MOBILE DATA: Voice Isn't Passé, but Let's Talk Data

In the past few months, mobile data services have shown an increasingly
significant growth in India. Even though SMS still accounts for the largest
chunk of an operator's data services revenue, other data services (MMS, mobile
Internet/e-mail access, ring tones, ringback tones, wallpapers, gaming, branded
content) too have picked up significantly. Mobile operators have been more
aggressive now and looking beyond SMS. "Dependence of non-voice revenue on
SMS has come down a lot in the past six months. An example is ringback tones. In
just five months, one million Airtel users adopted it. It is estimated that
around 15—20 percent of our entire base would now be using ringback tones.
This has created a good impact on the ARPU," says Mohit Bhatnagar, vice
president, new product development and alliances, Bharti Cellular.

According to IDC India's recently published research report on the mobile
data market, the overall non-voice market registered a growth of 139 percent in
2004 as compared to 2003. "The market has grown rapidly due to increasing
awareness and acceptance of mobile value added services and applications among
subscribers", says IDC (India) analyst Mugdh Rajit. According to IDC, at
present non-voice revenue contributes around 4.7 percent to the total mobile
services revenue, which is around Rs 14,560 crore. Though it is well behind the
international standards, it is quickly catching up.

GSM market leader Bharti which has been focusing a lot on data services in
recent months in its last quarter (ending December 2004) results said that its
non-voice revenue which includes SMS, voice mail, call management, and other
value-added services like Hello Tunes and Airtel Live accounted for a healthy
8.5 percent of the total revenue. SMS accounted for 5.8 percent out of this.
Overall, there was a whopping growth of 244 percent in revenue from non-voice
services as compared to the quarter-ended 31 December 2003. Even though no
statistics are available from Hutch, it is clear that high data and VAS usage is
one of the key reasons why it has the highest ARPU among the GSM operators.

The other significant mobile data opportunity that operators are tapping is
in the corporate users. Bharti claims to be getting good response to Blackberry
(primarily an e-mail access device) that it launched past year. Sunil Bharti
Mittal, chairman and managing director, Bharti Tele-Ventures told an analyst
conference in January that response to Blackberry has been very high and the
company is quite confident about the big success of this data device. "The
buzz is very high in the market place and number of corporates have come in and
taken it up as pilots and most of the corporates who have come in are now
growing the numbers. We are now starting a second phase where we have lowered
the monthly tariffs and given some more advantages to large buying by corporates,"
he added.

Growth, however, is just one aspect of the mobile data story.

Mobile data is also bringing in new stakeholders in the game and even
transforming other industries. Consider this: Just two years back nobody would
have imagined that television programs would become a key component of the
mobile data services ecosystem. Neither, for that matter, would have anybody
imagined how SMS would transform the television viewing experience by bringing
in interactivity. In 2004, TV programmes helped generate data (mostly SMS but
ringtones, wallpapers, etc. as well) traffic worth approximately Rs 25 to 30
crore. Even though the exact data on the amount of SMS or other downloads driven
by TV programs is not available, few can doubt the fact that popular reality
talent-hunt shows like Indian Idol generated millions of SMSs. In fact, the very
success of such programs is driven by the mobile users' way with SMS.
"The past six to seven months has seen a huge spurt in the volume of SMS
traffic, a large portion of which has been driven by TV and other media,"
Rajiv Hiranandani, vice president, sales and marketing, Mobile2Win, a leading
mobile solutions and content provider.

On the other hand, even though it is true that competitive pressures and
shrinking margins on voice have forced operators to focus on data and
content-rich services, a lot of push has also come from content aggregators like
Yahoo! Indiatimes, Rediff, etc. While mobile operators like Bharti, Hutch,
Reliance and Tata Indicom have been aggressively pushing data services, content
aggregators too are playing an equally significant role - despite an ecosystem
heavily skewed in favor of operators have been driving data usage. "We have
been creating a lot of value for operators," says Rajesh Sawhney, chief
operating officer, Times Internet, the company behind the popular 8888 service
that is available across almost all operators including Reliance Infocomm.

Clubbed by operators as value-added services (VAS), these non-voice services
are playing a significant role in slowing the speed of decline in ARPU of many
operators. Hutch, which has the highest ARPU among the GSM operators, attributes
that to the host of VAS it offers. However, it will take some more time before
these services really help ARPUs jump significantly. "To some extent, the
growing data usage is offsetting the loss of revenue on account of shrinking
margins on voice," says Vishal Maheshwari, director, Yahoo India Mobile.

What
is interesting, though, is the fact that some of the premium mobile data
services like e-mail access usually targeted at corporate users have not only
been helpful in checking customer churn to some extent but also bringing in
high-value customers. "Data services are strategic for checking customer
churn," emphasizes Bhatnagar. In other words, this also means that a small
number of mobile users are now acquiring an additional phone or a devices like
Blackberry for data access. Acquiring an additional phone allows them to keep
their existing number.

Even though India is still to catch up with other leading markets of the
world and is nowhere near the kind of data usage that Philippines, Japan, Korea
or Western Europe has, it appears to be catching up fast. Take the case of
mobile gaming. In-Stat/MDR expects that the Indian mobile gaming market will
generate $26 million in revenue in 2004, and will increase to $336 million in
annual revenue by 2009. On other hand, Jupiter Research in its annual wireless
forecast recently said that US mobile games revenues which was $24 million in
2003 and tripled to $72 million in 2004, would reach only $430 million in 2009.
So if these reports were to be believed, growth in India would be faster than
any in other country. In fact, growth in some of the mobile data segments in
India could be highest in the world in the months ahead. Already, services like
mono ringtones and picture messages have been growing at a rate of 30—40
percent, games, polyphonic tunes, wall paper downloads have been growing at 90—100
percent.

The good thing is that mobile operators are able to offer most of the data
services without any major new capex though they need to spend a good amount on
marketing these services. In other words, all this growth is coming without much
risk.

Ravi Shekhar Pandey

What's Driving Data?

- GPRS users have doubled in the
last three months of 2004, the growth continues with some estimates putting it
at 25 percent of all new subscribers

- Reliance Infocomm's big push to mobile Internet

- Growing variety of content: innovative services
being offered, content too has improved

- Youth are key drivers-they have more disposable
income now

- The growing need of communication anytime
anywhere

- Need for a person to personalize and express
himself

- Mobility experience has become affordable-voice
tariffs have come down, so users spend the savings from voice on data, an
obvious choice

- Devices more affordable now

Can India Match-up to This?

- In the Philippines, mobile data services such as SMS provide more than 40 percent of revenues for the service providers. Around 200 million text messages are sent every day. This is the largest SMS volume in the world accounting for almost 10 percent of global SMS traffic.

- Research firm Strategy Analytics puts the value of the mobile email market-services and equipment-at $11 billion by 2007. It estimates that global revenues from mobile data will grow from around $61 billion this year to just over $189 billion in 2009, with person-to-person messaging representing 48 percent of the total.

- Strategy Analytics estimates the ringtone market at $4 billion. According to the report, with mature cellular markets like Japan, Korea and Western Europe close to saturation, major growth will come from N America and emerging Asian markets.

- The global mobile gaming market will be worth Euro 5.25 billion by 2010, according to a report by research firm Screen Digest. A report by the Wireless World Forum (W2F) values the mobile games market at Euro 1.65 billion in 2006 from Euro 0.46 billion in 2003. According to another report (Jupiter Research), the total value of the global mobile games market is set to skyrocket by 78 percent during 2005 to nearly $5.6 billion.