Value added services major growth engine for telcos

Amid fierce competition with per second tariff pulse, which is affecting their top line, the mobile operators are now focusing on value added services, such as, callertunes, ringtones and others to make up for the depleting revenues.

Realising that future growth of revenues would come from value added services(VAS), telecom service provider Aircel recently tied up with software exporter Infosys Technologies to launch application store, where users can browse and download applications some for free or others at some cost.

Using the service provided by the mobile application store, users would be able to browse and download applications, such as, songs, videos, games and other informations related to health, finance, entertainment, either for free or at a cost.

Mobile service providers are seeing a steady shift in value from providing connectivity to monetising digital demand, an analyst said.

Even the mobile handset makers, like Nokia, also sense a great opportunity in VAS and are tying up with the operators to provide such services.

The concept of application store was pioneered by Apple for its iPhone users.

With tumbling voice tariffs contributing to declining Average Revenue Per User(ARPU) rates, mobile operators are actively pushing for growth of the non-voice VAS market, a report by research firm Frost and Sullivan said.

The moves by Bharti and Aircel show that operators do not want to loose market to handset makers or third party content developers.

Nokia has already launched its applications store in 2009.

Another handset maker Motorola has formed a joint venture called CanvasM  with IT firm Tech Mahindra to offer VAS services.

The firm is currently, chasing deals worth about $30 million in the space.

"The market for value-added services (VAS) will grow. We are chasing deals worth $30 million in India and overseas and expect to close two such deals by the first quarter of 2010," CanvasM CEO Jadgish Mitra said.

Currently, VAS which includes services such as ringtones, call back tones, games, music, astrology and others form 10 per cent of the revenues earned by the telcos.

Voice still forms 90 per cent of the Average Revenue Per User for any mobile service provider.

However, this equation is going to change, feel the analysts and industry officials.