Mobile VAS (Value-Added Services) in India: A brief insight

An astounding rise – can best describe the growth of the Mobile Phone market in India over the past decade. Declining call tariffs in conjunction with favorable regulatory policies have lead to a tremendous increase in the subscriber base, crossing the 600 million mark in 2010, almost six times its value four years ago. While the growing subscriber base has positively impacted industry revenues (which have risen consistently over the past few years), operator margins also have shrunk, pulling down “Average Revenue per User” (ARPU). As ARPU declines and voice gets commoditized, the challenge is to retain customers, develop alternative revenue streams, and create a basis for differentiation in high-churn markets – through Mobile Value-added-Services (VAS).Mobile phones today have moved beyond their fundamental role of communications and have graduated to become an extension of the persona of the user. We are witnessing an era when users buy mobile phones not just to be in touch, but to express themselves, their attitude, feelings and interests. From playing games and listening to music, to keeping a tab on astrology and checking their bank balance, to reading news headlines and surfing the internet, the Indian mobile user has created a platform of boundless growth for the VAS, in the market. The following diagram illustrates the growing revenue from the Value-added-Services in the past half a decade (as per a study by Boston Analytics).

Different VAS categories are – Entertainment (Ringtones, Caller Ring-back tones, Games), M-Commerce (Services allowing transactions on mobile phones, eg. Fees deposition, Booking Air Tickets) and Information (Bank Balance Enquiry, Air/Train Ticket Status, News Alerts, Stock Prices).

The main stakeholders involved in the VAS value chain are:-

• Content copyright owners: At the first level of the MVAS value chain are the content copyright owners, which develop original copyright content. Examples include music production houses (SaReGaMa, Sony), Bollywood production houses (Yash Raj Films), and media houses (Sony, Star, Zee, etc.)
• Customized content creators: Refers to companies that generate customized content for users through their own portals. Examples include Mauj, One 97, and Hungama Mobile.
• Content portals/aggregators: These are individuals/organizations that gather web content and in some cases distribute content to suit customer needs. Examples include Indiatimes and Hungama Mobile.
• Mobile operators: They provide transport and support mechanisms for delivery of mobile content. Examples include Airtel, Reliance, BSNL, MTNL, Hutch, Idea Cellular, etc.
• Technology enablers: On the other end of the value chain are technology enablers. These provide technology platforms that enable access to MVAS. Players include OnMobile, Bharti Telesoft, Webaroo, etc.
• Handset manufacturers: Mobile handset manufacturers have also started playing an important role, through their interaction with all other stakeholders across the value chain. Their activities include embedding software links in their handsets, allowing direct access to content portals, creating services customized to the need of certain regions, etc. Key players in the Indian market include Nokia, Motorola, and Samsung.

The Mobile VAS industry has grown by leaps and bounds in the past half a decade. The contributing factors to the rapid growth of the VAS industry have been – the booming economy, increasing user comfort with basic mobility services and personalisation of content and devices. As per a study by Boston Analytics, the mobile subsciber base has increased from a meagre 100 million in 2006, through 330 million in 2007 to 600 million in 2010. It is expected to scale up to a whopping 900 million by 2011. A booming industry in a booming economy, need we say more about its future prowess?