Thursday, February 18, 2010

Spice Plans Large Mobility Play

New Entity, Revenues & Synergy
By Preethi J on February 15th, 2010

Spice Mobile, led by industrialist BK Modi has consolidated its group’s telecom businesses into a single entity to be called Spice Mobility, effective January 1, 2010.

The company’s board of directors approved the amalgamation of BSE and NSE listed SpiceMobiles (SPICEMOBIL), the handset manufacturing division, with Spice Televentures – whose subsidiaries included distribution arm Spice Retail, VAS firm Spice Digital (formerly Cellebrum), Bharat BPO and Spice Labs. The merger is expected to take 4 to 6 months to complete.

Spice Televentures was launched in 2002 to buy ILD licenses. The company in April had made an open offer for shares in handset vendor Spice Mobiles, taking its stake to 63.25 percent.

The New Entity, Synergies

Dilip Modi, Chairman, Spice Mobiles said during the conference call, “Spice Mobility will bring together a combined manpower of 4,000 people, over 50 million users of our services and products and over 50,000 retail outlets.”
Spice Mobility will therefore span across products, services, retail and distribution:

Spice Digital – VAS, most recently launched Mobstore for Idea Cellular, m-gov app in HP. The company claims that it registered revenues close to Rs. 1.35 billion with an EBITDA margin of around 30% in the first 9 months of this current financial year – April 2009 to December 2009. The valuation of the company is believed to be around Rs. 8 billion.

During the conference call, Spice Digital CEO Saket Agarwal said that growth for the company has been around music, claiming that the company is the market leader in Mobile Radio. Agarwal said that “there has been a consistent rationalization on the revenue shares which have not tended to be in favor of value-added service provider and there has been margin squeeze on that front too. So while overall numbers have moved up, the content cost and revenue share has kind of got us to a reasonably good profitable numbers than something which was more like a blip in the initial phase.” The company claims a subscriber base of 31 million subscribers.

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