Can Sunil Mittal's son help the telecom industry ring in the good times with 'Hike'?
Kavin Mittal, 25, is hunched over his HTC smartphone, furiously attempting to win a round of a game that his company, Bharti SoftBank (BSB), has created. The game-not yet launched-is best described as a mobile-based music quiz where users try and guess the identity of the singer or the band, or in the case of Bollywood, the movie. "I am horrible at Bollywood , better at the Western stuff," he says. Mittal punches the category and gets a Guns 'N' Roses version of Knockin' on Heaven's Door which he guesses correctly in a flash.
Relying on songs from 1,000 albums, the game allows you to go head-to-head with all your friends playing the same game, so you can lord it over them if you're able to finally, quantitatively, establish your musical chops. With so many songs in this game's kitty, it's not hard to imagine what BSB could do to make some money.
Just as his father Sunil Mittal ignited a revolution in telecom in India, Kavin is trying to do so in a space that represents the rapid convergence of two industries-the internet and telecommunications. "As a small start-up with not much money, we have to ensure we play a different game-go through the backdoor," says Mittal. Bankrolled by the biggest name in technology investing (Japan's SoftBank) and Indian telecom (Bharti Airtel) in a 50:50 joint venture, BSB is as much of an underdog as a pittbull is a playmate for your children. Still, the task ahead of the purported scion of the Bharti empire is so vast that it may not be possible without the backing of big guns. (PAST ITS PRIME)
The death of SMS
The telecom industry is poised for tectonic change. One early warning sign is the demise of the SMS which, after 22 years of privileged existence, is being sent to its grave by a giant killer-the messaging application. Research suggests that the volume of mobile-based messaging in India-from apps such as Line, WhatsApp, WeChat and Nimbuzz, to name a few-will be twice that of SMS-based messaging by the end of 2013. Consequently, SMS growth rates have fallen from 14 per cent in 2011 to 8 per cent in 2013, according to research outfit Ovum. Also, 2013 will be the last year that SMS brings in the largest proportion of non-voice revenues. By 2015, its revenues will begin to plateau. It's not hard to see that the SMS is going the telegram way.
This is a serious problem for Indian telecom operators who will lose approximately Rs 18,600 crore in potential revenues from text messaging by 2016, according to Ovum. What's most worrying for telcos is that the decline of the SMS could also be just the tip of the iceberg if things like free calls over mobile internet become a reality.
Kavin Mittal thinks that BSB has a potentially win-win solution. Hike, an elegant messaging app devised by a BSB company of the same name and launched around seven months ago, is the backbone of his strategy and it has already been downloaded by 5 to 10 million users. His games-there are more in the pipeline developed by animators within the BSB fold-will eventually piggyback onto Hike and will come free for starters. The plan is to monetise them and share revenues with telecom operators. "Messaging becomes a loss leader. It will never make money; but you can build an ecosystem around it," says Mittal.
Worldwide, most games make the bulk of their money through in-app purchases, where gamers buy widgets to enhance their abilities, so this too will become a cash cow for Mittal's games. Telecom operators, acting as distributors, will be thrilled to share revenue in a market where their essential services are tanking. "Telcos are very interested to see a large number of apps that target the middle masses so they can scale up data services," says Mohammad Chowdhury, telecom analyst at PricewaterhouseCoopers.
Mittal may be on to something. It's a razor-and-blades strategy that has worked wonders for others. Within just one year of the launch of its mobile gaming platform, South Korea's messaging service Kakao Talk has generated a staggering $310 million in revenue for the first half of 2013 alone through its 180 games. A third of its 100 million users have been converted to players.
Mobile gaming hasn't yet taken off in India but Mittal hopes to change that. He has access to the biggest pipeline in India and he knows that in this game distribution is the key. Moreover, BSB is localising for the Indian market. It is making its content more visual than text-based and this could spark a breakthrough in a complex market with a multitude of mother tongues. For now, Mittal is busy creating and pushing stickers -animated images for use in a chat that enhances user stickiness and is bread and butter for global chat apps.
Speed, clearly, is something that Mittal revels in. He talks in long, rapid bursts, loves Formula One racing, and zooms about the Buddh Formula One racetrack every other weekend as a form of stress release-so it seems appropriate that he be anointed the chosen one to head Bharti's pivotal internet play, which saw $7 million pumped into it a few months ago after Hike hit the 5 million-user watermark. "What you need is a vision to lead a service that is extremely fast paced," says Mike Kayamori, director, BSB, who oversees the India and Singapore investments made by SoftBank.
But Mittal has never worked for anyone over a sustained period, has been cushioned by a privileged upbringing and probably never had to worry about his rent. He also appears uber confident and while this is generally a positive trait, it could be confused for arrogance while negotiating deals with people twice his age. After all, his father, say industry observers, is who he is because of his humble beginnings and his share of failures. "Well, as probably the next person theoretically in charge of Bharti, he has been brought up to lead. This is not his first start-up," says Kayamori. He is referring to AppSpark, an app-development firm that Mittal, post his electrical engineering and management degree from Imperial College, London, started in 2009. He personally designed and developed 'Movies Now'-dubbed 'One of the 10 Essential Movie Goer Apps' for the iPhone. "Kavin has the right qualification to lead the team. He is a digital native and understands the space," adds Kayamori.
There are other problems, though. The Indian messaging app world is now brimming with much bigger players who have grown up in fiercely competitive global waters. WhatsApp is the clear leader with upwards of 20 million users (and 350 million globally). China's WeChat and Japan's Line recently entered the Indian market with deep enough pockets to launch aggressive television campaigns. Line snagged an impressive 5 million users in just a few weeks. Nimbuzz, another dominant local app, has upwards of 10 million users and says it generates a lot of cash through ad revenues and international calling. Many of the things that Mittal is trying to do with Hike, these folks have already done in other markets. "Hike has a tough road ahead," says Neha Dharia, an analyst with Ovum.
Another problem, points out Dharia, is a curious existential dilemma. "At its core, Hike is obviously strongly associated with a telco. I would think it would come across as a threat to other telcos, but then again, it depends on the strategy that these competitors are looking at," she adds. In other words, Hike is in a 'no man's land,' unable to leverage its Airtel connection, which from a branding perspective would be key to attracting new users and a cinch to do. Mittal, however, says that so far, telecom operators have been more than amenable to working with Hike and being half-owned by Bharti has not proven to be a crutch.
All said and done, the younger Mittal is undoubtedly driven-he often posts messages on twitter at 3 am from his office-can walk the talk in the tech sphere, has shown gumption and has the backing of the most important names in the business. "If Hike really takes off, it could change the market," says Dharia.
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