The promise of 3G services and growing value added services could help the company put a tough year behind.
The huge payout for 3G licences has shaken balance sheets of many telecom companies. However, players reckon that the promise of 3G and value added services (VAS) would help them recover their tariffs. But, the real beneficiary will be the whole range VAS service provider OnMobile Global. It is gearing to put the past year behind it, when its revenue growth and profit margins took a beating due to shrinking revenue share, regulatory issues and termination of services. The company is set to tap the high-potential domestic market, while cashing on its overseas initiatives.
In FY10, it won two major contracts from Telefonica in 13 Latin American countries and Vodafone in three counties. The upfront costs in building up operations for these projects took a toll on earnings before interest, tax, depreciation and amortisation (Ebitda) margins, which plummeted to around 18 per cent in FY10 from 32 per cent in the previous year. The Telefonica and Vodafone operations are expected to come onstream by the end of the current financial year, and should start showing results in FY12. Ebitda margins are also expected to improve by that time, but not to the earlier 30 per cent plus levels.
Domestic revenues have risen seven-nine per cent sequentially in the March and June 2010 quarters. Analysts are optimistic over the VAS scenario, as its penetration in India is as low as 12 per cent. This includes SMS services as well. Increasing penetration in the market may trigger 20 per cent growth in revenues over the next two years, reckon analysts. VAS in India accounts for 12 to 15 per cent of telecom revenues, while it’s 30 per cent in China. International operations, which currently account for around 25 per cent of the company’s revenues, are expected to contribute 35 to 40 per cent in the next couple of years. Hence, the niche service provider is set to put a tough year behind.
