Friday, July 11, 2008

Value-added services seen driving telecom revenue

MUMBAI, March 5 (Reuters) - The mobile value-added services market in India is growing at 40 percent annually, but industry players say price points have to come down and a more user friendly experience ushered in to sustain growth.

"As markets saturate, focus will be on increased average revenue per user (ARPU) and value added services (VAS) is the easiest ARPU driver," said Motorola India's Director Marketing of mobile devices, Lloyd Mathias.

A major challenge for VAS and telecom providers is getting the customers to use the services. Customers find the download process frustrating and expensive and lose interest.

Another challenge is moving away from music, which accounts for 50-60 percent of the revenue from VAS now. "Music drove the first set of users. For the next set, we have look at other areas," said OnMobile Global's (ONMO.BO: Quote, Profile, Research) CEO, Arvind Rao.

Mobile VAS market in India is estimated to reach 55-60 billion rupees in 2007/08, Rao said. It contributes about 10 percent to telecom firms' revenue now.


VAS comes at a price which is on the higher side for consumers. "We need to re-evaluate and look at a reasonable price point because the consumers are making the choice," said Mathias.

Buying an audio CD of an album would be more cost-effective than downloading a single track on the mobile, he said.

"Copyright owners seem to be extracting a significant amount of money," said Idea Cellular's (IDEA.BO: Quote, Profile, Research) chief marketing officer, Pradeep Shrivastava. So the application providers and aggregators, who buy the content, have to suitably price their offering.

Under the current pricing model, telecoms operators keep up to 70 percent of VAS revenues, the remainder being shared by the aggregators and the content owners, adding to the final price.

Pricing will go down only with size, Shrivastava said.


Of the 242 million mobile subscribers in India, roughly 4 percent to 5 percent use GPRS-enabled phones. Of this, only 4-5 million would be active GPRS users, said Sanjit Chatterjee, of U.K.'s Flytxt Ltd, which offers mobile marketing technology.

GPRS or General Packet Radio System is a technology standard used for transmitting data wirelessly.

"It is necessary to enable 3G (third generation mobile phone standards) to sustain current growth," he added.

While music downloads are driven by messaging and voice, services like mobile commerce, video downloads and ticketing would require GPRS since they involve substantial data transfer.

"Music's share in revenues will go down and it is the other thing (services) which will drive the VAS market," said Rao.

In the next three years, revenue of telecom firms from VAS is seen rising to 20 percent, Shrivastava said.

"It has to go up. There is a critical mass of mobile users who are savvy and willing go beyond voice and SMS," he added. (Editing by Prem Udayabhanu)



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