cell phones and specialized software to snap and send in pictures of their crops. Experts from agricultural universities and companies then analyze the photos with a web application, offering instant advice to the farmers via text messages and voicemail on what pesticides to use or weather to expect.

For the weather reports to work, farming villages must set up sensor networks and weather stations to provide experts with localized data. Crop disease forecasting is more difficult because the sensors cannot measure all the various factors needed to predict when plants will become ill or suffer an insect attack. Still, mKrishi won MIT's Technology Review Grand Challenge this year for alerting farmers whenever possible to the threat of crop diseases.

"We expect preventive measures will reduce the cost of expensive pesticide once the disease is set in," Pande said.

MKrishi has so far helped cotton, grape, potato and soybean farmers in four villages to increase productivity and decrease pesticide use. The Grape Growers Association, fertilizer manufacturers and NGOs are now eager to use mKrishi, spurring Pande's team into talks with each group over potential partnerships.

If mKrishi had been developed earlier, it might have saved the nearly 20,000 recorded Indian farmer suicides in 2009. As the corporate chemical industry began to control seed supplies starting in 1997, prices rose and many farmers found they couldn't afford to grow anything. As it stands today, one Indian farmer kills himself every 30 minutes for want of any avenue to make an adequate living.

MKrishi can't heal the plight of Indian farmers overnight, but it may at least prevent them from ending their lives in despair. This in turn could encourage the next generation to stay and farm the land rather than leaving it to become migrant workers in a big city.

"Today's rural youth is aware of the prosperity in cities through print and television media, and they're moving away from the family farms, which are being sold off," Pande says. "This is creating a vicious cycle of reduction of farm land, fewer farmers to till the land, lower income from farms, migration of rural families to cities."

This cycle continues to spawn slums in over-crowded cities, hasten the loss of traditional culture and separate family members from one another. If mKrishi succeeds in making farmers' jobs easier, it could potentially help reverse this trend, drastically improving both India's economy and its society.source

Mobile Wallet From Google

With the advancement of technology, Google has recently unveiled its latest Mobile Wallet service. Google describes this service as tomorrow’s top shopping experience.

This is an Android application which enables one to pay for things they buy with their debit and credit cards by using their handsets.

This app comes with a near field communication which helps one to turn their phone to a virtual wallet. It helps one to store debit/credit card, offer coupons, loyalty cards, and cinema/train tickets.

Google has also promised that in the near future this app will also enable one to store their driving licence on it.

While purchasing daily goods like milk, chocolates and newspapers, one will just have to wave their handset before the terminal.

In case of higher value transactions one will have to enter a pin on the handset itself. Google has joined hands with MasterCard, Citibank, First Data and Sprint to test the technology.source