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.