VAS: Redefining Mobile Phone Services in India

Deepak HalanIMRB International

Mobile VAS Summit23-24th Sept 2009, New Delhi

Who Are We? Who Are We?

About IMRB International

• We are a part of Kantar Group, the insight & consulting division of WPP Group Plc.,

• 37 years of expertise with 28 offices in 11 countries

• Within IMRB, we have several sector specialist groups– Retail– Automobile– eTech (Telecom, Internet, etc) …………………….

Mobile VAS report with IAMAI- 2007 edition and 2008 edition

A supply side report on Mobile VAS in India

Mobile VASUsage behavior of Mobile

VAS among end consumers

Mobile RemittanceConcept test of remittance through mobile-

both Domestic and International

Mobile AdvertisingConcept test of various options of

Mobile Advertising among end consumers

Mobile BankingMapping of mobile banking technologies

Some VAS Studies Successfully Completed by us..…

…for a Number of Clients…

Mobile VAS: A Global PerspectiveMobile VAS: A Global Perspective

• India and brazil are low ARPU countries and share of data is small

• In most countries share of data increases with ARPU

ARPU & Share of Data: Cross Country Analysis

Comparison of Most Popular Mobile Phone Activities in GCC and Europe

Source: Yankee Group and AMRB, 2008

Percentages indicate penetration i.e. proportion of respondents who use the service at least once per month

GCC

1. Voice (99%)2. SMS (98%)3. Take photos (87%)4. Record videos (78%)5. Listen to music (77%)6. Play games (59%)7. MMS (56%)8. Ring-tone download (55%)9. Music download (51%)10. Phone balance transfer (50%)

Europe

1. SMS (90%)2. Voice (84%)3. Take photos (59%) 4. Collect voicemail (36%)5. MMS (35%)6. Play games (31%)7. Listen to music* (23%)8. Listen to streamed music (14%)9. Mobile web browsing (14%)10. Email (12%)

*Downloaded or side-loaded

• It is evident that proportion of data service users is higher in Europe vis-à-vis GCC.

• Voice calling and SMS dominate in both regions, though the order is reversed. As we look down the top-ten list we see broad similarities. e.g., music, games and multimedia services like MMS feature strongly on both

The Indian VAS Mobile MarketThe Indian VAS Mobile Market

Rising Mobile Subscriber base but… Decreasing ARPU

• We have crossed 450 million wireless subscriber mark now and have the second largest subscriber base in the world

• Over 100 mn new subscribers added in 08.

• The growth of mobile market can be clearly attributed to the favorable and improved regulatory structure, declining handset prices and innovative pre paid tariff structure.

• With increasing competition and need for increasing the subscriber base in rural markets, the call rates and hence the ARPU are declining.

Rising Mobile Subscriber base but… Decreasing ARPU

Defining the Scope of VASDefining the Scope of VAS

“Mobile Value Added Services are those services that are not part of the basic

voice offer and are availed separately by the end user. They are used as a tool for differentiation and allow mobile operators

to develop another stream of revenue”

Defining the Scope of VAS…

We see VAS standing on 4 pillars

Technology

Infrastructure

Content

AccessDevices

The use of VAS is largely dependent on the features available in the mobile handset.

Growth of VAS market is dependent on relevant content available to the consumers.

Technology platform such as SMS, GPRS, IVR & USSD are used to deliver VAS services to the consumer

USSD=Unstructured Supplementary Service Data

Revenue distribution in VAS market

End user pays for content/service/voting

Mobile operator keeps 60- 80% of the revenue

Technology enabler gets 10- 20% of the revenue

Content Aggregator gets 10 - 15% of the revenue

Content owner gets 5-

revenue

-

-

-10%

Media & Telecom: Towards Win-Win

• Markets such as China, Japan and Europe have an organized business model where the telecom operator keeps 20-30% of the revenue

• In these countries the VAS market is much more evolved than India and the content market is not over-supplied and fragmented – so carriage does not rule over content.

• Low revenue packages for VAS providers stunts innovation and quality control of content.

• The operators could help VAS providers by providing them venturecapital, promoting their services and providing intellectual property safeguard.

• An ideal revenue sharing arrangement - operators charge for access to their pipes and a fee for billing and collection and pass the rest to VAS providers and content owners.

Importance of VASImportance of VAS

VAS : Growing Market Size (Million USD)

1565

2033

3442

1204950

Dec 2007 Jun 2008 Dec 2008 Jun 2009E Jun 2010E

• The VAS market is expected to grow steadily at a rate of almost 70% for the next one year.

• VAS currently contributes around 10% to the operator’s revenue. It is expected to increase to 12% by June 2010.

Other Reasons for increasing importance of VAS

• Decrease in ARPU despite increase in MOU:With declining ARPU, the challenge is to develop alternative revenue streams and retain customers by creating a basis for differentiation.

• Greater need for differentiation among the service providers– Greater competition – Saturation in Metros and Urban cities – Number Portability expected shortly in India.

• 3G VAS: With added utility to mobile phone through 3G, both subscriber base and ARPU are expected to observe phenomenal increase in the coming years

Drivers and barriers to growth of VAS Drivers and barriers to growth of VAS in Indiain India

Key drivers for growth of VAS

Marketing Efforts by Operators

Price Decline of VAS services

New Technology Adoption by Operators

Impact of 3G

Supply side driversSupply side drivers

Low priced feature rich handsets

Need for Entertainment &mCommerce & Transaction based Services

Need for Local Content

Demand side driversDemand side drivers

Challenges to growth of Mobile VAS

VAS ChallengesVAS Challenges

Demand Perspective Demand Perspective Supply Perspective Supply Perspective

Lack of transparency in Revenue sharing arrangements & in billing system

Limited availability of local content

Limited awareness of VAS

High cost of content

Exit barriers for VAS consumers are high

VAS VAS -- Access ModesAccess Modes

Comparative evaluation of Mobile VAS access modes

Handset agnostic

Low penetration of GPRS enabled handsets

Handset agnostic

Handset agnosticReach

Infrastructurein place

Need to invest in technology infrastructure. E.g. from 2.5G to 3G

IVR infrastructure costly especially speech recognition

Infrastructure in placeCost to provider

Cheaper than SMS

Costly as user is required to invest at each stage

Costly Cheaper than voice

Cost to end consumer

USSDGPRSVoiceSMSParameter

Comparative evaluation of Mobile VAS access modes

Enjoys low cost and convenience of usage

Depends on uptake of 3G services

With expansion to rural and semi- rural areas, has huge potential

The biggest contributor and likely to remain so in near future

Potential

- More Convenient than SMSSteep learning

curveEasiest to use

- Limited by literacy and language factor

- Difficult to remember short code and keywords

Ease of usage

USSDGPRSVoiceSMSParameter

Share of VAS Revenue by Access Modes

SMS

49%

USSD

3%

Voice

40%

GPRS

8%

• SMS contributes around 49% to the overall VAS revenues. This consists of P2P, A2P and P2A services.

VAS CategoriesVAS Categories

Need based categorization of Mobile VAS

VAS categoriesVAS categories

EntertainmentEntertainment InformationInformation mCommercemCommerce

Designed for mass appeal and extensive usage.

E.g. Jokes, Bollywood ringtones, games, etc.

User interest comes in from relevance of the content

E.g. News alerts, travel information, ticket information, etc.

Allow the user to conduct a transaction using the mobile phone.

Currently in a nascent stage in India

E.g. payment platform from Paymate etc.

Comparative Analysis of various categories of VAS

Has potential to emerge as a key VAS component once security concerns are addressed

Is going to be key to address the needs of rural market

Expected to remain the VAS driver for the next few years

Future status

Identifying the best access mode to provide mCommerce

Handset penetration and usage of the key access mode (GPRS) of mCommerce is low in India

Security concerns

Marketing it since needs differ across different segments

Credibility of the source since there are alternate channels available

To drive the usage of content/services other than music e.g. games.

Challenges

mCommerceInformation VASEntertainment VAS

Rural VAS marketRural VAS market

The Great Rural India opportunity

70%

30%

Population Contribution

Rural India

Urban India

30%

70%

Subscription Contribution

• Telecom operators are seeing an immense growth potential in the rural sector both in terms of new connections & VAS.

• As per market expectations, it is believed that of the next 250 million expected to go mobile; at least 100 million will come from rural areas.

Future of VASFuture of VAS

Innovative Uses of VAS

• AdRBT (Ad Ring Backtone) wherein each time a person calls he/she hears an ad jingle instead of a ring tone.

• Healthcare chains tying up with operators to alert patients via SMSs about their appointment date with a particular doctor or when their next dose of medicine is due.

• GlucoPhone: A Cellphone for Diabetics that measures blood sugar levels, records and sends results to self and others and even manages meal plans

• Speech recognition applications

• LBS Apps: SMS sent by a tourist enables the taxi to locate him

• Data: Traffic policeman can retrieve entire data about an offender by simply sending an SMS

Future of VAS• Till now the emphasis has mostly been on Voice & SMS based VAS

• With the advent of 3G in India the VAS market is likely to grow to a larger extent in the near future both in terms of usage as well as new application development.

• Some new VAS likely to boom in the coming years are :– mCommerce (including travel, shopping, movie tickets etc.) & Mobile

marketing (like Ads on mobile, including product videos)– Location Based Services– Multimedia Broadcast Services :Mobile TV– Video calls/ conferencing – VOD (Video on Demand) or Live streaming video content

• Some of these applications are available on the existing 2 or 2.5G network as well, but few suppliers and slow access speed has resulted in low usage

• Mobile VAS in India has a long way to go

Thank You!Deepak Halan

deepak.halan@imrbint.com

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