The mobile VAS industry in India is undergoing a lot of structural changes
and is poised to grow and contribute greater revenues to the telecommunications
industry in the years to come. In an age of convergence, the prominent growth
driver of mobile VAS would be the consumers' desire of getting the maximum out
of their mobile. While among the youth in India, entertainment services would be
popular, consumers would also look for utility based-services like location
information, m-commerce, and local content-rich services.
And once 3G services are available, the mobile VAS scenario will undergo
dramatic changes. VAS providers are lining up innovative products that utilize
the 3G network to its optimal capacity and offer better consumer experience.
The Quandary
But there is a flip side too. Like any other burgeoning telecom segment, the
mobile VAS space has its share of challenges that will iron out with better
infrastructure, advanced technologies, more conducive regulations and
well-designed structure. Inspite of increased demands and a lot of new
innovations, the VAS industry faces a lot of roadblocks, the tussle over the
entry of 3G technology being one of them.
VAS companies and operators face a chicken and egg quandary. For the network
to be useful for VAS, they must be able to reach a large customer base. This
typically requires significant penetration of 3G capable hansets with an optimum
degree of network coverage for those handsets. On the other hand, the operators
must provide incentives to consumers to upgrade their services by buying new
handsets and subscribing to new network services.
The major issue that could have an impact on the 3G revolution is
affordability. While a section of urban users using high-end handsets, most
Indians still use low-end or mid-end handsets. The challenge lies in converting
this large customer base to use 3G from 2G handsets.
“Language is another big issue. Most mobile phone users, including the urban
ones, prefer regional languages instead of English while interacting over the
phone. The challenge is to provide them interactive voice support in a language
of their choice,” says Pratap Bernard, head, marketing and product, OnMobile.
Another key issue will be how operators price 3G services. If the prices are
high for an average user then the adoption of 3G services will not see its full
potential. The other area of concern is content. According to Raghunath
Vijayaraghavan, marketing director, Bay Talkitec, “Unless we have the right
content targeting the right audience, 3G will not see wider adoption. The major
roadblock in providing quality content to end-users has been the availability of
bandwidth.”
Most applications are not able to provide optimum user experience due to low
bandwidth, which makes streaming and downloading practically impossible. 3G
promises to be a boon for rural India as well, as it is pitched to revolutionize
social and economic development services like e-governance, tele-education, etc.
But its effectiveness on ground is a topic of debate as, initially, services
will be launched in the metros, And no time frame has been given in terms of
availability of services for rural India.
3G handset prices need to come down for easy adoption in rural markets. There
are skewed revenue sharing models where the content providers will have to make
peace with low revenue shares being offered by operators. Besides, high tariffs
continue to be a challenge for VAS adoption, and subscription-based services
will lead the way to emerge as a potent pricing model to engage customers.
Commenting on the same, Vijay Shekhar Sharma, MD, One97 Communications says,
“The number of first time mobile users is growing in the semi urban and rural
areas. They are initially low ARPU subscribers. VAS players constantly need to
reinvent and connect with users at both ends of the user segment-the higher
value subscribers and the semi-urban and rural subscribers. As the industry
grows we will also face a challenge in finding the right talent.”
Impact on ARPU
The impact of 3G on VAS usage should be highly positive, as the user gains a
far richer and more engaging service experience, prompting them to use new
multimedia services, and use these for longer. “The overall impact on ARPU will
be determined by pricing/bundling strategies that operators adopt. In some
markets where 3G services are already provided, operators have adopted a
penetration pricing strategy aimed to build a strong base of 3G users by pricing
3G services at an attractive rate,” says Mayank Sharma, VP, mLifestyle, Bharti
Telesoft.
The VAS market, currently valued at $1.35 bn, constitutes about 9-10% of the
total revenue for telecom operators in India, with SMS alone accounting for 44%
of that share. With the 3G services to be rolled out by next year, the VAS
industry is expected to increase its share manifold.
Vijay Shekhar Sharma of One97Communications says, “The effect would come
slowly but steadily. As users get more comfortable with the medium there will be
an increase in ARPU. We have just scratched the surface of the potentials of
entertainment, education and transaction on mobile phones.”
“It will take some time for 3G to penetrate into the lower-end segment of
subscribers and might have marginal impact on ARPU. But this may further
increase the minutes of usage. We also see an opportunity for operators to
extend existing services by providing enhancements that make use of data
services, enabling additional minutes of use,” says Ewald Anderl, VP and CTO,
Kirusa.
With the entry of 3G in the Indian market, new services will be launched that
do not depend on minutes of use. As 3G enables subscribers to expand, the
operators will have the ability to extend existing services to generate revenue
based on the new network's data capabilities. This will increase ARPU while
leaving existing minutes of use unchanged. “The increased network capacity would
lead to quicker browsing and downloads, which can increase revenues as users can
do more in the same amount of time,” says Pratap Bernard of OnMobile.
Experience the Difference
The launch of 3G in India is expected to open up a plethora of opportunities
for VAS players operating in the country. The advent of 3G technology will
enhance spectral efficiency of networks, thus increasing its capacity. Operators
will be able to offer a wide range of new services while improving their
existing portfolio.
Vijayaraghavan of Bay Talkitec says, “Though VAS contributes higher margins
to operators, current VAS revenue are only a small percentage of the total
revenue of operators. Now with 3G networks, operators can increase their VAS
revenues.”
The much-awaited 3G will undoubtedly provide the impetus required to boost
the segment, with services like mobile TV, full-motion videos, wireless tele-conferencing,
multi player online games, and m-commerce gaining popularity.
“Since 3G spectrum offers 4-5 times the voice capacity of the 2G spectrum, 3G
is a cost-effective tool to deliver both voice and data. In urban India, 3G
facilities will help in faster data and voice connectivity whereas in rural
India with the coming of 3G, tele-medicine, virtual marketplace and e-learning
will get an impetus,” adds Mayank Sharma of Bharti Telesoft.
Innovation and discovery are the two keywords driving the growth of the
mobile VAS segment in India. Based on the experience in international markets
where 3G is already commercially available, the users' expectations of mobile
applications are not directly linked with the underlying bearer technology.
The usage of VAS with 3G will be determined by the variety of content
available. In India where people are highly scalable, there is likely to be an
uptake of services that haven't enjoyed huge success in other markets, mainly
due to different cultures and norms. 3G also offers operators the opportunity to
adopt differential pricing strategies for video content and caters to both the
mass and niche market demands. The Indian mobile market is on a threshold of
maturity, and the road ahead looks even more promising.
Arpita Prem
arpitap@cybermedia.co.in
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