Snapdeal acquires Freecharge To Be The Top M-Commerce Firm

Online marketplace Snapdeal on Wednesday announced the acquisition of mobile transactions platform Freecharge, in what may be one of the biggest deals in India’s internet industry so far. According to Snapdeal, the acquisition, which was made through a combination of stock and cash, has made the Delhi-based company the largest mobile commerce (m-commerce) player in the country with 40 million users.

While Snapdeal and Freecharge refused to comment on the size of the deal, industry sources said the deal is valued at around Rs 2,500 crore. Snapdeal said “a majority” of the transaction is in stock and remaining in cash.

Bengaluru-based Freecharge allows users to recharge their mobile phone or internet connections and get coupons as reward for using its service. Post the acquisition, Freecharge will become a wholly-owned subsidiary of Snapdeal. However, it will continue to operate as a separate entity. Freecharge currently has 200 employees, which will continue to operate as is, and the company will expand its team further going forward.

M-commerce refers to commercial transactions conducted electronically through mobile phone. These include transactions for purchasing goods or services, making payments, banking, etc.

Besides the online marketplace that it operates and Freecharge, Snapdeal has strengthened its presence in the m-commerce space through acquisitions of luxury fashion e-tailer Exclusively and digital financial products platform RupeePower.

“The age of monolithic e-commerce platforms is over; it is now time to build an impactful digital commerce ecosystem in India that is multi-dimensional,” said Kunal Bahl, co-founder & chief executive officer of Snapdeal. “At Snapdeal we are building an ecosystem that powers billions of digital commerce transactions in the country in the coming years.”

While Snapdeal and Freecharge did not disclose their individual presence in m-commerce, they said, together they would have around one million mobile transaction per day, 40 million users and 30 million mobile application (app) downloads.

Snapdeal currently gets around 75 per cent orders from mobile devices, which it expects will go up to 85 per cent by the end of this year.

According to Freecharge’s estimates, around 75 million mobile recharges are done in India each day, of which only around one-two million are currently done online. Kunal Shah, co-founder and chief executive officer of Freecharge said, he expects the number of online mobile recharges to rise drastically going forward.

Easy availability of affordable smartphones and cheap internet plans have led to a majority of digital commerce transactions moving to mobile phones from computers. Most leading e-commerce companies get over 70 per cent of their traffic from mobile devices. According to Deloitte’s Technology, Media & Telecommunications India Predictions for 2015, the value of m-commerce based transactions in the country has increased to Rs 36,000 crore from from Rs 7,800 crore between FY2013 and FY2014.

“The ‘mobile first’ nature of Indian internet user base would only further the usage of mobiles as the preferred channel for commerce in the country,” Deloitte said in its report. “Favorable regulatory policies related to access to FDI (foreign direct investment), ease of MNP (mobile number portability), free roaming, and decreasing tariffs have led to a tremendous increase in the mobile subscriber base in the country. With PC penetration languishing in single digits, mobiles become the obvious choice for attaining a wider reach…Deloitte predicts that a

new breed of service that touches the daily lives of the consumer would play a pivotal role in the growth of e/m-commerce in next two years.”

Mobile internet users in India are estimated to be over 120 million compared to over 100 million users using internet on their personal computers. The current subscriber base in the country stands at around 964 million, out of which 937 million are wireless subscribers leading to a wireless tele-density of approximately 75 per cent.

Highlighting the importance of m-commerce in the country, 98 per cent of the respondents in a recent survey conducted by mobile e-commerce platform StoreHippo said creating a mobile website or app for a company’s online store is a must for “success of any business today”.

“With the increasing penetration of smartphones, tablets and mobile devices along with better broadband connectivity, as many as 98 per cent of respondents felt that the retailers who create websites optimised for mobile devices, and better still, the retailers who create a mobile app for their online store are likely to succeed in their business venture,” StoreHippo said. Respondents of the survey included 120 companies.