Currently industry estimates suggest that the VAS market will grow at a CAGR of 45% over the next three years, and there is a great demand for content on the mobile platform.

Sharma of One97 Communications agrees that both market and opportunities are large. “The true potential of this business will come to the force once operators' new subscriber acquiring spree nears a plateau, and the focus is on the subscriber who is ready to do more with his device than just calling,” he adds.

With the present spectrum infrastructure in India, operators are facing difficulty in getting proper bandwidth to make services a success. There are numerous challenges in India concerning the rollout of 3G. Also, gaining loyalty from existing subscribers becomes a challenge as the market matures. However, to retain the market share and maintain their position in the market along with new players would be the biggest challenge for existing leader in the wake of increased competition.

Phoneytunes' CEO Taron Mohan says, “With our base built in India over the last 6-7 years in understanding the telco networks and experience of handling these networks from the network interconnect perspective, we do have an edge over most companies coming in. Additionally, we do have a cost advantage over these new entrants with the overall understanding of networks and devices.”

The entry of new players in VAS is not looked upon as a threat by existing leaders, but more as an opportunity to collaborate and form partnership in creating innovative services and value added offerings. Mitra of Canvas M says that they are fully aware of the transient nature of VAS and believes that change is essential for growth.

“It happens in any industry. As the number of players increase, the market becomes cost competitive” Milind Pathak, CO-CEO, Buongiorno	“Gaining the loyalty of existing subscribers becomes a tough challenge as the market matures” Manoranjan Mohapatra, ceo, Bharti Telesoft

The New & the Established

According to Milind Pathak, co-founder, Buongiorno, “It happens in any industry. As the number of players increase, the market becomes cost competitive. It is the signal of growing from niche product to mass product, and the VAS domain is still evolving in its form.” He adds, “Further, more than undercutting rates, competition is packaging content in different forms for consumers.”

According to Nitin Patel of Telenity, “Increased competition for operators will undercut rates. Telcos will reduce prices to retain customers, bundled services will be major focus, and more user segmented VAS will be provided alongwith better quality of service to the end users.”

While Mohan of Phoneytunes believes that increased competition is leading to undercutting of rates, which is going to hurt everyone, Sharma of One97 communications, thinks that increased competition ideally will not result in decrease of rates, as most of the services will still hold via the operators. “Rate cutting is more prevalent in case of direct to consumer selling where we have seen limited transactions as of now,” says Sharma. But he does add that more competition has in some ways created pressures on VAS providers because some of them have decided to work on lower a revenue share to get a foothold.

Rajesh Jain of Netcore says, “In the existing VAS arena, this is happening because service providers are offering primarily commoditized content, doing arbitrage and trading, with a very limited focus on innovative offerings. The industry needs to evolve because the subscribers now expect much more.”

On the other hand, according to Rahul Pandey, head, Mobile 18, “If we look at the growth of mobile telephony and the surge it has witnessed since the reduction in prices, we can say that VAS will also follow the same path and business will grow exponentially at a lesser price point.”

Market Dynamics
Acceptance of VAS by operators has led to a huge shift in operator's focus, and they are working toward increasing the current VAS revenue contribution from 7% to 15-18% over the next three years. Technology would play a crucial role in introducing new applications and innovations in the market. Ad serving, m-commerce, and social networking on mobile are likely to see innovations in the coming days.

“For service where subscribers pay, mobile operators have the full prerogative to determine the revenue share” Rajesh Jain, MD & founder, Netcore	“Though the VAS industry is going strong, it still has a long way to go” Salil Bhargava, CEO, Jump Games

Pandey of Mobile 18 says that with the 3G license, there will be major transformations; there will be an array of content on the mobile platform, and dependence on astro, Bollywood, and cricket would decrease, as infotainment content will be in demand. “With new phones coming in and with improving bandwidth, the data market will grow faster,” adds Pandey.

Operators will focus on introducing new services based on user segmentation, retaining customers, and measures to grow revenue. Hopefully, spectrum constraint and delay in 3G roll out would be taken care of in the near future. Voice and data VAS is going to play a very important part, especially after the introduction of 3G. Regional voice content will be the next-gen killer application. Hosted voice exchange will play a big role as far as corporate communication is concerned.

According to Salil Bhargava, CEO, Jump Games, “Gaming is one of the most important evolving trends in India, and the future is very bright. The consumer is getting smarter day-by-day so the content needs to match up. There will be more demand for simple, slick, and easy to play gaming content. Social networking on games and applications will also climb popularity charts. Another interesting trend will be advergaming, with more and more brands taking on to games.”

With the present spectrum infrastructure in India, operators are facing difficulty in getting proper bandwidth to provide their services. Manoranjan Mahapatra, CEO, Bharti Telesoft says, “To offer services like IPTV and other video-based applications, one needs a much higher bandwidth. There are numerous challenges in India concerning the 3G rollout and we should be prepared to tackle them. However, the 3G rollout will definitely help us offer rich content. Also gaining loyalty from existing subscribers becomes a tough challenge as the market matures. With the number of first time mobile users shrinking and the likelihood of them being low ARPU subscribers, we constantly needed to reinvent ourselves and connect with the existing higher value subscribers.”

Future Calling
The future for value added services in India looks bright, and the growth being witnessed now is just the beginning. VAS will grow manifold in the coming years, as operators will pay more attention to it to enhance their bottom line.

It is also expected that in the coming two or three years, prices will drop significantly across VAS, leading to exponential rise in usage. The future will witness a focus shif toward the rural market as well.

Next generation VAS will also change the VAS landscape dramatically, widening the revenue ecosystem for the industry. Consolidation and acquisitions by larger players will also be a noticeable trend. Not to mention, India would continue to be a content-centric market.

Arpita Prem
arpitap@cybermedia.co.in