VAS Will Contribute 31% To Operator Revenues By 2015: IAMAI

Value added services (VAS) on mobile devices have the potential to reach Rs 671 billion as a market by 2015, driven by mobile data uptake with 3G and wireless dongles (USB modems), according to a report by IAMAI and Analysys Mason.

The report is timely as just this week, the Indian telecom regulator invited stakeholders' views on proposed changes to the VAS sector related to a new licensing scheme, revenue sharing models, and government regulation of tariffs of utility services.

The IAMAI-Analysys Mason report titled "Vision Document on Mobile VAS" expects VAS to contribute to 31 per cent of overall wireless revenues by 2015. Currently industry estimates are that VAS contributes to an average of 11 per cent of an operator's revenues, which has not risen by much over the past three years, though the mobile userbase has risen to over 800 million subscribers.

Voice revenues contribute to the majority of operators' revenues today. Non-voice revenue is expected to grow fast and contribute to 51 per cent of the overall incremental wireless revenues in 2015, according to the report. Currently it contributes to 11 per cent, compared to 14 per cent in Brazil, 21 per cent in UK and Germany, 27 per cent in China and 30 per cent in USA.

VAS were heralded as the sure-fire way for operators to halt the steady decline of ARPUs (average revenue per user) of their ever-growing mobile subscriber base. However, ARPUs continue to fall and are now at Rs 100 for GSM operators and Rs 66 for CDMA operators. App downloads and offline consumption of content on the mobile continue to be popular, but services are not picking up speed.

Kunal Bajaj, Partner and Director India, Analysys Mason, stated, "Carriers are under tremendous pressure from competition and declining ARPUs, leading to stunted revenue growth. Based on recent trends in the sector, now is the right time for them to increase focus on the VAS space to find new opportunities for differentiation and earnings."

Union Minister of State for Information Technology Sachin Pilot, while releasing the report, noted that mobile value added services was miniscule at present in comparison to its potential and the government would make efforts to put the industry on an equitable and sustainable growth path. Hence the TRAI paper inviting comments on changes in the M-VAS industry.

Dr. Subho Ray, President – IAMAI said "This is the first ever study in India which charts the evolution of the mobile value added services industry, maps the future growth potential and makes practical suggestions on what needs to be done by various stakeholders to set this industry on a "take off" mode. We are confident that this will become the industry's guide for the next 10 years."

IAMAI and Analysys Mason had discussions with over 50 telecom players including operators, technology platforms, OEMs and VAS providers to publish the report. It also adds that mobile commerce can potentially become a Rs 20 billion business in 2015. Some of the other key points mentioned in the report are:

Industry Issues: There is a need for policy enablers and market mechanisms to take steps to address the current growth limitations in the VAS sector, both from an on-deck as well as an off-deck perspective. The report lists the various challenges being faced by mobile VAS providers in the country today, such as reconciliation of MIS (management information systems) reports, dispute redressal, lack of an alternate billing mechanism and delays in allocation and implementation of short codes.

Local Languages: Local language support on devices should be incorporated and standardisation of a character set will help in further SMS uptake. On the subject, Pilot pointed out that locally-relevant services in local languages should be offered.

Mobile Video Will Be Limited: Despite the hype created by operators rolling out 3G networks, IAMAI and Analysys Mason say that mobile video will be limited to certain segments of users and cities due to poor spectrum capacity (5 MHz), atleast in the initial stages.

Internet Beneficiaries

Wireless connectivity on-the-go is growing in popularity with users opting for USB modems that offer plug-and-play connectivity. Data on handsets and through dongles and other connected computing devices will contribute to 54 per cent of the overall MVAS market by 2015, according to the report. Already, there are around 381.4 million such users (March 2011, TRAI), and has doubled since March 2010.

Pilot adviced digital service providers to adopt a change in their perception of internet users to 'internet beneficiaries', saying the benefits of technology should be made tangible to the masses and that will result in further adoption of internet in India. The digital industry should leverage the services and infrastructure set up by the government such as the fibre optic networks and UIDAI (Aadhaar), he said.

Pilot was recently called to launch a report on internet usage by Pricewaterhouse Coopers (PwC) which showed that data usage is still low across India and it will take another generation for it to pick up. The report 'Innovation In Telecom' reads, "even in the urban regions, Internet literacy is quite low, and so is the usage. It will take a generation for data usage to pick up.... Non-voice services, including value added services and SMS form just five to 15% of total operator revenues, which goes to over 50% for operators in major countries. The number for mobile data would be still lower."

According to Business Standard, Pilot had said that the government was (still?) putting into place a 21st century infrastructure for high speed broadband access across the country.