Sometime back Mobile2Win, a venture capitalist-funded company providing mobile value-added services (VAS), was merged with the Chandigarh-based Altruist Group, another VAS player. Four weeks prior to this, Delhi-based mobile VAS player One97 Communications raised money through series-B funding from chipmaker Intel’s corporate venture capital arm Intel Capital.

Common to the deals is the fact that all these players in the VAS space decided to take the merger and acquisition (M&A) route to expand their businesses.

While Mobile2Win-Altruist merger brings to light the emerging M&A trend in the M-VAS space, One97’s series-B fund raising indicates that there are many companies in the fraternity looking at inorganic route for growth .

Arun Natarajan, MD and CEO, Venture Intelligence, observes the kind of money being raised by companies in the M-VAS space currently hints at a possible surge in mergers and acquisitions. A key indicator is the significant rise in the number of large quantum or Series B fundraising by mobile VAS companies.

“The latest round of fundraising by some M-VAS companies is indicative of the possible increase in M&A activity in the M-VAS space in the coming 2-3 quarters,” he said.

In November last year, TeleDNA Communications received a $10 million funding from Peepul Capital.

People in the know say that One97 Communications, which is said to have raised more than $10 million last month, will use a significant portion of the funding for acquisitions.
Rajiv Madhok, director, One97, said the company was looking at the inorganic route to expand its services bouquet. “As for our inorganic story, there are 3-4 directions we have in mind,” said Madhok.

Madhok said the company was considering certain products such as social networking and m-commerce that could help it create a niche in the future.

“We can either do it ourselves or identify a group of people or entrepreneurs with necessary skill-sets and experience,” said Madhok.

A case in point would be OnMobile, an Infosys group company, which successfully acquired the necessary skill-sets and absorbed it in the company later.

Interestingly, One97 is not restricting itself to the domestic market. It will pursue inorganic growth options in other markets that are similar to India. “Countries like Bangladesh, Indonesia, Africa, etc are in our radar, where we can absorb entities with new skill-sets. Though the market dynamics would be entirely different from India, we would also like to look at the US and Europe for interesting opportunities,” said Madhok.

The Indian M-VAS market is pegged at $400 million. It currently comprises well-connected players with good exposure in the industry. A significant percentage of these firms haven’t taken any financing from private equity firms or venture capitalists. So, there aren’t many deals that get funded from the private investment fraternity.

“Companies that have been around since the last 7-8 years not only have gained momentum in terms of deployment, operator relationships etc, but also have the necessary management bandwidth that new entrants will lack. Such companies will be keen to take the M&A approach to absorb smaller companies,” an expert said.