Business

Snapdeal buys Freecharge, tops m-commerce segment

Online marketplace Snapdeal on Wednesday announced the acquisition of mobile transactions platform Freecharge, in one of the biggest deals in the Indian internet sector so far. According to Snapdeal, the acquisition, carried out through a combination of stock and cash, has made the Delhi-based company the largest mobile-commerce (m-commerce) company in the country, with 40 million users.

M-commerce refers to commercial transactions conducted electronically, through mobile phones. Such transactions include purchasing goods or services, making payments and banking.

While Snapdeal and Freecharge refused to comment on the size of the deal, sources said it was valued at about Rs 2,500 crore. Snapdeal said “a majority” of the transaction was in stock and the rest in cash.

City-based Freecharge allows users to recharge their mobile phones or internet connections and get coupons as reward for using its services. Following the acquisition, the company will become a wholly-owned subsidiary of Snapdeal but will continue to operate as a separate entity. Currently, Freecharge has 200 employees, who would continue to operate as they do now; the company will expand its team further.

Earlier, Snapdeal had strengthened its presence in the m-commerce space by acquiring luxury fashion e-tailer Exclusively and digital financial products platform RupeePower.

“The age of monolithic e-commerce platforms is over; it is time to build an impactful digital commerce ecosystem in India, which is multi-dimensional,” said Kunal Bahl, co-founder and chief executive 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 respective specifics in the m-commerce market, they said together, they had about a million mobile transactions a day, 40 million users and 30 million mobile application (app) downloads.

Currently, about 75 per cent of Snapdeal’s orders are accounted for by mobile devices. The company expects this to rise to 85 per cent by the end of this year.

According to Freecharge’s estimates, about 75 million mobile recharges are carried out in India everyday, of which only one-two million are online. Kunal Shah, co-founder and chief executive officer of Freecharge, says he expects the number of online mobile recharges to rise rapidly.

Easy availability of affordable smartphones and cheap internet plans have led to most digital commerce transactions moving from computers to mobile phones. Most leading e-commerce companies get about 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 India increased from Rs 7,800 crore in FY13 to Rs 36,000 crore in FY14.

“The ‘mobile first’ nature of the Indian internet user base would further the usage of mobiles as the preferred channel for commerce in the country,” Deloitte said in its report. “Favourable regulatory policies related to access to FDI (foreign direct investment), ease of MNP (mobile number portability), free roaming, and decreasing rates have led to a tremendous increase in the mobile subscriber base in the country. With PC (personal computer) penetration languishing in single digits, mobiles become the obvious choice for attaining a wider reach…Deloitte predicts a new breed of service, which touches the daily lives of the consumer, will play a pivotal role in the growth of e/m-commerce in next two years.”

The number of mobile internet users in India is estimated at about 120 million, compared with the 100 million who use internet on their PCs. The overall telecom subscriber base in the country stands at 964 million, of which 937 million are wireless subscribers, leading to a wireless tele-density of about 75 per cent.

Highlighting the importance of m-commerce in the country, 98 per cent of the respondents in a recent survey by mobile e-commerce platform StoreHippo said creating a mobile website or app for a company’s online store was a must for the “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 retailers who created websites optimised for mobile devices, and better still, retailers who created a mobile app for their online store, were likely to succeed in their business venture,” StoreHippo said. About 120 companies participated in the StoreHippo survey.

ALL ABOUT M-COMMERCE
What it means

  • Commercial transactions conducted electronically, through mobile phone. Such transactions include purchasing goods or services, making payments and banking

Leading m-commerce segments in India

  • E-commerce portals claim to get 65-70% of traffic from mobile devices; ticketing platforms; cab/auto hailing services; public & private banks that allow access through apps and mobile-browsers; payments for mobile recharge, utility bills; mobile marketing

M-commerce vs e-commerce

  • E-commerce refers to transactions over computer networks such as internet; m-commerce includes transactions over wireless hand-held devices such as mobile phones
     
  • In the absence of a strong wired internet and broadband network in parts of India, m-commerce provides mobility, convenience, broader reach and ubiquity

Global footprint

  • Globally, m-commerce is worth $ 230 billion, with Asia representing half the market. Some say it will stand at $ 700 billion in 2017

India footprint

  • According to Deloitte, the value of m-commerce-based transactions in India increased to Rs 36,000 cr from from Rs  7,800 cr between FY13 & FY14

Why India?

  • Easy availability of affordable smartphones and cheap internet plans have led to a majority of digital commerce transactions moving to mobile phones. Mobile internet users in India are estimated at 120 mn, against 100 mn using internet on PCs