Wednesday, January 13, 2010

ADSL as predicted making upmoves

ADSL 6% up in 4 trading sessions
first target achieved: 254 reached 253.85 today.....
Expecting to breakout tomorrow. If not sell half at 252 and hold half

This month: 3 targets given and all achieved in just 6 trading sessions with more than 10% gain in just 1 week...

Saturday, January 9, 2010

Further updates 17th oct calls...

Patience pays ... NOv was dull but was compensated heavily in Dec.. Status of the calls

 Havells: more than 30% up
2) Navbharat Ventures: Flat
3) Lakshmi Energy: more than 30% up
4) Heidelberg Cement: Flat
5) ADSL: Flat
6) Parekh Amulinax: more than 30% up
7) Sintex: flat
8) VST tillers: moe than 25% up.....

As I said in 15th Dec post...
Wait for the flat counters to ride next wave of magic.....:-)....
Bookk prfits in stocks which have appreciated by 25-30%  and out of stocks which were flat from past 2 months current status now..

1) Havells: more than 65% up
2) Navbharat Ventures: 7.5% up
3) Lakshmi Energy: more than 30% up
4) Heidelberg Cement: 20% up
5) ADSL: Flat
6) Parekh Amulinax: more than 40% up
7) Sintex: 11% up
8) VST tillers: moe than 25% up...

Overall gain in 2 months : more than 25%.....

Stay invested in NB Ventures,Sintex, ADSL & Heidelberg accumulate more on every 10% decline..

Book profits in other counters

Wednesday, January 6, 2010


Target achieved just in 2 days..
both 10% up 2 days in a flat market..
ADSL will rise to the occasion soon..:-)

Monday, January 4, 2010


I recommended t accumulate HEIDELBERG cement at 41 . Those who accumulated can hold it now as it has formed a support at 45 now and expected to reach 48-50 soon.


ADSL & FINANCIAL TECHNOLOGY recommended for 2 months perspective have started moving up. Technically, a triangular break put is expected in these 2 stocks in next 5-7 trading sessions if it does not fall from these levels. Volumes are very supportive. So, expecting a breakout in these 2 counters.

ADSL: next target 254 and 275

Tuesday, December 15, 2009

Status of stocks call given on Oct 17th

Patience pays ... NOv was dull but was compensated heavily in Dec.. Status of the calls

 Havells: more than 30% up
2) Navbharat Ventures: Flat
3) Lakshmi Energy: more than 30% up
4) Heidelberg Cement: Flat
5) ADSL: Flat
6) Parekh Amulinax: more than 30% up
7) Sintex: flat
8) VST tillers: moe than 25% up.....

Wait for the flat counters to ride next wave of magic.....:-)....
Bookk prfits in stocks which have appreciated by 25-30% in 2 months

Acrysil recommended by Dala street nov 15 edition

ACRYSIL which has ben recommended by me 4 months back in my portfolio has been flashed in last month edition of dalal street... nice to see i have hit the jackpot before they recognized...:),%20Issue_21/All%20Pages%20Issue/All%20pages%20Issue00010.html?zoomlevel=100

Thursday, December 10, 2009


Introduction of the Sector:
Mobile VAS: Mobile value-added services (MVAS) are the ability for cellular operators and service providers to charge a premium price for the services (beyond voice conversation) they offer to their subscribers (mobile users). Some of the services include: SMS (text messages), MMS (multimedia messages), USSD (interactive menu based services) ,CRBT (caller ring back tone), video streaming , mobile advertisements, participation in polls and contests, location based services, mCommerce (financial transactions), Instant messaging, Infotainment services (news, weather reports, songs, recipes ), content downloads (wallpapers, screen savers, games, ring tones), down loadable mobile applications.
Based on the need fulfillment of the end user, MVAS can be put into three broad categories:
1)    Entertainment VAS – E.g. – Jokes, Ringtones, Caller Ring Back Tones (CRBT), Mobile Radio. This drives the VAS market in terms of volume as well as revenue. This is expected to grow at a CAGR of 35%
2)    Information VAS – E.g. – Movie reviews, News, Astrology, Stock updates. This is gradually getting popular depending on relevance. This is expected to grow at a rate of 18-20% over next 5 years.
3)    MCommerce VAS (Transactional services) – E.g. - Mobile Banking, Mobile payments. This is currently in the embryonic stage.

Entities in VAS Value chain: The various entities involved in MVAS can be listed as:
1)       Content/Application Owner – Companies like saregama/mauj/Rajshri who develop copyrighted content.
2)      Aggregator – They aggregate content like games/wallpapers/ringtones and distributes it to suit customer needs .Different players are : mauj, hungama mobile, indiatimes mobile etc.
3)      Software developer – They develop applications like payment/games/middleware etc. for mobile VAS .The players are - mchek/July systems/webaroo/affle etc.
4)      Technology Enabler – provides the platform that plugs into telco networks and acts like a bridge between aggregator and telcos .The players include OnMobile, cellnext. mauj etc.
Operators still dominate the revenue sharing arrangement in VAS .Out of the total amount paid by end users, 60-70% is kept by operator, aggregator gets 20-25% and content app/owner gets 10-15% of the revenue.

Further, telecom sector is a non-cyclic sector. This sector is not heavily dependent on macroeconomic scenario. The ongoing recession has been a perfect example where the profits of the industry were not hit due to macroeconomic changes.

Quantitative as well as qualitative factors about the sector:


1. Decreasing ARPU- a warning signal for telecom industry:

Even though the number of mobile subscribers has increased over the past 5 years and is expected to grow further, decrease in average revenue per user (ARPU) continuously over past 3 years is a sign for telecom industry to look for alternative modes of profit generation for sustainable growth of the industry.

The ARPU is generated as a combination of voice based revenue and non-voice based revenues which are also known as value added services (VAS).

Nature of mobile service
Contribution towards ARPU
Voice based services
Non voice/Value added services

               Source: TRAI (Telecom Regulatory Authority of India)

The reason behind this fall in ARPU is the regular fall in voice based call rates due to extremely price sensitive competitive market. As voice based revenue contributes 87% towards ARPU, a small fall in voice based call rates hits ARPU badly. The situation is expected to continue in future and in fact, expected to get worse as many new players like unitech, Videocon etc have acquired telecom license in various regions. This creates a need for either a product enhancement as a means of organic growth or an inorganic expansion in the overseas market in order to have a sustainable product life cycle to regain the growth phase.
The telecom operators have found the answer for this issue in the form of non-voice/value added services which contributes to only 10% of revenues at present from 5% of total value 3 years back. There is a huge scope of opportunity still left to be tapped in order to create VAS as the next growth driver for telecom industry.

. Expected launch of 3G services in India by year end:

Results from nations having 3G services show significant increase in revenues in VAS after launch of 3G services. Below is data of Vodafone US which has shown significant increase in revenue after launch of 3 G. We expect a similar trend to continue in India after introduction of
3G technology.

Source: BDA Research

Further, after the long going tussle between telecom and defense, government has come forward and declared date for 3G auction. Government sets Jan 14 ,2010 as date for 3G spectrum auction .This will create another growth revolution in MVAS sector.

3. Emerging revenue opportunities due to bandwidth expansion:
Due to bandwidth expansion, GPRS, Internet and online gaming facilities will pick up which will enhance horizontal penetration of VAS services. The below data justifies this fact.

4. Niche and fast growing sector:
VAS is a relatively niche and fast moving sector which is still in the growth stage of product life cycle leaving ample scope of growth. In coming 5 years due to lot of horizontal and vertical growth opportunities, the penetration is expected to grow by 22% CAGR and sector is expected to grow at a rate of 30% CAGR according to TRAI.

Qualitative Parameters:

1)    Resolving conflict between telecom & defense ministry over 3G bandwidth allocations: As per government, the conflict between telecom and defence will be resolved and 3G will be auctioned by the end of this year, it is a very positive sign for things in future.

2)    Better technology at affordable prices: Further, the mobile technology has improved and expected to improve further with respect to price leading to provide better technology as reasonable price.

3)    Entry of high end mobile handsets: The entry of high end mobiles sets has lead to increase in technology based VAS services like gaming and with increasing income power of consumers, this trend will continue.

4)    Mobile as next medium of advertising: Mobile is projected as next biggest medium of advertising leading to higher revenues for VAS companies.

Key growth and value drivers in this sector and how they will change:

Increasing subscriber base:
In past 5 years, total number of mobile subscribers has grown with a CAGR of 24% and the growth is still intact. As per TRAI, in next 5 years, it is expected to grow at 30% Which will add lot of revenues for value added services.

Decreasing ARPU:
As average revenue per user is on subsequent decline due to heavy competition in voice call rates, mobile users have started looking at value added services in order to increase ARPU by providing additional features.

Implementation of 3G and technological advancement (Low cost better technology handset, broadband and bandwidth)
With the advancement of 3G, wider bandwidth and technologically better handsets are available at affordable prices. The penetration of value added services will increase both horizontally and vertically. By horizontally, we mean to say range of services like online gaming, chatting which requires higher bandwidth and broadband networks. By vertically, we mean that due to affordable handsets equipped with better technology at affordable prices, even customers at the bottom of the pyramid will be able to use value added services.

Rural VAS a big opportunity:
VAS has not been able to penetrate rural market due to lower spending potential and lack of technological literacy among rural consumers. But technological innovations like integrated voice response(IVR)  and local language support have given a major boost to rural VAS and this is expected to grow in future generating lots of revenues as it is a mass market.
Technological awareness and increasing penetration of education:
In current Indian scenario, most of the people in the aging generation are not able to use various features of mobile because of lack of technological awareness and generation lag. As the generation will progress, the existing and coming generations will be more equipped of using various available mobile features like gaming, browsing etc.

Innovation in VAS content and product innovation: VAS is relatively a very new concept which has still not picked its momentum except ringtones & sms as lot of other VAS services require higher bandwidth and higher technological features.

Advertisements (New growth driver): As 21st generation consumer has become highly mobile, the means of advertisement has changed and marketers are looking for every possible means to create new touch points as the old touch points are losing its connect due to mobility of users. Out of home media is one such effort. Mobiles are being projected as the next big source of advertising which will carry momentum once 3G services are launched. This can be substantiated by the amount of spending companies have done on mobile advertising.

Growing global VAS market:
In developed countries like Europe and North America, subscriber growth has slowed down dramatically and mobile penetration in some countries has exceeded 100% of the population. In these conditions where airtime prices are under severe pressure and subscriber retention is critical, data and Value Added Services are the primary tools for the Operator to differentiate their service offering. App Stores that enable consumers to directly download mobile applications opens a new market opportunity. Indian VAS players like Onmobile, Geodesic are expanding in these markets by finalizing many international deals.
For example, last fiscal year, Onmobile fixed two major deals, one with telefornica and other with Vodafone. This will add to international penetration of Indian VAS players.

Key cost elements and how they will change:

Taking into consideration the wide range of various value added services being offered, the costing of VAS depends highly on the nature of value added service being offered. Value added services can be broken into two groups:
1.    Content based value added services (80%)
2.    Non-content based value added services (20%)
a.  Product based value added services (20%)
b.  Advertising based value added services(in pipeline)

 In order to understand the cost structure of value added services, it is very important to understand the supply chain and the stakeholders involved in providing VAS.

Content based value added services: These are services for which the content is derived from a parent company by the aggregator. For example, if the aggregator provides ringtone of a specific music to the end customer, the company holding the music rights provides the original content. The role of an aggregator is redesigning the original content in a form which is adaptable to mobile subscribers and provides necessary software and interface to the mobile subscriber through the mobile network operator in order to make the subscriber use the facility. Currently, this sector contributes to 80% of the revenues of aggregators.

Non-content based value added services: In this case, the aggregator does not derive content from any other source but develops his own product which can be offered to the mobile subscriber as a product. For example: Phone backup management software, Mobile radio based software etc. The current contribution is 20% and is on the rise.

In order to beat the index by investing in VAS based business provided by aggregator to telecom based network operator, one needs to understand the cost structure of whole supply chain and analyze investing in companies at which level of this supply chain will help us to beat the sensex index. So, in order to extract maximum growth from VAS sector, an investor can either choose to invest in a network operator like Bharti Airtel, Idea, Reliance communication or it can go at the second level of supply chain and invest in aggregator based value added service providers like Onmobile Global services, Geodesic etc. So, even though we realize, the growth of this sector will beat the growth rate of sensex, from an investors point of view, we need to understand in terms of profitability, which of these two VAS participants will generate maximum profits for an investor beating the index. So, let us understand the cost pattern for these two sector participants.

Analyzing the current % share of various value added service being offered, we find the following distribution:

Cost elements:
The various additional cost elements involved at network operator level are as follows:
1)    Spectrum/3g cost
2)    GPRS Adoption cost
3)    Infrastructure issues
As network operator level will be a highly capital intensive business in order to reap benefits of MVAS, it will be more logical to look for less capital intensive/high gain players which can reap the growth of MVAS. 
This brings our focus on VAS aggregator/Software developer/Technological enabler. The various cost structure involved at VAS aggregator/Software developer/Technological enabler   level:
1)    Content cost (24%)
2)    Technological cost: Hardware & software (10%)
3)    Manpower cost (38%)
4)    Administration, Marketing, R&D and other costs (28%)

As we can see VAS aggregator business is a less capital intensive business where cost incurred in infrastructure & technological setup is far lesser than telecom operators and so, higher profit can be expected with minimum possible breakeven period for the companies operating at this level. Now, let’s analyze the probabilistic future changes in respective cost elements:
1. Content cost: The content cost is the cost which is paid to the content providers. For example, if we consider Ringtones of music as a value added service, cost paid to the company who holds the music rights will be the content cost. In case of gaming, this is valid only for content based VAS. As this is a means of secondary revenue for the supplier i.e. content provider and the market has a large number of content providers with lot of options to choose for very few VAS aggregators, in future too, aggregators will have an upper hand in costing of content. Further, aggregators have ample scope to diversify their revenue base in the form of non-content based VAS and mobile advertising based VAS which is slowly reducing its over dependence on content providers. This means that in future the content cost will be supportive to aggregator’s profit margins.

2. Technological cost: As it contributes to approximately only 10% of total operational cost and technology becomes cheaper day by day, in future also, this cost will be lower in terms of its total share in operational cost in future comparing to current levels.

3. Manpower cost: This is the most significant cost which is spent on the salaries of employees developing the required network, interface, product and software. This cost will increase in line with revenues and will be similar to IT sector manpower cost structure growth but since this sector can grow with a rate of more than 40% for next 5-6 years, the impact of this cost on the revenues and profitability will be much higher than IT sector which already in the matured phase of product life cycle.

4. Administration, Marketing, R&D and other costs: This cost involves the money spent on administration, marketing, R&D, travelling, market research. So, this cost is expected to grow in a stable manner as the business progresses and there is a scope of achieving cost operational efficiency and depends a lot on how the company manages this cost internally.

So, from operational cost point of view, this is an excellent business model in terms of profitability for next 5 years without any major risks leading to any unexpected rise in input cost structure.

Converting to numbers & Growth Projections for the sector:

The Department of Telecom (DoT) has following projections:
1)    A billion mobile phones by 2014.
2)     India’s population is expected to be 1.26 billion in the same year, and with mobile penetration at 1.01 billion, the mobile teledensity would be upwards of 80%.
3)    This probably reflects the world’s largest new growth opportunity over the next five years, surpassing even China’s potential.
4)    The above scenario is expected to provide a major boost to the MVAS market. Increase in user base, price decline in MVAS services, new technology adoption (like 3G, NGN) by operators and the entry of Mobile Virtual Network Operators (MVNOs) are the some of the factors that will propel the MVAS market to grow to Rs. 16520 crores by June 2010. This projection can be substantiated by the growth rate of MVAS industry for the past 3 years.

No. of Mobile subscriber(mn)
VAS contribution to ARPU
Total Telecom revenue(Crore)
Total VAS revenue(Crore)
VAS Growth rate%


Entertainment VAS is expected to remain the VAS driver for the next few years taking over all growth rate to 30% for next 5 years according to TRAI report.Currently, MVAS contributes over 13% of the total revenue of mobile telecom service providers. As per TRAI report, this is expected to rise to over 30% in the next 5-7 years.

Based on the need fulfillment of the end user, MVAS can be put into three broad categories:
1)    Entertainment VAS – E.g. – Jokes, Ringtones, Caller Ring Back Tones (CRBT), Mobile Radio. This drives the VAS market in terms of volume as well as revenue. This is expected to grow at a CAGR of 35%
2)    Information VAS – E.g. – Movie reviews, News, Astrology, Stock updates. This is gradually getting popular depending on relevance. This is expected to grow at a rate of 18-20% over next 5 years.
3)    MCommerce VAS (Transactional services) – E.g. - Mobile Banking, Mobile payments. This is currently in the embryonic stage.

VAS Revenues by Category

% of total VAS
In 2008
% of total VAS
In 2009
CRBT & Ringtones
IVR / Voice Portal
Data & Email

Points to note:
§  SMS & CRBT are still the major growth drivers and will continue to grow with 20%.
§  Data and Email has emerged as next driver for growth contributing to 10% of total VAS revenue without 3G contribution.
§  Games, data and email are growing with a rate higher than 60% and will continue to do so with penetration of 3 G and better technology.

Risks Associated:
·         The limited operating history of VAS firms may make it difficult for prospective investors to evaluate their business:
The telecommunications value added services market is nascent and is rapidly evolving. As a result, any evaluation of their business and   prospects must be considered in light of the industry, limited operating history and the risks and uncertainties often encountered by companies

·         The VAS firms offer white label applications and services to their customers who then market the applications and services to their end-user subscribers, but none of customer contracts obligate the customers to market or promote the services to their end-user subscribers:

In addition, as most of VAS firms customer contracts are non-exclusive; their customers may purchase similar application services from third parties and cease to use the applications and services in the future. Even if the customers retained the services, their customer contracts do not prevent the customers from significantly reducing the level of marketing or promotion of the applications or from electing to market or promote similar applications purchased from and provided by the competitors. Any of the foregoing may result in the loss of future revenue from their carrier application services.

·         Increasingly, the research shows that a substantial number of the new subscribers of carrier customers are from non-metro areas and they tend to have lower levels of average revenue per user:

The customers of the cellular services have declining average revenue per user these days because it is influenced by the demographic make-up of their subscriber base. With the expanding penetration of wireless telecommunications in India, increasingly, based on internal estimates, a substantial number of the new subscribers of the carrier customers are from non-metro areas. These subscribers generally spend less on telecommunications solutions and applications than subscribers from metro areas, which results in lower average revenues for the carrier customers. As most of the contracts with carrier customers are on a revenue sharing basis, this may in turn have a material adverse affect on results of operations of the VAS firms.

  • More than 90% of revenue for VAS firms is subject to the end-user pricing decisions of cellular operators and reconciliation of billing information:

The VAS firms have no control over their pricing decisions and most of the customer contracts do not provide for guaranteed minimum revenue payments even though some of the contracts have a minimum price clause. As a result, revenue derived from the revenue sharing agreements may be substantially reduced depending on the pricing decisions and pressures of cellular operators which may materially and adversely affect results of operations.

·         Excessive dependence on music related services, including the ringback tones, ringtone downloads and music messaging applications, for approximately 67% of our revenue:

Even though the industry is trying to reduce its overdependence on musical contents, still, it contributes to a significant level and needs to be reduced further. In future, licensing of 3 G services will help a lot in to mitigate this risk by easing technological barriers for other value added services like gaming, GPRS.

·         Delay in licensing of 3 G due to political reasons:

Licensing of 3G services has been pending from a long time due to ongoing tussle between telecom ministry and defense ministry. But current statement from government regarding auction of 3G services on 14th January 2010 has given ample hopes for the future. Even though, further delay in 3G  licensing wont hinder the current projected growth of value added services, of course, it will ct as a hindrance for lot of value added services which are not possible right now and can be possible leading to a completely different growth trajectory once they are launched.

SENSEX Vs VAS Industry Valuations:
Conservative view:
If we see 10 year data between 1995-2004, we will realize that in the long run (defined by a period of 10 years), the market has corrected itself and the BSE sensex has grown in accordance with the real GDP growth rate.

Macro indicators
Nominal GDP

Real GDP

sales growth

Stock market
BSE Sensex*
Source: RBI and Equitymaster database.  

Assuming the similar trend to be valid for next 10 years and assuming the economy to grow at a rate of 6% for next 5 years on conservative basis as per RBI guidelines

FY 05
FY 06
FY 07
FY 08
FY 09
FY 10
FY 11
FY 12
FY 13
FY 14
BSE Sensex

Real GDP
growth rate


We expect sensex to hover around 13006 but as market moves on future optimism and pessimism, the future values can have huge variations. So, considering the extreme positive optimistic deviations from past, taking a scenario when at height of optimism in Jan 2008
Jan 2008: BSE Sensex : approx 2100 i.e. 2.5 times of projected value based on GDP. So, considering same extreme optimism, the markets can go up to 13006*2.5= 32500 on the upper limit.
So, on conservative basis:
Considering present value of sensex at Oct 27, 2009 = 16353
Return from Sensex from current levels in next 5 years considering sensex at 13006 = -3.8% on CAGR basis
Optimistic basis:
Considering present value of sensex at Oct 27, 2009 = 16353
Return from Sensex from current levels in next 5 years considering sensex at 32500 = 15% on CAGR basis.

Since, our projected rate of growth for this sector is more than 15% on normal basis without any high optimism, we expect the companies involved in VAS based telecom sector to beat the index by a decent margin.

 Geographical coverage of mobile telephony has gone up from 13%, a couple of years ago to 39% now. Despite the economic slowdown, the telecom industry continues on a dynamic growth path. As the new subscriptions will largely happen at the bottom of the pyramid, they will lead to a reduction in the Average Revenue per User (ARPU). Further, most of the subscribers added are from the bottom of the pyramid having low usage resulting in low ARPU. With new licenses being offered, the number of Operators in the already crowded market is set to go up, which will bring with it further price cuts in airtime and for basic messaging. In this scenario, Mobile Value Added Services (MVAS) is a potential long term-revenue stream. Not only does it lead to an increase in the ARPU, it also acts as a differentiator between operators. Besides, consumers today seek more from their communication devices than just mobility and connectivity and MVAS serves this very need.
So, in short the reasons for MVAS outperforming sensex can be attributed to:
1)    Recession free growth
2)    Projected growth in subscriber base
3)    Ample opportunity in information VAS & m-commerce VAS still to be tapped
4)    Healthy growing entertainment VAS
5)    Rise of Indian VAS players like Onmobile services, Geodesic etc as global MVAS players adding overseas growth revenues.
6)    Business in nascent stage , so, huge innovative and growth opportunities left
7)    Mobile as next medium of advertising provide next scope of growth for MVAS
8)    Low capital high return business model

Disclaimer: This report was prepared by me along with my friend Jaybind kumar jha. The data has been collected from TRAI and BDA research reports. Special thanks to prof. Som sekhar for providing clarity over the subject.