Rising, Despite the Fall

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Mobile VAS is gaining momentum, and the Indian VAS market is the fulcrum of growth. Today, VAS contributes 10-14% of total telecom revenue, and it is expected to cross 30% of service providers' revenue in the next five years. SMS, ringtones/CRBT, and voice VAS are, and will continue to be, among the highest revenue generating services.

As ARPUs take a steep fall, finding an alternative source of revenue is resulting in operators looking at the VAS market aggressively. Simultaneously, convergence of technology has lead to VAS being diversified into fields like audio, video, text, images and applications, inturn increasing the market prospects. According to VOICE&DATA estimates, in FY 2007-08, the VAS market stood at Rs 4,576 crore and grew by 60% with respect to Rs 2,860 crore in FY 2006-07. The major reason behind this tremendous growth is a rapid increase in mobile subscribers base, and also that services are becoming cheaper with easy accessibility to end users. According to V&D estimates, OnMoble has emcrged as the top player in the mobile VAS market.

Growth Driver
The key growth drivers for the industry are subscribers growth, product innovation, and content innovation. Besides, data and voice are also two main growth drivers for mobile VAS in India. There is a huge growth in the number of subscriber from R1/R2 markets, and here VAS will play an important role. Hence, it is important that VAS content is delivered on the voice platform, in local vernacular language to enhance the usage.

After being the single largest revenue component, voice is now going to be a key offering by mobile companies in the VAS space as well. In spite of the fall in voice tariffs and pressure on ARPUs, telecom companies in India have been able to demonstrate a commendable play thanks to innovations in marketing, aggressive customer acquisition strategy, and growth in VAS.

The growing telecom subscribers in India, and an addition of more than 8 mn subscribers every month are other major growth drivers. Not only that, popular SMS votes-based programs on TV have brought to life P2A (person to application) and A2P (application to person) SMS services, contributing to the mobile VAS growth. Other growth drivers are penetration of mobile VAS services, rationalization of mobile VAS products pricing, and revenue share equity between telcos and VAS service providers.

A price conscious Indian market with low or no balance being a reality, the mobile advertising supported VAS service model will be a great relief for the end consumers.

A plethora of GPRS-enabled handsets available in the market along with the fall in handset prices and decreasing lifecycle of handsets are leading to easier access to VAS services at affordable prices. Subscribers are using their handsets for a wide range of applications like playing games, accessing information from banks, railways, airlines, downloading ringtones, news/sports alerts, check exam results, surf the Internet, and participate in contests.

Consumer satisfaction is also a very crucial growth driver. On the product front, VAS players need to take care of the customers to enjoy good consumer acceptance and repeated usage. The content should be consumer-centric and easy to use, with an easy content discovery process using M search Technology. Content providers should have a personalized and intuitive user interface and content by offering services in regional languages.

Flexible price plans like micro payment and subscription based plans would lead to consumer stickiness and thus propel growth of VAS.

Tasting Success
The year is marked by several big achievements, acquisitions and launches by VAS players around the world. Bharti Telesoft acquired Jatayu, a leading player in the mobile Internet space, bolstering its portfolio of Internet and VAS applications for mobile operators and handsets manufacturers. The geographical presence of both complement each other-while Bharti Telesoft has a strong base in India, the Middle East, Europe, Africa and South Asia, Jatayu has a strong foothold in Latin America, the US, and Apac region.

OnMobile, the biggest player in the VAS space has also marked some significant achievements. In Feb 2008,OnMobile made its debut on the two prominent stock exchanges. OnMobile is the first Indian telecom VAS company to go public. It has also acquired Voxmobili, a specialist in personal mobile data management software. The acquisition adds a number of international customers to OnMobile's customer portfolio.

OnMobile has been able to successfully launch its VAS offering with international operators like Indosat in Indonesia, Maxis in Malaysia, Dialog in Sri Lanka, M1 in Singapore, and Banglalink in Bangladesh.

Bay Talkitec launched 3G video products in Singapore and Malaysia, and has signed up with reputed companies in the regions to provide services. It has also received $2.5 mn funding from NEA Indo US Ventures, and is in the process of expansion. For another major player in the VAS space Hungama Mobile, the year's biggest achievement was the consolidation of all business to gear up for the next quantum growth.

Mobile 18, a year old player in the VAS space, has been able to conduct some successful contests on IRVS and Short Code. Its IVRS contest in association with BSNL generated 5 mn MoUs, while the SMS contest generated close of a million SMSes. For Mauj Mobile, the 3G portal developed for Bahrain Telecom (Batelco) is a major achievement. The portal has been specifically designed for Batelco's 3G network.

Buongiorno consolidated its position as a comprehensive portal manager for technology and content aggregation. Canvas M's launch of India's first multiplayer mobile gaming services with Reliance Communications and a content delivery management portal for a major European sports association have been feathers in its cap.

Market Dynamics
The consumer uptake of VAS services in India has seen more than 70% y-o-y growth with the introduction of consumer centric innovative services. Like simplification of the user interface for ease of content discovery, local and regional content in rich formats, availability of services in multiple languages, and new technologies and access channels.

Though the Indian VAS content is still driven by astrology, Bollywood and cricket, with most downloads happening in these genres, demand for infotainment is an evolving trend. It constitutes information on personal finance, commodities, education content, etc.

Most VAS services are provided through SMS, IVR or WAP. Revenue growth has been driven by SMS (including P2P, A2P, P2A), contributing over 55% of the total VAS revenue in 2007. However, the biggest challenge would be consumer adoption. In the short run, lack of standards or interoperable solutions will hamper market growth.

VAS is offered across multiple access channels like voice, SMS, WAP, USSD, and On-Device portal. During the last fiscal consumers preferred voice as an access technology because of the ease of interaction. In a country like India, voice will always have an edge over other access medium because of lower levels of literacy.

The other key factor is that voice VAS, eliminates the limitation of handset dependencies faced by other access technologies. This has resulted in voice VAS penetration into the highly price conscious rural markets.

Product innovation, ease of use, higher awareness and flexible pricing for data offering is increasing VAS user-base, and improving user experience. As device capabilities continue to improve, focus on high end VAS like entertainment on the go will gain momentum.

Urban and non-urban market characteristics and VAS preference was another major trend observed during the last fiscal. The urban market step fairly populated with high-end, feature rich handsets leads to an urban consumer expecting services to match his niche requirements apart from the basic VAS services. On the other hand, the rural market, which still struggles with a relatively weak network infrastructure and populated predominantly with low-end handsets is poised to experience a huge uptake of basic VAS services. Utility and need-based services focused to enhance the quality of life will see a good uptake in rural markets.