On behalf of the Board of Directors of S Mobility, I am pleased to
present to you our financial performance and significant milestones for
the financial year ended June 30, 2012 which covers a period of 15
months from April 1, 2011 to June 30, 2012.
Indian Telecom Industry
Indian telecommunication industry is one of the fastest growing
industry in the world. It is estimated that India will have more than
1.2 billion mobile subscribers by 2013 exceeding even the total
subscriber count in China.
Telecommunication in India is synonymous to Mobility and the Mobile
Industry in India is growing with a CAGR of over 10%. Your company has
created good presence in the Mobility Sector - namely within the spaces
of Mobile Devices, Mobility Retail and Mobile Value Added Services.
Within the space of Mobile Devices domestic brands have played a
significant role to bring the power of communication within the hands
of the consumers by focusing on Product and Cost Innovation - bringing
rightly priced and correctly engineered devices to the Indian Consumer.
Domestic brands have been successful in capturing over 15 % of the
At the same time, the mobility industry has become very competitive in
the last few years. Due to the absence of entry barrier in the mobile
handset industry, most players coming into this industry are using
price as their USP for gaining market share. On the other hand
international giants like Nokia, Blackberry etc. have seen rapid
erosion in their market share. The combination of all the above has led
to significant reduction in profits for the mobile device players.
At another level, the Indian consumer''s needs and expectations have
graduated beyond acquiring hardware. It has become the lifeline of
every consumer. Hence, there is an increasing demand for the device to
enable an empowered lifestyle through data services and applications.
It also includes a comfortable retail experience along with a
qualitative and responsive after sales care. And this trend is
dominant in both rural and urban markets alike. The majority of data
consumption comprise of services in utility, education, information and
However,without enablement of data services through Wi-fi, this potential
cannot be fully realized. In the US, digital empowerment is not only
spearheading growth but also improving the quality of life. Likewise,
in order to accelerate the pace of growth through the digital highways,
government should seriously consider providing free Wi- Fi for youth,
especially in schools, colleges and youth hotspots.
Amidst such a dynamic scenario, your company with its unique integrated
business model is well poised to counter challenges and create a
leading space for itself.
SPICE is one of the top 3 players amongst the domestic Mobile devices
space in India and is focused on Product Innovation in line with the
changing requirements and has been very successful in bringing state of
the art devices to the market which has been well received by the
SPICE Retail has now the distinction of being the largest player in the
organized mobile retail sector. At SPICE Retail we have continuously
focused on providing the best retail experience to the mobility
consumer providing him with greater choice and more informed purchase
SPICE Digital is one of the top 3 mobile VAS companies in India and had
led through Services Innovation. Its focus is to provide a greater
choice of content and services to the underserved and has expanded to
multiple geographies and multiple operators in the last year emerging
as one of the most tightly run VAS operations in the country. SPICE
Digital is amongst the few players in the country focused on enabling
new and innovative services on Voice.
The Year in Review: Navigating rapid technology shifts
The mobile communication technology scene continues to change at an
unprecedented speed to meet the demands of the increasingly
sophisticated consumer. Innovative companies such as Apple and Samsung
have captured the hearts and minds of mobile consumers with
leading-edge smart phones and a range of applications that are based on
proprietary technology and well-designed platforms. Open source
platforms like Android, backed by Google have also redefined the
mobility space, enabling unlimited innovation. In contrast, the
erstwhile leaders like Nokia, Motorola and Blackberry and other major
technology companies have been impacted by the rapid changes in the
product market and retail trends. These ongoing developments have
reaffirmed our belief that innovation, scale, technology and product
leadership are key to our future success.
Your company over the years has developed highly cost effective feature
phones for the value driven cost conscious market segment to capture
the tremendous growth opportunity in that space. Moving forward, to
capture the huge demand projected in the 2G wi-fi & wi-fi/ 3G Android
phones which have all localized Apps and smart features, your company
has acquired the requisite skills, talent and technical expertise. The
company has planned a product portfolio to capture this space and
create value for money smart phones.
Performance of the last financial year
The year gone by was one fraught with challenges. The economic slowdown
and the Rupee depreciation of over 20% in the last financial year was a
major factor for the erosion of margins. This impacted not only the
device segment but also the high revenue VAS segment which
predominantly operates on revenue share basis.
Your company has always been quick to respond to the economic
challenges with effective management measures. These included an
overall management reshuffle along with a revamped salary structure,
with a higher percentage of variable incomes linked to performance for
the top management, which was instrumental in arresting a continual
downward trend in revenues.
The company has put in place a concrete roadmap for putting the company
on a fast trajectory of growth.
Future Roadmap: A Return to Profitability
The company has taken stringent measures to control costs and increase
revenues. We have taken several decisions to focus on rationalizing
manpower, reducing infrastructure and selling expenses, introducing new
products at competitive prices, improving our channel coverage, rolling
out new stores with better customer experience etc.
Over the coming quarters, we expect our strategies to pay rich
dividends and help return the company to profitability.
We believe that moving forward, the growth in mobility is now being led
through the growth of Mobile Internet. In September the Internet
Measurement Firm Stat Counter reported that mobile now accounted for
51.63% of web usage with desktop devices making up the remaining
48.37%. That''s a first for India and it follows a steady uptick of
Internet usage from Mobile and Tablet devices. Mobile Internet is being
focused on by all key stakeholders of telecommunications. As such,
- Operators are focusing in bringing greater 3G Connectivity and are
supplementing it with Wi-Fi connectivity in areas of greater usage.
- Device players are focused on bringing Smart Phones and other Next
generation connected devices to the market.
- VAS Players are increasingly focusing on service innovation across
voice, data and video platforms.
- The Government is investing heavily in creating a backbone internet
infrastructure that can be used by all stakeholders to reach the
remotest part of the country.
Given the emergence of a new Internet Economy, Spice is very well
positioned to bring the power of Information to the consumer by
providing the latest internet connected devices to the Indian Consumer
at great value and by educating the Consumer by introducing him to the
power of the new age devices and related services when the consumer
comes to our stores to buy devices. SPICE will continue to delight
customers with new age products and services through its integrated
business model and all possible channels namely - the Device Channel,
the Retail Channel and the Online Channel.
SPICE intends to work closely with Carriers. Just as the first phase of
Mobile Growth happened with the availability of infrastructure
provisioned by operators we believe that Carriers will continue to play
an important role in the introduction of Mobile Internet and will be
the key partners for Mobile Internet Players.
Our brand vision at Spice is to be One Step Ahead of the Needs of the
Mobile Internet Society and with this view SPICE has plans to renew
the organization to become better capable at providing Mobile Internet
focused devices, primarily Android, 3G and Wi-fi enabled and enhanced
retail experiences and new innovative Value Added Services.
We have taken several steps to invest in the various elements of our
- Focus on new products in all our businesses.
- More capable Smartphone''s and Tablets with superior hardware,
software and applications for the benefit of our consumers
- New Formats Retail Stores with better infrastructure and with focus
on trained staff in all aspects of Mobile internet to create a better
experience for consumers
- Better Leadership, Developers and Engineers with experience in
developing new content services across Voice, Data and Video Platforms
- Create office Infrastructure across the country to support the new
needs of the organization. This will be designed to encourage open and
- Hiring of highly motivated talent across the country which is
better suited to fulfill emerging consumer requirements
We strongly believe that SPICE needs to play a pivotal role in creating
in the new Mobile Internet Economy. We believe that the empowered life
style that Mobile Internet promises through new devices and application
in both rural and urban markets cannot be ushered in without
availability of affordable internet infrastructure across the length
and breadth of our country.
In order to usher in the new age of Mobile internet and move from
Ring Tone to Information Tone I look forward to working closely with
Carriers, Government Agencies, Device Players, Software Platform
Providers and other agencies to work closely with us to build highly
affordable infrastructure to enable the Youth of this country. SPICE
commits itself to this cause.
A Word of Appreciation
We could not have weathered the challenging economic environment and
survived the competitive business environment to move forward with
renewed vigour without the contribution, commitment and support of our
management team and staff, business associates and shareholders and
We appreciate your continued support, and steadfast belief in our
mission and vision.
Dr. B K Modi