On an Acquisition Spree

The Indian content industry is in the M&A mode. The
"rolling up" of small companies into larger entities through
acquisitions is changing the face of the entire industry. Mobile content service
is now big business in India with more richness and variety. Moving up the
growth ladder, Indian VAS companies are now eyeing the global market moving out
of the confines of the domestic market. This is mainly due to regulatory changes
that have made the whole process of acquisition much easier than ever before.

Growing Manifolds

The prospect of growth for the content industry in India is to a size
similar to the computer software industry, with massive opportunities for income
and employment generation. The content industry is known as the priority sector
for telecom's phenomenal growth.

The value added services market is big but is characterized by
the presence of a number of small players instead of a few big ones. If we look
at the market size of the VAS industry, in FY '06-07, it stood at around Rs
2,860 crore and grew 29% with respect to FY '05-06. The VAS market in India
could be worth nearly a billion dollars (Rs 4,560 crore) in FY '07-08. Also,
VAS is expected to contribute 20% of revenue by 2008 and 30% by 2010.

One of the major acquisitions of 2007 was that of Jataayu
Software by Bharti Telesoft. Jataayu's wholly-owned subsidiary in the US will
be added to Bharti Telesoft's existing operation across Africa, the Middle
East, and the Asia Pacific region. For Bharti Telesoft, the acquisition of
Jataayu is part of their growth strategy. The major components of the two
companies will be fully integrated by March 2008. The cost of acquisition of
Bharti Telesoft with Jataayu's software is still undisclosed. Bharti Telesoft
is a private company and doesn't release specific financial details. The
transaction is structured as a stock purchase, and Bharti Telesoft will be
acquiring all outstanding shares of Jataayu.

According to Atul Madan, VP, VAS, Bharti Telesoft, one of the
major reasons for this acquisition is that both companies operate in the mobile
VAS space, where Jataayu focuses on WAP applications and handset application
businesses. Bharti Telesoft focuses on integrated value added services, namely
core VAS, m-commerce, m-entertainment and business support solutions. In
addition, their geographical presence is complimentary. Bharti has a strong
presence in India, the Middle East, Europe, Africa and South Asia, and Jataayu,
while being present in some of these markets, also has presence in Latin
America, the US, and Apac.

"The WAP, MMS, and IMPS capabilities of Jataayu fit
suitably with Bharti Telesoft's messaging portfolio and will position us more
positively in the market by enhancing our service offerings for the
customers," says Atul Madan. The handset applications business takes us
into a new, rapidly developing, and very important area which is set to change
dramatically in the near future. As Jataayu is an established player in this
space, we can consolidate our position and build attractive propositions for
this sector.

Another major deal is that of Geodesic. Geodesic acquired 100%
stake in Chandamama. An investment of close to Rs 100 mn was made toward
purchasing shares from existing shareholders as part of the acquisition.

According to Geodesic's MD, Kiran Kulkarni, "We have
always believed in convergence of the Web content, the computer and the
communication devices. Chandamama hasn't really taken advantage of the new
medium. Chandamama, to most Indians, has been a mix of pride, nostalgia and
value, and we at Geodesic are excited at the prospect of presenting Chandamama's
values and morals in styles and formats that appeal to people in this day and
age."

According to L Subramanyan, CEO, Chandamama, Chandamama has been
educating generations of Indian customers for the last three generations. For
Geodesic, such a property made a perfect fit, as it was falling within the
entertainment genre but with a very strong footprint in educative content.

After this acquisition, the mission of the dual entity is to
provide content solutions across a wide cross section of platforms ranging from
traditional to new technology-online, mobile and other interactive media.
Besides providing time tested and high quality 'Edutainment', the combined
entity has the mandate to create new content for the young Indians in the
platforms that they want to consume. Chandamama and Geodesic will strive to
reach out to the largest number of Indians and drive content that is relevant,
contemporary and timely.

"We are strongly focused on growing our customer base in emerging markets, and will aim to further penetrate key regions by cross selling our respective portfolios."	"We aim to work more closely and benefit from internal synergies offered by group companies within the UTV family, ie, India games , Ignition, and UTV animation"	"Chandamama and Geodesic will strive to reach out to the largest numbers of Indians, and drive content that is relevant, contemporary, and timely."
Atul Madan, VP, VAS, Bharti Telesoft	Samir Bangara, associate VP, Indiagames	L Subramanyan, CEO, Chandamama

UTV Software Communications has completed its acquisition of 60%
stake in Indiagames.With Indiagames under it, UTV has now a presence across
console and handheld game development and global publishing, global mobile games
publishing, and a unique online PC games distribution model in India.

The main target of companies behind these acquisitions is to
grow their global footprint, application reach, and to enhance their overall
product portfolio. Their main strategy is to play in all areas of the mobile
space, from delivering content to providing core platforms to support the
ever-increasing range of VAS being developed, to delivering applications to the
handsets.

Aftereffects

An acquisition is bound to have an effect on the management system of both
the companies at stake. For example, Jataayu currently has 350 employees and
Bharti Telesoft 650. After the acquisition by Bharti Telesoft, Jataayu's
current management team will continue to work within the combined company and
contribute to its success.

Similarly, Chandamama has acquired a new leadership team and a
new CEO, mandated with the task of reviving the brand and making it relevant.
Talking about the changes in management, L Subramanyan, CEO, Chandamama, says
that new people have joined the company in the form of an online head and the
entire online editorial team, a revamped circulation/sales team and a marketing
and business development team. However, the old team continues to work along
with the new.

UTV has acquired 12.11% equity stake in Indiagames by
subscribing to Indiagames' share capital. In addition, UTV UK has an
obligation to subscribe to additional shares amounting to 8% of the equity share
capital of Indiagames for a value of $1.5 mn. The total investment after the
additional subscription will be approximately Rs 42.4 crore.

According to Vishal Gondal, founder and CEO, Indiagames,
"We have been working very closely and successfully with UTV on a number of
initiatives over the last few months and look forward to maximizing the benefits
arising from the various synergies from our association."

Sameer Bangara, associate VP, Indiagames says, "Indiagames
has had a close working relationship with UTV for a while now. Our new
association will work toward taking our businesses to the next level, ie, mobile
and online gaming services by acquiring leading international licenses and
through larger investments in developing our own IPs."

Future Talk

Talking about their plans, Bangara, says, "We will be investing in a
number of leading international IP/licenses as well as maximizing our marketing
efforts on promoting our titles to a larger audience globally. Co-marketing
activities with various UTV properties like TV and films would be a part of our
marketing mix."

These kinds of integration where there is duplication of
activity are generally painful. There are strong chances of policy overlapping.
That's why during the integration both companies paid special attention to
ensure that their HR policies should be consistent across both organizations and
that day-to-day processes are clearly communicated and understood to ensure
smooth operations.

Both at the leadership levels and at the operational levels, the
integration has been to ensure commonality of objectives, congruence of purpose
and unification in terms of efforts. As a consequence, in the case of Geodesic
and Chandamama acquisitions, the technical teams work together to ensure that
the most optimal technology is used in Chandamama. There is a congruence of the
business development teams in terms of alliances and providing the customer with
a common face and a unified set of services.

According to Subramanyan, the internal challenges have been
largely to induct high performance manpower into Chandamama and look at internal
re-organization to deliver a unified set of solutions. For the company, it is
essentially to do with synergies at the SGA level and removing redundancy in the
system.

UTV Software is also in talks with Dhruva interactive for
acquiring a stake. This comes close on the heels of UTV Software's acquisition
of Indiagames. Dhruva interactive is looking at raising about $4-5 mn for
expansion purposes. It plans to raise headcount and set up a new studio. Besides
UTV, Dhruva Interactive is also looking at venture capital funding.

A major step taken by OnMobile is buying 100 shares of Voxmobili
for $35.1 mn (or Rs 143.5 crore). With this acquisition, OnMobile expects to
strengthen its data product offerings. The acquisition adds a number of
international customers to OnMobile's customer portfolio like Orange, Cingular
AT&T, France Telecom, T-Mobile, Wanadoo, and Turkcell.

With the changing scenario and increased market demand, these
big companies experience the need to have presence in the US and Europe. This
desire to make their presence in the global market forces the companies to merge
with or acquire international firms.

According to Arvind Rao, CEO and co-founder, OnMobile, "We
are excited about this transaction, and joining hands with Voxmobili to deliver
a powerful suite of complementary VAS products to the global telecom and the
Internet industry. Their product and technology leadership in their domain,
innovation, and leadership all complement what we have built at OnMobile, and we
are geared to fully exploit the synergies between us. This will be a win-win for
all of us, starting with our customers and a great platform for OnMobile to
serve the European market." OnMobile is acquiring a total of 3,697,509
shares.

According to Eric Vieillevigne, managing director and
co-founder, Voxmobili, "We are very excited to expand our presence in this
exciting marketplace with OnMobile. We're confident that the combined
strengths, service expertise, and talent of our companies will deliver a great
experience for users, service providers, and mobile operators."

These acquisitions are also beneficial for customers. Customers
gain access to a wider portfolio of offerings, greater on the ground presence,
and access to greater technical knowledge. With this knowledge and strength in
R&D, customers will benefit from a wider range of innovative product
offerings. Subramanyan of Chandamama says that as far as the customer is
concerned, this is a huge benefit as the same company that wants an IM system
also wants content.

The VAS industry in India is very astonishing as of now, and we
can expect more excitement and zest, as more and more VAS companies grow larger
with their acquisitions and mergers. Overall, these acquisitions and mergers
seem to be beneficial and profitable for the content industry because it is
supporting the expansion and revenue generating activities of the companies. The
main issue here is: is the content industy going to follow this trend in 2008?

Arpita Prem


arpitap@cybermedia.co.in

(With inputs by Sandeep Budki)