mobile industry summary, page-3

The Mobile Industry is indeed growing but it is still in its infancy stages. Cellphones are everywhere but the penetration of smartphones and smart media is what will drive the revolution of mobile media consumption, app development and monetary transaction across mobile platforms.

Currently in first world markets, we are just beginning to see how to effectively monetize this platforms and many companies across multiple parallel industries (telecom, IT and financial) are working to get the mix just right. Like the e-commerce race, but with so much more potential (for profit and misfortune).

What is truly interesting is that the markets of third-world countries have roughly the same market dynamics in place to scale mobile media consumption. The only hurdle currently in place is the mass availability of smart devices. However, according to research, this is supposed to shift between 2015-2017. During this time a few things will change, we will need greater data bandwidth to supply these countries and our own for increasing mobile media data consumption.

Furthermore, with the increase in mobile media consumption comes mobile advertising, a sector that is growing phenomenally in the US and in Europe. Australia is still playing catch-up because in our market the ROI is not justified presently. This is because of a few reasons. The mobile advertising networks currently do not have the marketing expertise and customer insights to validate multi-million dollar budget spending, yet. The network model is largely speculative right now but many networks are in testing. Generating revenue on these ad-networks are only just succeeding.

Looking at MBEs fundamentals, I feel like it is stronger than ever, in this sector, particularly with the deal with Syniverse, the signing of US carrier (5m users) and the potential to sign up more carriers in the US as the connectivity partner plan comes into fruition. In 30 days MBE will have a serviceable network of 150m users. I'm speculating that this is Singtel coming into play after finishing the test and learn phase, but I could be wrong.

I'm impressed that they are able to consistently continue revenue growth in Australian market. What this means is that not only is the sector still growing but the company are refining their media platform year-on-year to yield better performance. This intellectual property (user insights) will be very useful as they continue to grow. The proof of this is the five new products that will be introduced into Australia in H12015.

4th Screen is delivering very promising growth, especially since coming from a pretty pathetic year (2013), this is the result of having a stronger and more refined advertising network, and it will be the difference in becoming an advertising leader in this market or not.

The company have had a solid year compared to last year and it is commendable given that they have faced some pretty epic hurdles like the Sprint/US delays and the Tech sell-off sentiment in the market overseas and in Australia, however, that being said, in the US we are seeing the money coming back into profitable businesses in the Tech sector and if it continues this week in the US, tech may bounce back with smarter money. We are already seeing some smart money coming in with IOOF holding "together with an outstanding list of other local and international institutional investors that have also joined the company’s share register following the recent capital raising".

Over this year I have realised that MBEs management is smart. I believe that management has an ace up their sleeves for next year where they quadruple their users just before the start and as a result will have an explosive Q1 2015 from international and local markets. They have had nearly a year of test and learn overseas and have geared for rapid expansion, this will kick in the next few months.

A marker of this is the recent updating of their website - it's not that they woke up recently and realised that their website was dated and poorly designed with hardly any information as to how the company works. I understand that this was in the pipeline for a while and strategically updated to coincide with the launch of next years run-up. The back-end is shaping up according to plan - finally and they needed to execute the much needed transparent front-end that explains the business model and segments. Further proof of this is that the company are now in a comfortable position to explain their business model (as done in the recent trading update) they are confident in their model and understand their advantage.

The financial institutions holdings of Perennial Value Management are a welcoming sign that there are believers in the MBE model and I have no doubt that when the company transitions from a 70m to a 150m market cap, there won't be more institutional support.

If there is a company that can build a multi-million advertising user network across multiple markets and innovate on that platform through digital products and billing arrangements, it looks like MBE are going the right way to become that company. Why not, they are already half way there and that's half the race won.