Messaging App Nimbuzz Goes To UK’s New Call In $250M Deal

Yet more consolidation in the messaging app business: Nimbuzz, an early mover in messaging that currently has 200 million+ users with a large number of those in India, has been majority acquired by New Call. The UK-based provider of low-cost fixed line and broadband services has taken a 70 percent stake in the business for $175 million, valuing the full company at $250 million according to reports that we have confirmed. Nimbuzz was a breakeven business, and expects to be profitable in Q4 with voice services, mobile ads and stickers driving revenues.

The move is part of a bigger strategy at New Call to invest in India, with Nimbuzz keeping its focus mainly on that country. We understand that the full staff of Nimbuzz, including CEO Vikas Saxena, will be coming over as part of the deal.

India is very hot at the moment for tech investment. Its mobile user base is exploding, from 795 million in 2013 to 1.145 billion users by 2020, according to Ericsson, with the smartphone market growing at about 300 percent, according to IDC. It’s also the subject of a lot of investment from others right now, with Softbank earlier today announcing investments in Snapdeal and Ola that total over $800 million — with both of these very firmly banked also on the country’s mobile services boom.

New Call says that it will make Nimbuzz the latest brand in its portfolio, covering entertainment, “basic connectivity” and WiFi while on the move. Other brands include the recently-launched Fuel broadband service in the UK, a mid-tier provider.

Nimbuzz was founded way back in 2006 in the Netherlands, but it found a lot of traction in the India, South East Asian and Middle East/North Africa markets. These form a significant part of its user base today — the vast majority of them, in fact, considering that in 2013 it already counted 150 million users in those regions.

Nimbuzz came online well before the first iPhone and the app explosion that followed on iOS and Android, and the subsequent rush of messaging apps like WhatsApp, Line, WeChat, Viber, Kik, Facebook Messenger, Snapchat (and so on) — all of which offer consumers the promise of connecting them to friends in more interesting and cheaper ways than telcos’ messaging services ever did. 

Messaging apps have proven to be hugely popular with mobile consumers, hundreds of millions of which now use them. It’s also proven to be a very lucrative business — if not yet in terms of profitability, at least in terms of M&A opportunities, with larger companies keen to own these properties as a way of acquiring loyal and engaged users.

Indeed, as profit has more immediately taken second seat to user acquisition, there have been a number of consolidations in this space, most recently with MessageMe getting acquired by Yahoo for tens of millions of dollars, but also much bigger players like Facebook buying WhatsApp for upwards of $20 billion. 

Similar to other rivals in the messaging space like Line, Nimbuzz more recently moved into voice services, taking advantage of regulatory changes in India that effectively let it operate like a telco in the country. Nimbuzz now processes 1 billion VoIP minutes each month, over 100 billion messages per month and a large mobile ad platform in the region. 

Prior to this, Nimbuzz had raised only $25 million from investors that included Mangrove Capital Partners. As New Call is taking a majority stake, Michael Jackson, a partner at Mangrove, will continue to keep a seat on the board. (Other investors in previous rounds, Naspers and Holzbrinck, had essentially sold most of their stakes about three years ago, and have now completely cashed out in this latest deal.)

“The Indian market is booming,” he said in a statement.  “Thanks to a growing middle class and increased connectivity, provided by lower cost yet highly functional Android phones and tablets, there is a tremendous demand for services. In many areas these services do not yet exist, or are significantly behind the European best-in-class. While the iPhone, 4G and online payments represents the future in Europe and the U.S., it is a very different story in emerging markets. Android, advertising and operators are a much more important part of the ecosystem.”

Mangrove has a long track record in messaging and disruptive communications. Among its portfolio, it was the first investor in Skype, and also invests in FreedomPop and he tells me that he’s looking forward to continuing to be involved in the company. “I’m a telecommunications guy,” he told me.

“Nimbuzz started life as a global Instant Messaging Company, and social media aggregator – but it is now a lot more,” continues Michael Jackson. “Today it provides a communications, e-commerce and entertainment platform for millions of Indian consumers. The deal represents a partial exit to Mangrove investors, together with a continued participation in what is a very exciting business with tremendous potential, under the auspices of a very competent and experienced emerging market team.”