2012 is the year of switch for S Mobility: BK Modi

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2012 is the year of switch for S Mobility: BK Modi

2012 is the year of switch for S Mobility says, company’s chairman BK Modi. "At present we are in the investment mode. 2012 is the year where we are trying to convert ourselves from mobile company to mobile internet," he adds.

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2012 is the year of switch for S Mobility says, company's chairman BK Modi. "At present we are in the investment mode. 2012 is the year where we are trying to convert ourselves from mobile company to mobile internet," he adds.

According to Modi, the mobile internet is the future. "With the coming of 3G, 2.5G, 2.75G and WiMAX, people now want to access internet in their mobile."

Below is the edited transcript of Modi's interview with CNBC-TV18. Also watch the accompanying video.

Q: What would be the impact of rupee depreciation on the company and what sort of earnings we could expect in the quarter gone by?

A: We have been importing products from China and other places. So, we are impacted by dollar appreciation, but we have got certain discounts from suppliers. We have gone into a next stage of buying products from SKG to CKG style which has also cut down our cost little bit. We have been able to take care of part of the impact, but we will still have between 8-9% impact in our import bill.

Q: As a part of your company's strategy you all are also increasing your focus on mobile internet. Could you walk us through the plans and what kind of investment the company needs to make in something like this?

A: The mobile internet is the future. With the coming of 3G, 2.5G, 2.75G and WiMAX, people now want to access internet in their mobile and that's why the product has to have applications based on internet. So, we are making investment in Singapore. We have just set up a very modern innovation centre for application development based on MRE platform. On December 2 this centre was opened internally and on January 13 we will be coming with the product which will have applications.

Initially, we are looking for putting about 100 applications in our app stores and taking forward to 1,000. We have already made an investment of nearly USD 30 million. We are making further investment of Rs 170 million to upgrade our manufacturing because we have to go in full manufacturing where applications can be put inside the phones. We would also build up our application based innovation centre. Most of this investment will take place in Singapore and some of it is in the factory which we are planning to set up in Chennai.

Q: There was an acquisition, which took place in Tanzania was well, just take us through what this acquisition was and how much did you spend on it?

A: Tanzania is our entry to African market, we have defied ourselves working between Ivory Coast to Indonesia, we call I to I strategy and that includes Africa, Middle East, ASEAN countries and India. In Singapore, we have acquired a company called Si2i through, we have also acquired company in Indonesia, Malaysia and Thailand and in the same way we acquired companies in Africa.

These Africa companies already deals with the operators. In mobile internet we are creating a strategy to the operators that we will be making money not only in selling the device, but also after the device is sold and when people use applications, we will be sharing revenue with operators. This model is based on service, just not the product sales. Tanzania is a very important acquisition because that is something, which gives us a market with the operators in Africa.

Q: Can you give us a sense what the financials for FY12 might look like because just last quarter your revenues grew by about 12-13% but your profitability had declined by about 77%?

A: At present we are in the investment mode. 2012 is the year where we are trying to convert ourselves from mobile company to mobile internet. Though we have a running profit in the business, we are making major expansion. We have just added in S Mobility about 2,500 people all over India. I am training them to be able to sell mobile internet. So there is lot of investment going into people training and also innovation and investment in manufacturing.

So, 2012 is the year of switch. We do see the profit booking taking a hit operationally for the way balance sheets are made. Some of the expenses which are for future are being charged to P&L. We will take a hit in 2012 but hopefully from 2013 and 2014 the impact of these investments in people, innovation and manufacturing will come in effect.

Q: Any plans of revisiting Spice Digital and the IPO that was planned of around Rs 300 crore?

A: That is also part of the scheme because Spice Digital is also now moving into creation of this app store. They are also switching their business model from giving services to the operator, to giving services to the device manufacturer.

They are working on an exclusive agreement for I to I market with our device company. For other markets, they are giving the service to the other brands also which will be based on MRE platform. So, they are also investing heavily on this. We are hopeful that we will be able to come with an IPO in second or third quarter of next year depending upon the market situation.

Q: You spoke about still moving an investment of about USD 170 million for your mobile internet MRE platform. Could you tell us how are you planning to raise this money and by when?

A: Part of this money will be raised through supplier credit because we suppliers who are going to support us. Then we have internal generations plus we have zero borrowing in the company. We can do that borrowing and we have got more than USD 100 million cash between two companies.