OnMobile sacks nearly 300 employees, may fire another 300
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Mumbai/Bangalore: Mobile value-added services provider OnMobile Global Ltd has asked nearly 300 employees to leave and may fire an equal number in the coming months, two people familiar with the development said. The lay-offs follow a spate of senior-level exits over the past two years, starting with that of its founder.
“Another 300-odd employees will be asked to go in the next couple of months,” said one of the two people, both of whom declined to be named.
One former employee who asked not to be identified said that eventually the lay-offs could number around 600, and were primarily driven by the need to cut costs.
An OnMobile Global spokesperson attributed the departures to an “ongoing business review” in an emailed response.
“In order to increase productivity, OnMobile is having an ongoing business review to improve operational efficiency and focus of the business. This has impacted certain positions, making them redundant. These changes are not specific to any one geography or country...At this juncture, we can state that the number of employees impacted is in the double digits,” the spokesperson wrote.
The company spokesperson claimed that the lay-offs aren’t about costs but “aimed at improving productivity and increased operational efficiency”.
The company raked in revenue from products that included text messages, caller tunes and ring tones; eight years later, OnMobile Global became the first Indian company in the mobile value-added service (MVAS) industry to go public, making its debut on BSE at a premium of 18.6% from its issue price. The company announced a 1:1 bonus in May, 2011. The momentum slowed dramatically after a series of senior-level exits that began two years ago with the company’s co-founder Rao resigning on 10 July 2012. The resignation followed a company statement that a special review had “identified weaknesses in some processes”.
After Rao’s exit, the reins were in the hands of Haight, founder and chief executive of Argo Capital Management Ltd, which held 74.7% of the voting share capital in Onmobile Systems Inc., the Delaware-based holding company of OnMobile Global.
In May, co-founder Janakiraman too stepped down as managing director and chief executive. He resigned from the OnMobile board a month later.
A month later, chief executive Rajiv Pancholy was appointed as managing director and additional director on the board of directors.
Analysts that Mint contacted have either given up tracking the company, or declined to be named.
“There is a lot of change that keeps happening in the management. The company changes strategy mid-way and it is difficult to get clients to buy into it,” said an analyst with a brokerage who used to track the company and spoke on condition of anonymity.
In the June quarter, the company posted a loss of Rs.23.9 crore on revenue of Rs.198.8 crore.
The big companies that compete in the mobile VAS space include CanvasM Technologies Ltd, Comviva Technology Ltd, Hungama Digital Media Entertainment Pvt. Ltd, IMImobile Pvt. Ltd, One97 Communications Ltd, OnMobile Global, Spice Digital Ltd, and ValueFirst Digital Media Pvt. Ltd.
On 25 March 2013, Wipro Ltd and Internet and Mobile Association of India (IAMAI), in a joint research report forecast the Indian MVAS market to touch $9.5 billion in 2015 from an estimated $4.9 billion in 2012. However, in July 2013, the Telecom Regulatory Authority of India (Trai) issued new guidelines to telecom service providers on the procedures for activation and deactivation of VAS to protect the interest of users.
This has affected revenue from Indian VAS companies, and also OnMobile’s India business.
In the quarter ended 30 June, OnMobile Global’s international business revenue at Rs.152.5 crore, grew 21.7% over the preceding quarter but declined 5.3% sequentially. It accounted for 77% of the company’s overall revenue.
However, OnMobile Global’s India revenue declined 28.1% from a year ago and 27.8% over the preceding quarter.
OnMobile hasn’t kept pace with a market that has moved to data, claimed an executive at a rival firm who asked not to be identified.
Under Pancholy, the company is working on renewing its product portfolio, and is also keeping a tight watch on costs.
“The new management headed by Rajiv Pancholy has brought in some changes, and as is common practice at most companies, a change in top management results in some senior exits from the earlier management,” said an OnMobile executive who asked not to be identified.
Pancholy, in a call with analysts at the end of the June quarter, said “...we will be obsessed with our cost base and exercise tight management of all controllable cost. We are focusing immensely on the cost for the rest of the year and we will try and reverse the negative margins to positive margins by the end of the financial year.”
On Tuesday, OnMobile Global appointed François-Charles Sirois as non-executive chairman of its board, replacing Haight.
Shares of OnMobile Global closed at Rs.33.10 each, the same price at which they closed on 31 December 2013. The benchmark Sensex has risen 24.9% and BSE IT Index is up 10.9% in the same period.
Beryl Menezes from Mumbai contributed to this story.