Blog Post

More Consolidation In Mobile Content: Livewire Buys Fonestarz

More consolidation among mobile content players: LiveWire Mobile, a U.S.-based company that sells music and related content like ringback tones, has bought Fonestarz, a UK-based concern that specialises in wallpapers, ringtones and phone enhancements that it sells through its digital storefront, in an all-cash deal. Other financial terms were not disclosed.

Dave Moreau, the CEO of Fonestarz, will become the COO of the global operation. Fonestarz will keep its offices in the UK.

Both companies primarily sell services in white-label agreements with mobile operators and content brands, rather than via app store storefronts — collectively working with operators like Sprint (NYSE: S), Cricket, Vodafone (NYSE: VOD) and Virgin Mobile (NYSE: VM), as well as content publishers such as Disney and major music labels, although there may be more apps on the horizon.

In an interview, Moreau said that the merger of the two companies would be complementary: LiveWire focuses mainly on music services, while Fonestarz has built up a business in all of the furniture that people use to personalise their handsets: ringtones, wallpapers, and so on, which can also potentially extend into merchandising around the music services that LiveWire already offers. But Fonestarz, too, has moved into music services — it has a deal to manage the mobile music service of Vodafone New Zealand and Moreau says it plans to announce a similar deal for a major European operator in the next two months.

Music deals like these, however, will require Fonestarz to scale up, something that is hard for a small company to do organically, and much easier to do by acquisition, says Moreau: “We needed to be bigger and joining with LiveWire gives us the ability to deliver more products. If you’re small and niche you can make a living but you just can’t keep growing.”

Moreau says that traditional services, bought by people who use featurephones, still make up more than half of Fonestarz’s revenues, which were £3.2 million ($4.9 million) in the last fiscal year. He admits this part of the business isn’t growing like it used to, although it is still seeing growth particularly in developing markets where feature phone use remains high.

Meanwhile LiveWire Mobile had turnover of $16.8 million (£10.8 million) in 2009. Release