WW-130 -- Are Mobile Content Providers a Worthwhile Investment?

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J@pan Inc presents the Wireless Watch Newsletter:

W I R E L E S S W A T C H

Commentary on Japan's Wireless World
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Wireless Watch Newsletter
Issue No. 130
Thursday, May 27, 2004
TOKYO

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CONTENTS

@@ Viewpoint: Are Mobile Content Providers a Worthwhile Investment?

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@@ Viewpoint: Are Mobile Content Providers a Worthwhile Investment?

Overshadowed by the financial results of the Vodafone group, the more
interesting news of the week emerged from the US: VeriSign announced
its acquisition of Jamba!, Germany's leading mobile content provider.

The US-based provider of infrastructure services to enable more secure
and more intelligent Internet and telecommunications networks paid
$273 million for Jamba!. Through Jamba!, VeriSign will have immediate
access to a large portfolio of mobile content and applications. Jamba!
provides content to customers of European carrier groups Vodafone,
T-Mobile and KPN.

VeriSign might be interested in expanding its existing business to the
mobile Internet by leveraging Jamba!'s existing customer base of wireless
carriers and consumers. Its technologies can be used to provide services
for digital rights management, the copyright clearing of content and
financial settlement of mobile payments.

But to become successful in the mobile Internet, VeriSign needs to close
deals with the wireless carriers already deploying m-payment systems.
Questions remain as to whether VeriSign has sufficient time left to play
a leading role in the European m-payment scene.

You might wonder what the relation is between the VeriSign褒amba! deal and
Japan. The acquisition of Jamba! was not expensive compared to the market
capitalization of large Japanese content providers. VeriSign expects the
deal will generate approximately $70 million in incremental revenue
during the second half of 2004. If we assume that Jamba! sales will be
flat this year, VeriSign paid about twice revenues for the Berlin
company.

Let us compare this with the leading publicly listed Japanese content
providers. Index, the largest Japanese mobile media company, has a market
capitalization of about $2 billion -- 20 times its revenues. At No. 2,
For-side.com's market value is $1.4 billion, roughly 30 times its sales
with a 20 percent operating profit margin.

Margins for content providers in Europe are generally smaller than they are
in Japan. Magazines targeting the youth of Europe are flooded with page-
wide promotions for SMS, WAP and MMS content. Advertising budgets in Europe
to acquire customers are much higher than those in Japan, where subscription
services are widely used. Subscriptions only end when the consumer
unsubscribes from the service or cancels the contract with the carrier.

Jamba! is one of the few European companies that has been able to
establish a business where its end-users subscribe for a certain period
with the right to download mobile content on their mobile phone.

Both Index and For-side.com have expanded overseas. Index acquired US-based
Mobliss for $15 million and invested $5 million in Haiku from France.
They will now encounter VeriSign as a major competitor in Europe and the
US.

Don稚 expect consolidation in the mobile content industry to end soon.
An interesting battle lies ahead.

-- Arjen van Blokland

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STAFF
Written by Arjen van Blokland; Edited by Roland Kelts
(editors@japaninc.com)

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