Value-added services need industry push

VALUE OVER VOICE FOR TELCOS PART-2

Telcos betting on value-added services (VAS) to shore up their bottomlines are facing a couple of issues. The first revolves around the percentage of revenue sharing with content providers and VAS vendors.

So much so that the Confederation of Indian Industry (CII) has formed a Mobile VAS task force to bring together the content providers, network operators, media companies, handset manufacturers, technology providers on one platform to give "the mobile VAS sector a push from the industry".

Currently, on an average, a VAS vendor gets a 25 per cent share while the telco gets 50 per cent. Content providers, on the other hand, get anywhere around 12-25 per cent of the revenue realisation (maximum up to 35 per cent), as opposed to countries like China where they get about 85 per cent of the realisation.

China (with its around 400 million cellphones) and India (with around 90 million cellphones) have the benefit of playing the volumes' game. This means that even with a 15 per cent share, the telcos can make profits with India expecting a 500 million cellphone base by 2010 (not to speak of the landline numbers).

"The Indian market is relatively similar to where China was three years ago. So a lot of lessons can be learnt. Korea and Japan are on a different plane altogether. Mobile came very early on there. The markets there have take a very positive stand on revenue shares with content providers getting between 70-90 per cent revenue shares," notes Arun Gupta, CEO, Mauj Telecom.

The second issue concerns the adoption of high-end cellphones which can leverage VAS. In fact, the average operator could be losing potential revenues of approximately $4 million per month from un-configured devices, according to a recent study by SmartTrust.

Tim DeLuca Smith, Communications Manager, SmartTrust, points out that from a handset perspective, much of the equipment being used in lower income rural regions is entry-level and relatively feature-poor.

The market is now advancing and embracing music, video and gaming, which often rely on technologies such as GPRS (General Packet Radio Service) and WAP (Wireless Application Protocol, used to display and access the Internet on small wireless portable devices like cellphones) to make the connection.

A recent SmartTrust Mobile Trends Guide survery reveals that only 13 per cent of all Indian subscribers had ever made a GPRS connection and even fewer (seven per cent) were familiar with WAP. Seventy per cent of handsets (in India) requires customer care interaction (which is related to VAS) and takes approximately 20 minutes to resolve which spells a huge loss of revenue for the operator.

Roamware CEO, Bobby Srinivasan, substantiates this line of argument. He says: "On the pure data side, we are seeing mobile content download developing into a sizeable revenue contributor. However, this is not growing at its potential rate purely because GPRS (General Packet Radio Service) today is a subscription-driven service in the Indian market. If the GPRS service is made available to users on a pure transaction basis, the available market size would grow by at least 400-500 per cent."

Besides, in India, handsets from the grey market and those swapped between friends and family are often left unconfigured and unable to access high value services such as WAP / GPRS access which require complex configurations to be made on the handset.

Part of the answer lies in alternative technologies (such as the SmartTrust solution wherein links to the content are stored on the SIM card and one connects to the Internet only to download the content) and platforms to download content.

However, the fact remains that the Rs 1100 crore VAS market is pacing rapidly and innovatively to touch around Rs 5000 crore by 2010.