Tech Revolution

The year 2009 can be termed as the year of innovation in
MVAS globally, VAS players from across the world developed ground-breaking
solutions. Also, it saw the growing penetration of mobile commerce which would
go a long way in enabling financial inclusion. There have been 3G VAS product
innovations offered by VAS players, despite the fact that 3G is yet to be
launched in India.

Amid fierce competition with per-second tariff pulse,
which is affecting their topline, mobile operators are now focusing on value
added services, such as caller tunes, ringtones, and others to make up for the
depleting revenues.

Mobile VAS solutions have evolved from a mere
communications service to a plethora of information and varied customized
solutions to serve enterprise requirements. In the changing market scenario,
mobile solutions will fuel the market for a large chunk of revenues for service
providers in the near future.

Today, mobile VAS in India is focused around a gamut of
services around the technology platforms of commerce and utility. The future
implementation will encompass several new and exciting areas in utility
solutions such as mobile Internet, location based services, mobile
advertisement, and regional content based services.

Tech Making a Buzz

The technologies that have dominated MVAS in 2009 are mainly user interfaces
(UIs) and GPRS, which is 2.5 technology. UIs is the new favorite among Indian
users which is reflected in the rapid adoption of smartphones. Another
innovative technology in demand is electronic top-up solution to enable
distribution of their services which are electronic in nature.

The market continued to be dominated by entertainment
services like CRBT and SMS subscription services being the large revenue
generator for operators. The key trend that was observed across operators was
the huge upsurge in mobile data. Even on 2.5G networks, mobile Internet was the
mega trend of 2009. Operators saw a huge incremental growth of data traffic
month-on-month.

Mobile advertising is expected to grow consistently to reach a valuation of
$12.8 bn by 2011. Taking on this opportunity, technologies like video SMS could
be of much help to the mobile advertising industry.

With 3G services ironing its way in, the VAS industry is
expected to increase its share manifold, with some industry estimates pegging
the figure at Rs 200 bn by 2015. The prime movers in the VAS industry will be
Bollywood and cricket. The latest trends in the mobile gaming space are 3D
mobile games and multi-player games on large screen mobiles with improved GPRS
networks. Among users with high-end mobile phones, there will be experimentation
with applications like mobile broadcast/TV, on-demand video, video/audio
streaming, etc, will gain traction.

As the penetration of MVAS grows in rural India, the
necessity and importance of interactive voice response system will increase.
Framers in the country with the latest market trends, weather forecasts, and
crop information via SMS based service in the local language.

Also with regulations now becoming more favorable for
operators to have customers' wallets being opened for limited functionality, and
also the retailer's wallet being used for distributing services outside the
telecom domain, the industry will see these kind of services picking up.

Mobile TV and mobile gaming are other technologies that
would lead the Indian market. The year 2010 will also witness large scale
adoption of mobile community services and the emergence of location based
services across the operators landscape in India.

After testing the success of vernacular unstructured
supplementary services data (USSD) portals, telenity is ready to introduce a
large portfolio of location based services. On the other hand, after launching
electronic top-ups service with Airtel, BSNL, and MTS, Utiba is in discussion
with some more players to launch mobile commerce solution.

Comviva is coming up with its virtual SIM technology for
rural and semi-urban areas. This solution enables access to mobile services for
a large group of people, currently unable to afford mobile handsets. By using
virtual SIM-without owning a handset or a SIM-the under-served segment can
become a part of the global mobile community.

Kirusa is very hopeful about its two new technologies-LoudMouth,
which is a broadcasting application used by enterprises customers to advertise
their products; and Call-N-Tweet service for Twitter users to update their
status by voice tweets.

After touching half a billion subscriber base for its offering, Behtar
Zindagi, Handygo is focusing on enhancing this service with a 360° solution
based on rural requirements. Also, the company is planning to launch location
based services soon.

Bay Talkitec is introducing next generation SDP platform which is both 2.5G
and 3G complaint and has a number of applications relevant for rural India such
as mobile education, weather forecast for farmers, mobile yellow pages, etc.

Comverse is also ready to launch a number of services like ONE Billing and
Active Customer Management, HUB value added services, and Netcentrix IP
communications. Few other technologies in the pipeline are visual voice mails
and RBT.

A Tough Task

The biggest issue haunting the MVAS sector is the slow rollout of 3G
services. The other major issue affecting the growth of MVAS in India is the
lack of transparency in the revenue sharing agreement. The MVAS ecosystem has
accommodated various players: content developers, content aggregators,
technology enablers, short code providers, handset manufacturers, and operators.
While operators command the highest share, rest of the payers get a minor
portion. VAS players have always been getting the short-end of the stick in
revenue sharing in which they have always been vying for their due share.

Also there is a lack of transparency when it comes to making payments to VAS
providers. VAS introduction in rural India has been impending which is
considered to revolutionize the VAS industry. The challenge also lies with
providing them vernacular support of consumer choice across India. The mobility
support to consumers, which offers them the services whenever and wherever they
need them has to be strengthened with upgradation and offering new network
services. Also, the new pricing model to suit the needs of end consumers has to
be considered well in advance as they tend to prefer services which are
available for free.

Technology understanding and acceptance is considerably low in Indian rural
areas. Multiple languages will always be a challenge to provide the services and
support. Mobile users also need to be educated and encouraged to start taking
buying/selling decisions via mobile, and to look at mobile as an alternative to
a debit/credit card.

M-commerce has not picked up very well in India so far. Different parties
involved in the entire m-commerce value chain like wireless infrastructure
providers, wireless service providers, certifying authorities,
applications/software providers, equipment manufacturers, credit card companies,
and banks as well as media houses and global brands have to coordinate and come
together to establish the industry standards for m-commerce transactions.

Other factors hampering the growth are limited awareness of services, high
cost of content, high exit barriers for MVAS consumers, limited availability of
local content, low GPRS connectivity, authentication standards, copyright
protection, low feature handsets, etc. Besides, commoditization of the existing
VAS services due to intense competition is a major roadblock.

In Vogue

Location sensing is presently accessed through GPRS, but Wi-Fi will
soon replace it. The mobile web is emerging as a low-cost way to deliver simple
mobile applications to a range of devices. Another important trend in the VAS
industry has been to offer browser based and voice based access to content and
VAS. With browser based access using USSD technology, end user dials a simple
string and then navigates his way to content and services.

Social networking on mobile is another upcoming trend in
the VAS segment. Besides, Internet developers are also seeing mobile as a
predominant avenue to reach customers.

The business trend has clearly been towards developing new
business models through adopting a managed service approach to service delivery
and management. The other trend is that operators have begun experimenting with
mobile marketing and mobile advertising.

Lack of differentiation among existing telecom players has
led to lowering of call tariffs in India. Low profit margins from existing
businesses will push more companies to look out for alternative revenue sources
in the form of VAS.

The continuous high penetration of smartphones is opening
a new opportunity for VAS services based on mobile applications.

Pricing Issues

Price has been an issue all along. With operators' ARPU decreasing,
it's getting increasingly difficult to get the fair share of the revenue on any
VAS service. As of now, there are no solutions available unless VAS itself
becomes a significant portion of the operators' revenue. The only way to get
better pricing is to offer innovative solutions so that they enable better
visibility and the value gets appreciated.

The current price war helps no one, not even consumers.
MVAS is also suffering in this scenario as most VAS prices remain the same; only
the call and SMS prices are crashing. This makes the other VAS appear more
expensive than it really is, affecting its consumption.

Since majority of the consumer base is driven by the
prepaid market, they will only be able to pay and value the services which are
personalized. The services coming with a cost lose their value; therefore
differential pricing for differentiated customer base is highly important. The
cost-effective model and strategies which bring in more profitability and can be
co-related with the purchasing power of customers are the prime focus.
Innovative services and a greater focus on utility applications are what
subscribers are willing to pay for.

The Road Ahead

Despite the downturn, VAS industry has seen its growth with new
emerging opportunities of data services with high rates of adoption where
entertainment VAS has been giving impetus to the industry with growing revenues.

Leading telecom players have adopted growth techniques by
focusing on entertainment services like RBTs, voice and music portals, among
others. The other services that they plan to adopt or to focus upon are coming
from the value chain process which includes managed services like system
integration, device testing and others which are primarily from the network side
of operators.

Due to saturation in urban markets, the entire telecom
industry is moving towards rural. Similarly, VAS has always been a bundle of
innovation and attraction, and it will bring rural in its kitty too.

Arpita Prem

arpitap@cybermedia.co.in