India-Huge market for Mobile VAS

Stanford University and BDA, through a combination of interviews of executives in leading VAS firms, secondary research and analysis of prevailing trends has released it’s research report on “Future of Mobile VAS in India“.
Here are key excerpts:

Subscriber base:

• Population: 1.112 billion
• Fixed Subs : 39.41 million (Oct 2007)
• Mobile Subs : 217.14 million (Oct 2007)
• Internet Subs : 9.22 million (Jun 2007)
• Broadband Subs :2.67 million (Sept 2007)

Of the mobile subscribers:

• Prepaid connection comprise 85% of total subscriber base (expected to increase to 90%); and over 95% of new additions.
• By the end of 2010, the mobile teledensity will be almost 44% with 497 mn subscribers (driven by semi-urban and rural areas)

VAS in India:Past, Present and Future

• VAS constitutes 7% of of total telecom revenue for Indian operators.
• SMS consituted 55% of VAS revenue in 2006 [P2P/A2P/P2A, A = Application, P=Person), the growth was majorly driven by reality shows like Indian Idol/Kelloggs/KBC etc.
• Digital music (including CRBT and ringtones) constitutes 35% of VAS revenue.
• CAGR of 44% (2007 – 2010), VAS revenues will reach USD 2,744 mn (926mn $ by 2007): This is dependent on several factors like regulatory (e.g. number portability) and non-regulatory factors.
  • Growth acceleration will begin in 2009, as various challenges are overcome, size of mature user base increases, and telco focus on high end user VAS heightens
• Bollywood and Cricket is the killer content - though no significant investment has gone beyond developing local apps or even content/services.
• Revenue share between telcos & content providers / aggregators is 70:30, substantially more skewed in favor of telco than in other countries - further aggravated by lack of payment mechanisms.
• SMS/IVR/Music downloads/Internet Apps/Search will see an upsurge; limited growth of UGC and mCommerce
• Almost half of Indians use ULCH (Ultra Low Cost Handsets)

Entities in VAS Value chain

• Content/Application Owner - cos. like saregama/mauj/Rajshri who develop coyrighted content
• Aggregator - aggregates content like games/wallpapers/ringtones and distributes it to suit customer needs [players : mauj, hungama mobile, indiatimes mobile etc]
• software developer - develops applications (like payment/games/middleware etc.) for mobile VAS [players - mchek/July systems/webaroo/affle etc]
• Technology Enabler - provides the platform that plugs into telco networks and acts like a bridge between aggregator and telcos [players include OnMobile, cellnext. mauj etc]

Operators still dominate the revenue sharing arrangement in VAS [Of the amount paid by end users, 60-70% is kept by operator, aggregator gets 20-25% and content app/owner gets 10-15% of the revenue]

Challenges:

• Lack of content localization
• Shortage of spectrum
• Slow adoption of GPRS mobiles (only 6.1 mn GPRS users compared to 200 mn overall subs)

Future VAS trends:

• Location Based Services
  
• Mobile Music update will increase with better bandwidth
• Migration to 3G will result in increased ARPU
• Local content is on the rise - regional/rural IVR seen as a major opportunity
  
• Mobile commerce doesn not look too promising (India is still a cash and cheque country)
• IVR will see large scale adoption, especially in rural areas.
• Mobile E-Mail will primarily be driven by enterprises
• Stocks on mobile will see an uptake

The current state of VAS can be candidly summed in one sentence “Novelty of VAS on mobile is short-lived and innovation is the key to success which means technology companies like will have to increase their investments into R&D”