TelecomTiger catches up with Carsten Brinkschulte, CEO Synchronica which announced foray into Indian market for its mobile email services.
Q1) You are aiming to take on incumbent service providers like BlackBerry who have the first mover advantage and strong brand acceptability as well as recall. How do you intend to overcome these marketing challenges?
Ans: RIM’s Blackberry is an excellent product which has made mobile Email popular in particular in the high-end of the end user spectrum. RIM is a Smartphone device manufacturer which has one key asset – an infrastructure component (BIS, BES) which connects the devices to the user’s mailbox, calendar and contacts. However, RIM is “just” a device manufacturer and therefore focused on its own (high-end) devices which are generating the vast majority of their revenues.
By contrast, Synchronica is a vendor-neutral infrastructure software vendor that aims to deliver Blackberry-like services on a wide variety of mobile devices. Unlike RIM, Nokia Intellisync, Visto or Seven, Synchronica’s Mobile Gateway uses industry standards to deliver push Email (IMAP, OMA EMN) and synchronization (SyncML) of calendar and contact data. As a result of this unique approach and the broad support for these standards by manufacturers, Synchronica can support mobile Email and synchronization on more than 1,300 device models from all leading manufacturers, representing more than 1.5 billion devices in the market worldwide today. Unlike our competitors, who base their technology on proprietary protocols, Synchronica does not require any additional client application to be downloaded and installed on the handset. Instead, we synchronize with the built-in Email client, address book and calendar found in most devices shipping today.
Fundamentally, Synchronica has a much larger addressable market than RIM and other competitors who are focused on, and limited to, the high-end of the device spectrum. With the recent acquisition of our nearest competitor, AxisMobile, Synchronica has further enhanced its product portfolio for mobile Email, in particular expanding the range of supported devices in the low end of the device spectrum (low-end feature phones and basic phones), which represent the vast majority of devices shipping. This year, the industry is targeting to ship about 1.2 billion new devices, but analysts predict only 10% of these will be Smartphones. While the Smartphone sector is growing, the feature and basic phone sector is growing, too. Even the wildest predictions of Smartphone-friendly analysts are not predicting more than a 30% Smartphone market share in new devices by 2011.
With the acquisition of AxisMobile, Synchronica gains additional channels, in particular Email to SMS, Email to MMS, WAP/xHTML Gateways and a transcoding engine enabling users mass-market devices to view office documents and reduce the size of the attachment (e.g. down-sampling of images). Synchronica aims to complete the integration of AxisMobile technology into Mobile Gateway by the end of 2008, which will result in Mobile Gateway 4.0, a multi-protocol gateway delivering mobile Email and synchronization to virtually any device in the market today, massively expanding the addressable market in the low-end of the device spectrum, which is exceptionally important in particular in emerging markets where we see the largest potential for mobile Email due to the low PC penetration and lack of wireline infrastructure.
Q2) Synchronica has reported losses in its latest announced financial results. Revenues too declined. How do you perceive these financial results and how do you assure your shareholders of future growth prospects?
Ans: It is true that Synchronica has increased its losses compared to the first half of last year, but the analysts are predicting an increase of revenues for the full year from £2.3m in 2007 to £3.6m in 2008. If we achieve this goal, we believe that we can retain shareholder confidence in the company. Also, Synchronica raised additional funds of £5.1 million in September 2008 from new and existing shareholders, which secured the financial stability of the company and demonstrated shareholder confidence. Our revenues in 2007 and 2008 remained “lumpy” and half-year results are dependent on the timing of revenue recognition of relatively large license deals which can (and have) skewed the picture. However, we are moving towards an annuity model in our license revenue which will result in a more linear growth pattern and more predictable revenue stream.
Also, we have in recent months secured a number of contracts with mobile operators and device manufacturers (a new operator in Nigeria, an expansion order from an operator in Russia, a new operator in Belgium, a new operator in India and a license agreement with a major Chinese handset manufacturer) which represent substantial revenue potential for Synchronica in 2008, 2009 and beyond. We are confident that we will continue to develop positively and aim to achieve profitability in the foreseeable future and growth thereafter.
Q3) In India BlackBerry services were under cloud for security reasons. The advanced encryption used for data communication in BlackBerry devices was not traceable by the security agencies in India. Do you also employ similar standards and do you believe your services will meet all the statutory regulatory criteria in India especially from the security perspective?
Ans: Synchronica fully supports legal interception and, unlike RIM, does not operate a central NOC outside of the borders of our licensees. Instead Mobile Gateway is typically deployed in the datacenter of the mobile operator which acts as the “Gateway” connecting the user’s mobile device to the user’s mailbox, calendar and address book. We can and will fully comply with legal interception regulations in India and other countries while at the same time maintaining a secure communication channel to the device and to the user’s mailbox. Since Mobile Gateway does not route all traffic through a central NOC outside of the hosting country, there is also no possibility of foreign legal interception. We understand that this has been a concern voiced over systems which do route all traffic through central NOCs, which has led to several government organizations banning the use of these systems.
Q4) In India there are only about a million BlackBerry devices on active subscription. The market is just recently picking up with entry of new players like Apple’s iPhone. What are your immediate targets in terms of subscriber base? Also do you intend to offer customised services for the Indian market?
Ans: Unlike RIM and Apple, Synchronica aims to deliver mobile Email to the mass-market, enabling Blackberry-like services on a wide range of cheap, mass-market devices. Apple and RIM are aiming at the high-end of the end-user spectrum. Synchronica Mobile Gateway is a complementary solution , expanding the concept to the mid-range and low-end device and end-user spectrum. Our immediate targets in terms of subscriber-base are disclosed in the announcement for our recent deal targeting a mobile operator in India – a 50,000 user licence on start- up, a 250,000 expansion later this year , followed by another expansion for a further 500,000 licenses in 2009. Obviously, these could be viewed as conservative figures given the massive addressable market of the world’s second largest mobile market, but they are nonetheless significant for a new entrant into the Indian market.
Q5) You have recently clicked a deal with an Indian agency who will act as your reseller in the country and claims to have tied with a leading Indian operator with over 50 million subscribers. Could you please elaborate on the deal?
Ans: As the operator wishes to remain anonymous at the moment, I cannot elaborate further, other than to point you to the regulatory news announcement.