VAS update: Indian Telecom (Part I)
Contribution of VAS or non-voice revenue of Indian mobile operators is 13% of the total revenue or Rs.13,026 crore in FY11. Higher spectrum bamdwidth to push VAS in India have been around for about and year now and there are movements which if not scape changing and huge, are definitively moving towards a wiser set of Value Added Services with deeper reach.VAS in India contributes approximately 13% of operators’ revenues, whereas in other countries its contribution is around 25-30 percent. On another note, it is an observation that, VAS services come to full bloom ion an average 2 years after the implementation of 3G. That has been the case in European and American roll outs. India was late to the 3G technology club, and hence VAS services have not found the required network environment to push higher end services.
Despite getting huge recognition and prominence in the telecom industry, Indian VAS players need to shake away a few more crucial bottlenecks to reach a full bloom. The VAS industry also faces challenges like reconciliation issues with operators, delayed payouts from operators, and lack of a common body to offer unified short codes, which work across all operators at the pan-India level.
Even though the VAS players know their customer’s demands, majority of content producers are only producing VAS content that has low cost of production, eg, wall papers, ringtones, astro, or other plain vanilla text based content. Since the content producers get extremely low revenue shares from the mobile operators, hence they are doing so. And, since the mobile operators do not get any specialized content, therefore they give low shares.
The mobile VAS industry needs to work towards building up an ecosystem where in each and every stakeholder should benefit in the value chain process. The time has come to break away from this vicious cycle and convert this process into a value chain.
Today, a typical value chain in the MVAS industry encompasses content creators/providers, mobile advertisers, aggregators, technology enablers, telecom service providers, and end-users or subscribers. Also, it’s to be noted here that in the value chain of MVAS, telecom service providers are a very big entity in comparison to the content providers/content aggregators who are basically SMEs.
Since there is no standard format of agreement between the telecom service provider and VASPs for VAS, hence the telecom service providers being the core of the MVAS value chain, usually dominate in finalizing the terms and conditions of the agreement.
The VAS industry in India is at a nascent stage. In the present scenario, there are quite a large number of small and medium sized content aggregators and technology enablers.
Generally, such VAS providers depend on the facilities provided by the telecom operators. Effective cooperation and collaboration among various stakeholders is a key factor to form a healthy value chain of VAS. Looking at the potential of MVAS, there is a need to develop a suitable framework, which will enable consumers to access a variety of VAS, promote entrepreneurship, and at the same time create additional revenue streams for the service providers.
to be continued