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OnMobile Global – Global contracts to drive growth

May 20, 2009

Vodafone Group has announced that they have chosen OnMobile Global to provide its ring-back tone (RBT) service in emerging markets ex-India. This deal highlights OnMobile’s ability to convince international telecom operators to shift to a revenue share model for Mobile Value-added Services (MVAS), which is different from the one-time licensing model prevalent in international markets. We believe that this deal could be a precursor to more global contract wins for OnMobile.

The recent regulation from the telecom regulator to ask for explicit confirmation from the customer before activating mobile value added services could weigh on rate of adoption of CRBT in India. Industry sources cite ongoing discussions between MVAS providers and the regulator to find an effective workaround without hampering adoption. We are conservatively modelling a flat CRBT penetration of about 20% in India. Initial responses from our checks related to Ad-RBT in India show promise, which could possibly push RBT penetration in the mid-20’s.

OnMobile is expected to report an EPS of Rs 19.34 for FY10 and Rs 25.05 for FY11 a CAGR of 30%. Analysts are bullish on the prospects of the company and expect it to reach the IPO price of Rs 450 within 6 months.

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