The future lies in VAS

The Indian telecommunications industry, with over 600 mn mobile phone

connections as of April 2010, is now touching new heights with value added

services (VAS) being seen as a segment having enormous growth potential.

VAS

is

now acting as the prime mover and shaker of the application services. VAS

constitutes data, music, information and infotainment. The usage of VAS is

expected to grow by leaps and bounds in the aftermath of the launch of 3G

services. The mobile VAS market registered 15% growth during the last fiscal.

The mobile VAS

revenue

grew to Rs 6,900 crore from Rs 6,000 crore, according to

Voice&Data estimates.

VAS is playing a crucial role in bridging down the digital gap between urban

and rural masses, with operators now coming up with innovative offerings to suit

customer demands in all regions. Of late, VAS has also helped in digitally

empowering the masses as it continues to play a major role in m-governance and

m-commerce. Offerings like medical facilities an SMS away or mandi prices for

farmers on phone, have even made the government to take a keen interest in the

development of VAS. Innovations such as location based services (LBS), mobile

TV, m-wallet have given the best breed of personalized services on mobile

devices.

With the ARPUs falling due to voice calls in the country becoming the

cheapest in the world, the Indian operators are now focusing on VAS to curb

their falling profits. VAS contributes 10-15% of the operators' revenue. There

are many factors that are responsible for the growth of VAS. Among major ones,

are the increase in the number of smartphones, an ever increasing interest in

social networking sites, an appetite for data intensive services and also an

inclination of consumers to go beyond voice-are shaping the phenomenal presence

of VAS.

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.

Going by the market demands and industry interests, it can be easily inferred

that in the coming times VAS (and not voice) will be the major driver of the

Indian telecom industry. The onus now lies on the telcos and government to give

real value to VAS.

Growth Drivers



The VAS segment is showing steady growth and still has tremendous potential.

Backed by a growing consumer class and middle class, young population and

increasing discretionary spending, India today is one of the biggest VAS markets

in the world, making it the region of choice to launch innovative solutions

through different platforms.

VAS growth has been further spurred by increased focus on this segment by

operators, thanks to steadily declining voice ARPUs and cut-throat competition.

The imminent mobile number portability has also driven operators to offer unique

and innovative value added services to differentiate themselves in the market.

Availability of rich content, access to which is simplified through solutions

such as OnMobile's MSearch, has also increased consumer awareness and uptake of

VAS.

Business Deals



In December 2009, One97 Communications acquired a 21.28 % ownership interest

in tenCube, which developed WaveSecure, the mobile phone security and data

back-up application services. Also before, the company had secured a 54.99 %

ownership interest in Oorja, a subsidiary that provides

mobile marketing

services to telecom service providers.

OnMobile in the last fiscal had an agreement with Telefonica, the world's

third largest operator, for exclusive market rights to deploy over twenty

different value added services in the Latin American Region (130 mn subscribers,

across thirteen countries). Several of the core services will be exclusive to

OnMobile.

Comviva also struck a deal with Bharti Airtel for providing it managed

services. As a part of this three-year deal, Comviva will manage more than 2,000

of Airtel's VAS nodes across India from various partners, to meet defined

service level agreements. Incidentally, Comviva is providing services to Zain

Telecom so after the Bharti Airtel and Zain tie-up, it's services might be

consolidated for the same. The company has its presence in Africa since 2003.

Netxcell had a strategic agreement with Clockwork Mobile-a mobile content

management company in the content space where it will be managing all Clockwork

Mobile's content, from digitizing audio content, uploading content to operator's

portals, to producing/generating mobile content, including voice based

applications as required by Clockwork. The company also partnered with

AquaSanTec as part of its Africa entry. It has set up Netxcell Mauritius, a

subsidiary of Netxcell which will be dealing in the African continent.

Comverse had some major deals in the last fiscal with companies like Bell

Mobility and tigo. The company also helped NetComm to become first mobile

operator to offer Visual Voicemail on Sony Ericsson handsets.

Innovation



OnMobile ring back tones (RBT) platform was extremely successful, with over 250
mn song downloads in CY 2009, a 55% growth over the previous year. Innovations

in RBT such as reverse RBT (where the caller can set the song that he/she wants

to hear, rather than the tune of the called party) and social RBT (which

integrates social networking with RBT) also generated a lot of interest in the

RBT offerings.

On the data side, it offered social address book, which converts the user's

hitherto static address book to a dynamic, primary point of access for receiving

and sharing updates on web based social networking sites as well. Subscriber

uptake was also driven by MSearch, which simplified content discovery and

therefore, made the 'long tail' of music content easily accessible and thereby

increased usage.

Comverse has some popular services like ONE Billing and Active Customer

Management, mobile Internet HUB provide Multi-Dimensional Policy Solution,

real-time monitoring and tracking services. The company has in its portfolio

mobile Internet HUB's 'Smart' traffic management adds Deep Packet Inspection

(DPI) upgrade and hosts IP communications helping operators exploit new business

models.

Comviva also announced the global launch of usage and retention solutions. It

helps operators enhance their revenues by leveraging insights that drive usage.

The company also launched in this fiscal, the first ever 'one click' online

gaming solution. 'No download' gaming is being hailed as one-of-its-kind

experience.

Telenity is working with operators to integrate location with mobile

marketing and social networking as well. Location gives an exciting opportunity

for marketers to reach out to targeted consumers, who are actually looking to

buy a product or a service. In addition, being a community based service, the

technology gives all segments of subscribers a great social networking

experience. Even a person with a $10 phone would be able to interact with

his/her buddies with a Google latitude like experience, thus integrating social

networking with location services.

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 forecasts, etc.

Kirusa during the last fiscal launched 'Call-n-Tweet' in the US and a few

Latin American countries like Bolivia, Dominican Republic and Peru.

'Call-n-Tweet' is a solution that enables Twitter users to post voice tweets

(short audio snippets) and text tweets via mobile to update their Twitter

status. Users also have the option to share and listen to the voice and text

tweets on mobile or desktop. The company also added new revenue enhancing

features to our voice SMS platform, and carriers who have implemented these are

seeing voice SMS traffic growing exponentially.

Netxcell has built two new divisions to its revenue pie over the past few

years ie, Enterprise VAS (Bulk SMS + Voice + USSD Push) and 3G products like

video streaming/mobile advertising/cell broadcasting and professional services.

The company has already tested it in international markets.

Netxcell also launched CBC (cell broadcasting) and video streaming solution,

ICM and m-infinity to have revenue gains. All other products were addressed

keeping the future in view like mobile advertisement is a huge growth area and

with 3G on the anvil, the video streaming server can serve service providers and

media companies.

Flytxt, has enhanced the capabilities of its mobile marketing platform Neon

by sprucing up marketing agility and effectiveness. Flytxt is already providing

services to Reliance communications covering around 65 mn subscribers.

Hot Trend



With the continuous erosion of voice revenues, and the tendency of operators

and vendors to explore alternate sources of revenue, is the main focus. With the

trend moving from voice to non-voice, services like mobile TV, m-payment will

prove to be happening. Apart from this, location based services, advertising

solutions, personalized applications are other services that will rule the

roost. Overall, the Indian VAS industry today is dominated by three themes-music

and entertainment, search and discovery, and social networking.

With 3G services, the VAS industry is expected to increase its share

manifold. It will enable a full mobile Internet experience, so that all the

things that people do on high-speed Internet networks, can now be done over the

mobile. 3G and enhanced smartphones penetration is only going to make it easier

for content providers to reach out to a larger population with relevant content

specifically dedicated to users and making it directly available to them.

According to ABI Research, the market for mobile marketing and advertising is

expected to touch $24 bn by 2013 globally, while conservative estimates put the

Indian market at Rs 500 crore by 2012, from the present Rs 40 crore.

Challenges



For the VAS industry, challenges are in developing content for the typical

rural customer, leveraging on the network capabilities that current operators

have, and ensuring that new scope of work is defined, low cost handsets that are

3G compliant with large screen formats available and of course, the challenge of

who owns the customer and hence who will invest in educating the customer

remains a major challenge which has not been addressed by the community at all.

Consumers today are more from the prepaid segment which comprises of more

than 50% subscribers whose prepaid balance is less than Rs 10. Therefore, the

segmentation needs to be done with which customers who do not have money to pay

for VAS, wherein, brands will be paying for their advertising inserts.

Outlook



Increased focus on VAS by operators and the encouraging uptake from the

consumer side for innovative solutions that improve their mobile experience,

will continue to drive the growth of the VAS market. At OnMobile, the focus is

on the development of the mobile ecosystem not just by creating new solutions,

but also the OnMobile Developer Network-an opportunity for developers to

leverage OnMobile's expertise and platform to take their ideas to the market.

Additionally, 3G will also drive availability of new services. Consumers will

experience three significant benefits with 3G-on-demand access to content,

higher speeds and more variety of multimedia content. For example, if you take

cricket, 3G will enable consumers to get match updates much faster, and the

content will include video, etc.

It is expected that once the 3G spectrum becomes available in India, about

275 mn Indian subscribers will use 3G based services, and the number of 3G

enabled handsets will reach close to 395 mn by the end of 2013. Apart from basic

wireless services, there is an enormous potential for various value added

services.

Archana Singh



archanasi@cybermedia.co.in