Mobile VAS: Building a sustainable alternate revenue stream
MVAS will drive data revenue/ARPU, but the telecom eco-system must have to look beyond the ABC of Mobile VAS as we know it.
Indian Telecom Market numbers continue to sizzle: Indian added 19.9 million new subscribers in January 2010, which (to give a perspective) is 1.5X the number of subscribers US added in the whole year 2009. It is like adding a whole Canadian wireless market every month. For the year 2009, India added 177 million subs versus 106 million for China. A lot of this growth is powered by the tariff hyper competition and the ARPU have now dropped 30% YOY (INR 155.6 for OND 2009 Quarter versus INR 220 for OND 2008).
Now, with operators having no price differentiation, quality will be the driver for growth. Also this will most likely lead the valuation model to move from subscriber based one to a model based on margins and minutes of usage. With the lowest tariffs in the world, industry analyst have started raising questions on the viability of the business. With MNP round the corner where a subscriber move to another service provider it is unlikely that the tariffs will rise from here. The rapid re-basing in pricing by incumbents will seriously affect and threaten smaller, regional and startup operators, perhaps shortening the period before which industry consolidation inevitably takes place.
Operators are looking at more avenues and revenue streams to augment their Incomes and stay afloat and the M-VAS industry holds a great deal of promise out there. The Indian MVAS industry estimated at more than USD 1 Billion in 2009 is expected to grow at a CAGR of 50% in 2010 and help the Service Providers arrest the fall in their ARPU’s and improve their profit margins. 90% of Operators revenues in India come from Voice and Rentals. Of the balance 5% comes from SMS’s and MVAS accounts for only about 5% of revenue. Clearly for Indian Operators, MVAS is the next revenue opportunity.
MVAS so far has been restricted to Mobile Infotainment. The VAS operators call it ABC in the Indian Context (A for Astrology, B for Bollywood and C for Cricket). In 2009, the most popular mobile value added services were songs and ringtone downloads, mobile games and mobile advertising. With the rise of reality shows, interactive participation in TV and Radio game shows and contests has already gained tremendous popularity. Given India’s demographics where more than 50% of the population is under the age of 30, infotainment is most likely to be the service that will run up the operators ARPU’s in 2010.
However with 3G roll outs around the corner, MVAS will assume greater dimensions than the ABC/Infotainment that it has so far been. It is anticipated that 2G to 3G migration of users in the first year of launch will increase the ARPU by Rs 200 per month per migrating subscriber.