Business - Vas to decide who will win telecom war

MUMBAI: “If Indian mobile phone users end up spending even an average of Rs 3 on value-added services (VAS) every week, you arrive at revenues rarely seen in any other country, right now. India is throwing up mind-boggling numbers.”—Marcel Fenez, managing partner, global entertainment and media practice, PricewaterhouseCoopers
While Fenez’s predictions may seem a bit far-fetched, his estimates do not look too off-the-mark if the following numbers are anything to go by. According to a report by Ambit Capital, VAS industry has swelled 77% in just three years. From being a Rs 700 crore industry in FY05, it has grown to a whopping Rs 3,900 crore business in FY08.While delay in 3G spectrum allocation and a revenue share skewed in favour of telecom operators continue to remain hurdles, the VAS industry clearly seems to have overcome these bottlenecks, at least for the time being. The report said there were around 277 million mobile subscribers at the end of May 2008, making India the second-largest mobile market in the world. The country is adding up to 8-9 million subscribers per month. Ambit Capital analysts Amit K Ahire, Parikshit Kandpal and Mamta Singh in a recent report said the growth is expected to continue at 43% annually over the next four years, but it will peak after some time.The report said the (mobile VAS) industry is estimated to reach Rs 16,100 crore by FY12. “The strong growth in the mobile subscriber base, coupled with the focus of the telecom companies to arrest (declining) average revenue per user through differentiated service offerings, is expected to sustain the growth momentum,” the report said.The analysts in the report also predict VAS to gain such importance in the future that the nature and pricing of these services will determine which telecom service the user chooses. “Over the next few years, we expect mobile phone subscribers to choose their operators on the basis of the value-added services they offer,” they said in the report. “Bollywood language content is already popular as VAS, what is required is more of local language content.”Currently, VAS includes those services that add value to standard voice calls such as ringtones, caller ring-back tones (CRBT), video games, imagery, jokes and information services. However, unlike person-to- applications SMSes, person-to-person SMSes are not considered a part of VAS. About 60-70% of consumers use SMSes for downloading ringtones, seeking information like news, cricket scores, subscribing to jokes and in accessing other such services. In future, there will be a shift towards m-commerce-based services (payments of bills through mobile, booking of movie tickets, etc.). Airtel is already highlighting its m-commerce offering in its latest commercial featuring Vidya Balan and R Madhavan. Nokia has also taken the lead in advertising its location-based services in its Navigator range of phones.While m-commerce might still be at a nascent stage, telecom players are already increasing their advertising spends to promote their VAS offerings. In Q4 FY08 alone, almost all major telecom operators advertised heavily on TV and print about services in astrology alerts, CRBT, sher-o-shayari, amongst others. Most of the print advertising was directed towards non-metros. According to Adex India, a division of TAM Media Research, between January and May 2008, cellular phone service providers clearly preferred advertising in non-metro newspapers. Further, launch of innovative voice services in different regional languages has helped increase the reach of VAS from urban areas to semi-urban and rural areas.
(Marcel Fenez spoke to DNA Money while releasing the PwC Global Entertainment Outlook on Monday.)