Messages

781

Web 2.0 / Recruitment Without Innovation Core for InfoEdge

« on: March 06, 2015, 02:35:15 PM »

Recruitment Remains the core business segment and contributes major profits to InfoEdge India. The economy has picked up, which has helped accelerate top-line growth (now at ~20%). Top-line growth should accelerate further if economic growth improves. Growth beyond 20% will expand segmental margins (currently at 50%). What InfoEdge lacks is Innovation

Property segment is under pressure both due to challenges in the onground environment and rising competition. Info Edge spent US$6-7m to become the largest player in the segment but has raised US$125m six months back to create a "war chest" to defend market share (competition is now becoming irrational). It has expanded its operations team and improved its platform. The company believes that it is seeing good user traction

Good asset where it has a 50% stake. 85% of revenue currently comes from India and UAE (both are EBITDA positive). The company has spent the bulk of the US$60m raised a couple of months back on acquiring Urban Spoon. Zomato is entering new service areas - food delivery and restaurant booking. It is also likely to undertake two more rounds - 1) near term to replenish funds and 2) larger round for rolling out services in new geographies. The valuations in private space have gone up significantly so remains to be seen if it will be likely to retain its stake.

782

Web 2.0 / eCommerce is Not about Discounting

« on: March 05, 2015, 11:49:04 AM »

High discounting in e-commerce is not sustainable over a longer period of time. Customer loyalty will come from addressing basic issues and pain points of the customers and moving further to provide higher level of personalization and customization through analytics at a larger scale. While companies may be doing it independently for customers in their own platform; another approach to improve customer loyalty would be a collaborative approach through a third party platform like Payback.

Significant increase in internet users (to over 500m) , online buyers (to over 250m), large market opportunity and improving ecosystem (payments and logistics) will support continued strong growth which is driving a premium for valuations.

783

5G / Wi-Fi / Moderate demand for 800Mhz Spectrum - Day 1

« on: March 05, 2015, 11:14:20 AM »

In 800MHz spectrum, there were buyers in 9 out of 20 circles, with 9.3% price escalation in the Madhya Pradesh circle.

Out of 15 circles where 1800MHz spectrum was put up for auction, there were no takers in 6 circles, there were takers at reserve prices in 7 circles and only one circle (Andhra Pradesh) saw some price escalation.

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3G / HSPA / EVDO / Demand for 900Mhz Spectrum Auction - Day 1

« on: March 05, 2015, 11:10:20 AM »

As expected, despite high reserve prices, 900MHz spectrum is seeing strong demand with price escalation ranging from 0-61%, with average price escalation of 29.8%. This has resulted in 26.2% and 30.9% escalation in spectrum renewal cost for Bharti and Idea to INR77.8bn and INR164.8bn, respectively, for 5MHz spectrum in each of the circle. The cost replenishment of entire spectrum has gone up by 24.9% and 29.8% to INR115.9bn and INR218.9bn, respectively. For 900MHz spectrum, there is still excess demand in 5 circles. Gujarat and UP (West), must-win circles for Idea, witnessed price escalation of 41.1% and 61.0%, respectively. Price for the Rajasthan circle, a must-win for Bharti, escalated by 21.5%.

2100Mhz Spectrum Demand
For 2100MHz spectrum too, there was only limited demand with no takers in four circles (Andhra Pradesh, Delhi, Karnataka and Mumbai), takers at reserve prices in 5 circles (Gujarat, Haryana, Maharashtra, Tamil Nadu, UP (West)), and 5% to 9.2% escalation in 8 circles. In 800MHz spectrum, there were buyers in 9 out of 20 circles, with 9.3% price escalation in the Madhya Pradesh circle.

785

Web 2.0 / Google Won't challenge JustDial in Local Search

« on: March 04, 2015, 09:01:17 PM »

Management believes that Google is unlikely to be a challenger in local search, given 1) content of local listings is difficult to acquire and 2) monetization will be difficult without feet on the street. A similar experience has been seen in US where companies like Yelp have done well despite Googles' presence.

Just Dial believes that a single app capable of handling multiple services over time is superior to multiple apps. It claims that while competition is high across internet segments, the company is unlikely to undertake aggressive marketing techniques to either increase the number of app downloads or encourage usage. High competition has led to an increase in employee cost.

Retention rate has remained at 55-60%; the company remains comfortable with this level. Some 18-20% of the customers don't renew on account of the high mortality rate in the SME segment.

Daily traffic is 1.6m. Mobile remains the largest proportion (~40%), PC is at ~35% and 25% traffic is on voice. Top 10 cities contribute 70% of the traffic, and 10k apps are downloaded daily. It handles 4k reverse auction queries, 2k doctor appointments and 450 table bookings.

786

Smart Connected Devices / HTC Vive (the VR headset) and Grip (the smart wristband)

« on: March 04, 2015, 10:51:10 AM »

At the MWC2015, HTC's wearable strategy was unveiled, find a good partner for niche products. This is a sense-making strategy, given it is a latecomer with less resource. HTC tied-up with Valve, a leading online game platform, and released HTC Vive, a betaversion of VR (virtual reality) headset, for third-party game developers.

The consumer version is slated for launch in late 2015. HTC Vive will detect users head movements to provide a 360-degree view of the vision field, with the help of multiple built-in sensors. Also, HTC teamed up with Under Armor, a leading sportswear brand to launch HTC Grip, a GPS-enabled smart wristband (retailed at USD199) for fitness monitoring (via UA Record app) and message/task alerts. This rugged, waterproof device works with both iOS and Android OS devices

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3G / HSPA / EVDO / Why TRAI Proposes Reduction in Ceiling Tariff for National Roaming ?

« on: March 03, 2015, 03:20:36 PM »

TRAI (Telecom Regulatory Authority of India) has issued a draft amendment to reduce the ceiling tariff for national roaming services. TRAI has proposed to reduce the ceiling on national roaming voice tariff by ~35% and national roaming SMS by ~80%. Incumbents' tariff plans suggest the current roaming tariffs are largely priced at existing ceiling rates; however, special tariff vouchers with discounts on roaming minutes are available.

TRAI is of the view that the reduction in ceiling tariff will result in an increase in roaming outgoing as well as incoming minutes. TRAI had last cut the ceiling on incoming roaming minutes by 25% (Rs 1/min to Rs 0.75/min) in 2013. Since then, incoming roaming minutes per outroamer per month has increased by 26%; however, outgoing minutes per outroamer per month has been unchanged.

Currently, mobile roaming revenues constitute ~9% of overall wireless revenues for the telecom operators. Reduction in the national roaming ceiling tariff would imply ~3% revenue impact and ~5% EBITDA impact for operators, but this could be partly offset by an increase in roaming minutes.

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3G / HSPA / EVDO / Why Airtel Must Complete 3G Footprint in Current Auction ?

« on: March 02, 2015, 11:06:25 AM »

Data pricing will come down when Reliance Jio launches services and Intra?circle 3G roaming arrangements will lead to significant losses. This leads to a must?have 3G scenario for Airtel in remaining 9 circles. At reserve price Airtel will need Rs 51.5bn to complete pan?India 3G foot print on 2100MHz except Punjab. In Punjab 2100MHz is not available but 3 blocks of 900MHz are coming up for auction and in Bharti could acquire even 2 blocks (one for 2G and one for 3G) to complete its data footprint.

Airtel has 30,945 eligibility points which is more than sufficient to renew 900MHz spectrum, complete pan?India 3G foot print and even more.

Maharashtra and Gujarat are two critical large circles for Bharti where it does not have 900MHz or 2100MHz spectrum. In all likelihood it will buy 2100MHz in Gujarat and Maharashtra but it might also try for 900MHz which could dislodge Idea from its position of strength in these circles.

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3G / HSPA / EVDO / What is Uninor / Telenor's Cluster Strategy ?

« on: February 27, 2015, 09:34:22 PM »

The cluster strategy has either been introduced or is being introduced across all of Telenor's Asian operations. The strategy was developed - by necessity (is the mother of all inventions) - in India, where Telenor's brand Uninor has focused its efforts on the ground, given the significant competitive intensity of the market and the significant differences between the demographics and financial capacity of its customers.

The idea is to put together all the elements of decision-making and separate parts of the business (distribution, network, etc) at a cluster rather than a nationwide level. We discuss the strategy in more detail for Grameenphone (GP), as we see the benefits in Bangladesh as typical of what could be achieved across the rest of Telenor's Asian footprint over time.

India remains challenged as Telenor needs to build scale and acquire more spectrum. On a standalone basis Telenor India may not lack scale in the circles where it is already present in the medium term, but we think it will need to come up with a strategy to both consolidate the market and increase its spectrum holdings in order to effectively compete in data.

790

SmartPhones & Apps / Why Alibaba Invest in Meizu SmartPhones ?

« on: February 27, 2015, 09:14:00 PM »

Alibaba has recently invested in Meizu. The company is comparable to Xiaomi, in that both brands build competitive advantages via the integration of hardware and software. Alibaba Group owns some of China?s top-ranked mobile apps across map services, payment, mobile search, mobile browser, video, etc. The strong portfolio complements Meizu?s hardware strategy and will support competitive user experience.

Management reiterates the strategy to broaden the consumption categories of younger users. Consumers in lower tier cities,
despite their lower disposable income, tend to spend a greater proportion of their income online since the physical infrastructure is poor. Focus of category expansion includes online-to-offline and healthcare products.

Through Aliexpress, Alibaba is tapping into the expanding consumer markets in Brazil and Russia. International growth, however, will take time, as Alibaba also needs to work with their governments to balance imports/exports for healthy current accounts. Management did not rule out acquisition strategies to help with cross-border expansion.

791

Smart Connected Devices / Why Americans Went Shopping on Desktop for Valentines Day ?

« on: February 27, 2015, 04:57:33 PM »

Although the gifts of lingerie, jewelry, and chocolates are likely to remain unchanged, the method in which these gifts are purchased is quickly shifting. Consistent with U.S. commerce trends, Valentine?s Day is increasingly becoming an online-shopping holiday for U.S. lovebirds.

With approximately 29% of couples purchasing gifts online, Valentine?s Day (and the weeks leading up to it) has become an important event for online retailers. Even individuals shopping offline are using online sources to complement their off-line buying, with the most popular reasons being: 1) price comparison; 2) product reviews; and 3) finding coupons. Given the last minute nature of many Valentine?s Day?s purchases, we have seen Amazon try to grab share by offering Free One-Day Shipping on select items.

However, one of the more interesting stats of the holiday is the high concentration of purchases that are taking place on the Desktop / Laptop - 75% Valentine?s Day highlights the key role that the desktop continues to play in U.S. e-commerce.

792

Web 2.0 / What does Naspers own in India?

« on: February 27, 2015, 04:48:01 PM »

Naspers' investment  is a leading South African and emerging market media holding conglomerate with a diversified portfolio
of media and internet holdings.

Naspers Investments in India include c18% of Flipkart (a horizontal/broad-based B2C ecommerce site), c80% of Ibibo / RedBus (online bus and hotel bookings), and c100% of OLX India (online classifieds). We think that RedBus has a compelling market position(better gross margins, online travel accounts for most of e-commerce spend today, less direct/severe competition), although the sheer size of Flipkart and its market opportunity could capture investor mindshare and headlines.

India is a nascent e-commerce market with large potential (cUS$86bn in 2018) but is fraught with risk in terms of execution, funding, and competitors. ECommerce enjoys improving drivers (internet access, GDP per capita growth, and consumer experience).

What are Competitive advantage in e-commerce ?
First mover advantage (or ?first to scale? advantage) is huge: Brandawareness matters in e-commerce and attempts to acquire customers inorganically against scaled businesses with strong brands and high levels of organic traffic could be extremely costly and may not be successful.

Localization: Another key reason local companies win vs. larger international players is their ability to tailor service and product offerings to local markets

Quality of management: In consumer internet, the team usually matters most at the formation phase of a market. Better management teams should be able to out-execute the competition.

793

Technology / Digital Advertising - Google vs Facebook

« on: February 27, 2015, 04:44:07 PM »

Programmatic advertising, adtech, RTB (real-time bidding), ad exchanges, and ad automation ? but at the end of the day they all relate to the use of software-based platforms to automate the buying and selling of advertising. Google is far and away the programmatic leader in online advertising. As a result of savvy acquisitions (e.g., Admeld, Invite Media, DoubleClick, etc.) and internal product development, Google today has leading solutions for both the buy- and sell-sides of the digital ad marketplace, and the scale and breadth of offerings to address most needs in the market.

For Google's adtech business, the key questions investors are asking include: 1) How much of a threat does Facebook and its
new initiatives/acquisitions such as Atlas, FAN (Facebook Audience Network) and LiveRail represent for Google?; and 2) How is Google evolving its adtech business as the market moves from a predominantly desktop- and cookie-based medium to more of a mobile Internet- and mobile app-based medium?

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SmartPhones & Apps / How Lenovo Plans to Repliace PC Success in SmartPhones ?

« on: February 27, 2015, 04:37:44 PM »

Lenovo SmartPhone Strategy volume increase + mix improvement + cost reduction

After Moto's recent come-back to the China market, Lenovo plans to continue growing the Moto business by rolling out to more countries such as India. In terms of market position, Lenovo/Moto intends to avoid competing with Apple and Samsung in the high-end market. On the other hand, it will target the US$200-300 price band where LGE, HTC, and local leaders (e.g., Karbonn in India and Advan in Indonesia) are the major competitors. Lenovo believes that it can replicate the success in PC by growing the smartphone volume first then reach breakeven in 3-5 quarters. Longer term, Lenovo group targets mid-to-high-teens market share for smartphone with 5- 6% OP margin.

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Technology / Success factors for Digital Opportunity

« on: February 27, 2015, 02:39:38 PM »

TCS CEO Chandra highlighted: (a) a strong ecosystem of partnerships with startups, (b) a digital team in each industry unit and (c) development of internal tools / platforms, as company's focus parameters to tap the digital opportunity.

Capgemini group CEO Paul highlighted a big shortfall in new skillsets like data scientists, which can potentially become a source of competitive advantage for large-scale IT services firms. Industry consultants highlighted reskilling of existing employees as a
key success factor, with McKinsey estimating that as much as 50% of the existing workforce may need to be shifted to newer technologies in the next few years.