ValueFirst Messaging, a Delhi-based mobile messaging services provider, has acquired mobile value add services (VAS) firm Cellnext Solutions Limited. Though the details were not disclosed, the acquisition is an all-cash deal. Cellnext will continue to operate as a separate company following this deal.

The deal signals the growing consolidation in the fast growing mobile VAS sector.

ValueFirst raised $6 million earlier this year from venture capital firm New Enterprise Associates (NEA). Cellnext is a subsidiary of Escorts Limited and the deal is part of the divestiture of the group's non-core businesses.

Cellnext's clients and partners include Bharti Airtel, Vodafone, Idea Cellular, BSNL, MTNL and financial services majors like LIC, ICICI Bank, Axis Bank, Max New York Life Insurance, Citi Financial, among others.

The operator business and the m-commerce platform of Cellnext will help ValueFirst extend its reach deeper in the mobile eco-system, according to its CEO Vish Bajaj.

Besides mobile messaging services, ValueFirst also has two subsidiaries, SpotOn (media mobile ad network) and ValueFirst Connect (mobility solutions provider).

There has been some consolidation in the Indian mobile VAS recently. "Mobile VAS started in India as early as 2000 becoming a multi-billion dollar industry but it’s still extremely fragmented," said Arun Gupta, Associate Director at Equirius Capital, who were the advisors to

Escorts on the deal.

Earlier this year Mobile2Win, a VAS player, was acquired by Chandigarh-based Altruist Group in an all stock deal. Another deal was UK's 2ergo Group Plc acquiring mobile marketing and VAS firm Activemedia Technologies, which had clients like Airtel, Vodafone, Idea, Reliance Mobile and Tata Tele.

Though the space has witnessed a number of investments by PE & VC firms, M&A is bound to increase as players look to build scale. "As the next lot of 6-7 mobile VAS firms get ready to hit the capital markets in the next 18-24 months, a lot of bolt-on acquisitions will happen," added Gupta.

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