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Business – India;Telcos concerned at majority of VAS products being ignored

Rajesh S Kurup

For telecom service providers in the country, Value Added Services (VAS) may be the buzzword. But despite operators launching over 100 VAS products in the country, just five or six are actively being used by subscribers.

“Only a handful of VAS products like the Caller Ring Back Tunes, SMSes and music downloads are being extensively used, while the majority of the products are yet to gain customer affection. Most of the products have not yet been used actively by mobile subscribers, and for telecos, revenues still flow in from voice communications,” Tata DoCoMo President Deepak Gulati told Business Standard.

Music portals (ring tones, music downloads), game-based applications and interactive voice response are among other services that have gained traction in the industry. The penetration of these products are due to user awareness and ease of usage, Gulati added.

Among the host of products yet to gain traction are location based services, mobile commerce, weather reports, mandi bhav (market prices) and tracking services.

According to the Internet and Mobile Association of India (IMAI), the Mobile VAS industry is pegged at around Rs 9,000 crore. There are over 20 major VAS providers in the country, including One97 Communications, Hungama, Bharti Airtel subsidiary Comviva, Roamware, IMImobile and Pressmart, among others.

Yet, contribution from VAS is no more than 10 per cent of any operator’s total revenues, when they have been banking on these products to drive growth. In addition, revenue from conventional voice modes have dipped over the past couple of years.

At present, the industry’s blended Average Revenue per User (ARPU) is around Rs 200 a month and is expected to slide further during the next couple of quarters. ARPUs, a measure of the financial strength of telecom players, were as high as Rs 400 in 2007

“For a telecom service provider, 80 per cent of the VAS revenues are generated from the top five-six products. It’s a fact that the majority of VAS solutions don’t bring in revenues. This is because the Indian VAS industry is much ahead of the curve, and operators have to provide ‘compelling’ products to get customer attention. Importantly, it’s the value that a customer gets which matters,” One97 Communications’ Managing Director Vijay Shekhar Sharma said.

One97 has a VAS product that enables SMSes to be read over the web or on a computer. “This is a compelling product, but has not gained traction. This does not mean we are withdrawing the product. It would gain consumer affection as the industry matures,” he added.

Milind Pathak, co-CEO and Country Manager of Buongiorno (Hong Kong) India, a leading Vas provider, admits that the Indian Vas industry, unlike in the developed countries, is at a nascent stage. Buongiorno is a global provider of mobile Vas.

“Penetration of Vas products needs the presence of a whole eco-system, and the present eco-system in the country is nascent. The lack of traction for a majority of the products is not due to lack of technology, but the need of a good eco-system. For example, for a music product there should be producer, distributor and marketeer,” Pathak added.

However, the industry is persistent in launching more Vas solutions (telcos are launching at least one product every quarter). With the expected launch of 3G services (sometime next year), increasing of telecom user base (adding 10 million per month) and convergence of digital devices (phones communicating with computers and iPods), Vas solutions are expected to the fore.

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October 26, 2009 - Posted by | Uncategorized |

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