mobile vas report aug08

8/8/2019 Mobile Vas Report Aug08

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Mobile VAS in India, August 2008

IAMAI & eTechnology Group@IMRB1

MobileVAS

in

India

AReportbyIAMAI&eTechnologyGroup@IMRB

August2008

InternetandMobileAssociationofIndia,2


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Internet & Mobile Association of India (IAMAI), 2008All rights reserved. No part of this report may be reproduced, either in part or

in full, without the prior permission of Internet & Mobile Association of India


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Table

of

Content

ExecutiveSummary ................................................................................................................................. 4

1.0TheIndianMobileTelephonyMarketAnOverview ................................................................ 8

2.0NeedforMVAS ................................................................................................................................ 15

3.0MappingMobileValueAddedServices....................................................................................... 17

3.1DefiningVAS ................................................................................................................................ 17

3.2UnderstandingDifferentMVAScategories ............................................................................. 19

3.3Perceived&PracticalvalueofvariouscategoriesofMVAS ................................................. 22

3.3.1Perceived&PracticalvalueofEntertainmentVAS ............................................................. 22

3.3.2Perceived&PracticalvalueofInfoVAS ............................................................................... 23

3.3.3Perceived&PracticalvalueofMcommerce.......................................................................... 23

3.4PillarsofMVAS ............................................................................................................................ 24

3.5MobileVASinruralmarket ....................................................................................................... 27

4.0UnderstandingMVASEcosystem ................................................................................................. 28

4.1Understandingtheroleofvariousentities............................................................................... 28

4.2Roleoverlapping.......................................................................................................................... 31

4.3Revenuedistribution ................................................................................................................... 31

4.4Thekeyfactorsplayingroleinrevenuedistribution ............................................................. 32

4.5Regulation

of

MVAS

market ...................................................................................................... 33

4.6Comparativeanalysisofrolesandchallengesofvariousstakeholders .............................. 35

5.0MobileVASaccessmodes .............................................................................................................. 36

6.0MobileVASaccessdevices ............................................................................................................. 39

7.03GanditsimpactinIndianMVASmarket.................................................................................. 43

7.1Defining3G ................................................................................................................................... 43

7.2Analyzingstrengthsandweaknessesof3G............................................................................. 43

7.3Impactof3G.................................................................................................................................. 44

8.0DriverstothegrowthofMVASmarketinIndia ........................................................................ 44

9.0BarrierstothegrowthofMVASinIndia ..................................................................................... 47

10.0NewservicesintheMVASmarket ............................................................................................. 49

11.0MobileVASmarketinIndia......................................................................................................... 55

12.0FutureofMobileVASinIndia..................................................................................................... 58


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ExecutiveSummary

Needforthestudy

Over the last5years, the telecom industryhasrealised the importanceofMVAS.Given the

declining ARPU and increasing competition among operators it is imperative to focus on

alternate revenue streams. That is where there is a felt need for capitalizing on the Value

AddedServicesMarket.

Today the various MVAS entities are still struggling with issues such as the correct

definitionofMVAS,therolesandresponsibilitiesofeachentityinthevaluechain,revenue

sharing arrangements between them and other critical issues such as regulation of the

MVAS market. This report presents these key issues in detail and provides a neutral

perspectivetotheindustry.

ItprovidesaclearandprecisedefinitionofMVAS,itsvariouscategoriesexistinginIndia,the

MVAS still evolving and thus changing ecosystem along with the current revenue sharing

schemebetweenvariousentities,itsdriversandbarriersalongwithitsfutureinIndia.

Methodology

The research team at eTechnology Group@IMRB conducted the research through 2 key

modules PrimaryresearchandextensiveDeskresearch.

Primary Research was conducted using indepth interviews across a crosssection of

stakeholders. These included telecom operators, content aggregators, content owners and

technology enablers. The interviews were content analyzed in detail from different

perspectives.

Extensive desk research was done tobuild an indepth understanding of the Mobile VAS

marketinIndia.Detailedanalysisofsecondaryinformationwasusedtoarriveatthespecific

frameworks provided in the report. Information from various published resources such as

TRAI,COAI,etcandotherresearchbodieswerealsousedtovalidatethemarketfiguresand

crossvalidatethedata.


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Key Findings

The Current Mobile VAS industry is estimated at Rs. 5780 crore by end June 2008 and is estimated

to grow steadily at 70% over the next two years to touch Rs. 9760 crores by end June 2009 and

Rs.16520 crores by end June 2010.

ThecurrentMVASmarketcontributionofeachoftheaboveservicesisgivenbelow

5780

7510

9760

16520

4560

2850

Dec 2006 Dec 2007 Jun 2008 Dec 2008 Jun

2009E

Jun

2010E

P2P SMS

37%

Others

2%Games

5%

CRBT/RT

40%

P2A/A2P

SMS

16%

ThecurrentMVASmarket(asofJune2008)isRs5780crores.P2PSMScontributesRs2140

croresto

the

MVAS

market

and

this

goes

only

to

the

operators

(the

balance

Rs

3640

crores

is dividedbetween the different stakeholders including the operators.). Rs 2312 crores

come from CRBT/RT while thebalance Rs 1329 crores is divided amongst the other

services.

VASRevenuecontribution b Services un 2008

MVASmarket

(inCroreRupees)


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MVAScurrentlycontributesaround9%totheoperatorsrevenue.Itisexpectedtoincreaseto

10.4%inthenext1yearand12%byJune2010.


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The Road Ahead

In theageofconvergence, theprominentgrowthdriverofMVASwouldbe theconsumers

desireofgettingmorefromtheirmobilephone.

Whileamongtheyouthentertainmentrelatedserviceswouldbepopular,theotherconsumers

would also look for utilitybased services like location information, mobile commerce (M

Commerce)formobiletransactionsandLocalcontentrichservices.

MobileVASindustryinIndiaisundergoingalotofstructuralchangesandispoisedtogrow

andcontribute

greater

revenues

to

the

telecom

industry

in

years

to

come.


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1.0TheIndianMobileTelephonyMarketAnOverview

The growth of an infrastructure sector such as telecom has a multipliereffect on the entire

economyofthenation.FortunatelythetelecomsectorinIndia,sinceitsliberalizationin1991,

hasregisteredanunprecedentedgrowthandisthereforevaluedat$100bntoday,contributing

significantly(13%)totheGDP.

Globallyintermsofmobilesubscriptions,Indiaistheworldssecondlargestwirelessmarket

afterChina.AttheendofJune2008,thetotalwirelesssubscribers(GSM,CDMA&WLL(F))

basewas286.86million.A totalof8.94millionwireless subscriberswereaddedduring the

monthofJune2008asagainst8.62millionwireless subscribersaddedduring themonthof

May2008.

Asaresulttheoverallteledensityroseto28.33%byendofJune2008asagainst27.59%inMay

2008. This growth of the sector can be clearly attributed to the favorable and improved

regulatorystructure,declininghandsetpricesandinnovativeprepaidtariffstructure.

Source: TRAI Report QE stands for Quarter End while E stands for estimated

AllIndiaMobileSubscriberBase

33.6952.22

98.77

165.11

261.07286.86

500

50

50

150

250

350

450

550

QE-Mar-04 QE-Mar-05 QE-Mar-06 QE-Mar-07 QE-Mar-08 QE-Jun-08 E 2010


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Withincreasingcompetitionandtheneedforincreasingthesubscriberbaseinruralmarkets,

thecall

rates

are

declining.

This

has

led

to

decrease

in

ARPU.

Therefore, in spite of unprecedented growth in the mobile subscriber base, the operator

marginsaredecliningquarteronquarterwithaverymarginalincreaseinMar08.Thoughthe

Minutes of Usage is increasing however the same isbeing offsetby the lowering tariffs of

operators. This couldbe attributed to the major subscription growth that is coming from

bottomof

the

pyramid.

395 414425

454 471476 462 464

493

0

100

200

300

400

500

Mar '06 Jun '06 Sep '06 Dec '06 Mar '07 Jun '07 Sep' 07 Dec '07 Mar '07AverageMinutesofUsagePer

Subscriber

Average Revenue Per User

366352

337316

298 297275

261 264

228215 196 202 206

159176173

256

100

150

200

250

300

350

400

Mar '06 Jun'06 Sep'06 Dec'06 Mar '07 Jun'07 Sep'07 Dec'07 Mar '08Aver

ageRevenuePerUserIn

INR

GSM CDMA

Source: TRAI Quarterly Report

Source: TRAI Quarterly Report


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AsARPUdeclines,thechallengeforoperatorsistoincreaserevenuesbydifferentiatingtheir

offeringsanddevelopalternativerevenuestreamsbyofferingmorevalueaddedservices to

theexisting

subscribers.

ThedecreaseinaveragerevenuecanalsobeattributedtothestructureoftheIndianMobility

Marketwhichislargelyprepaid.Thismeansthatmostofthesubscribersaddedarefromthe

bottomofpyramidwithlowusageresultinginlowARPU.

Intermsofmarketshare,92%ofthesubscriberbaseinIndiaisonprepaidconnection,with

the remaining 8% on postpaid subscriptions. This has also given rise to opportunities for

generatingincreasedrevenue,throughexploringpotentialValueAddedServices(MVAS)like

subscriptionpacksofnews,alertsetcandmoreexclusiveroamingservicestailoredtoprepaid

subscribers.

1.1Exploringtheruraltelecomopportunity

Fuelledby operator expansion and Government support, the growth is taking off in semi

urbanandruralareasnow.Thereforeinnearfuture,majorityofnewsubscribersareexpected

to come from here. With cell phone operators and mobile phone manufacturers seeing an

immensegrowthpotentialintheruralsector,theyarenowdevisingnewwaysandtryingto

grabalargershareoftheruralpie.

Fromlaunchinglowcosthandsetstobringingdownthetariffsandorganizingstreetplaystoadvertise, the real battle among telecom competitors is now being fought in the rural

hinterland.

Itisbelievedthatofthenext250millionpeopleexpectedtogomobile;atleast100millionwill

come from ruralareas.Though the rural mobilepenetration is highest inPunjab (20.69per

cent), followedby Himachal Pradesh (17.09 per cent), Kerala (10.63 per cent) and Haryana

8%

92%

Post Paid Pre Paid


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(10.20percent),mostcompaniesarenowsweating itoutbyhardselling theirproductsand

services in the rural areas of the region. As a result, the geographical coverage of mobile

telephonyin

India

has

gone

up

from

13

percent,

acouple

of

years

ago,

to

39

percent

now.

1.2GrowthintheIndianTelecomMarket

TheIndiantelecommarkethastremendousgrowthopportunities.Asperthecellularindustry

experts, thenationsmobile subscriberbase isalso set toexceed500millionconnectionsby

2010.

Thegrowthinthetelecommarketisafunctionoftwosetoffactors.TheDemandSideFactors

referredtoasthePullfactorsandSupplySideFactors referredtoasthePushFactors.

1.2.1PullFactors

PositiveMacroEconomicTrends

HighDisposableIncome

IndiasGDPwithacurrentgrowthrateof8%makesitthe2ndfastestgrowingeconomiesofthe

world. This growth has resulted in increasing disposable income among the individual

population.Therefore theyoung Indianpopulation is increasingly investingmoremoney in

variousentertainmentandcommunicationservicesthusfuellinggrowthofthetelecomsector.

72%

15 -20%

PopulationContribution

Rural India

Urban India

28%

80-85%

SubscriptionContribution


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MobilityandConnectivity

Thegrowingneedofhighmobilityandstayingconnected is theprimedriver for theentire

category.Thisistrueforpeoplefromdifferentagegroupsandoccupation.Theyouthsegment

thatcomprises30%ofthetotalhandsetsmarketrequireshighmobilityandconnectivityand

the same is true for business and other professionals. This innate need coupled with

availabilityofhandsetsandconnectivityataffordablepricepointshastriggeredthegrowthof

telecominIndia.

1.2.2Push

Factors

InvestmentsinTelecomIndustry

Thetelecomindustryhasseenanestimated$8.5bnininvestmentflowduring200607alone,

ofwhich$550millionwasintheformofforeigndirectinvestment.Allmajortelecomhandsets

manufacturers includingNokia,Samsung,MotorolaandLG havetheirpresence in India,

alongwiththeleadingglobalservicecompaniesandinfrastructuremajors,suchasVodafone,

Singapore Telecom,AT&T,Ericsson,Alcateland Siemens.Thishas triggered the growthof

TelecomSectorinIndia.

GradualProgressioninTelecomSector

The progression chart below depicts the major regulations and events driving the extra

ordinarygrowthofTelecomsectorfromyear1999to2008.


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Inorder tocapitalize thisopportunityofmeeting theconsumerneeds inhighlycompetitive

markettheoperatorshavereducedthetariffstoattractconsumerswithlowpurchasingpower

primarily insemiurbanandruralIndia.Infact lucrativeoffers likebeingpaidfor incomingcalls have transformed the scenario completely. Through these changing regulations and

events,theIndustryplayersareaimingtoachievethefollowing

AcquiringnewsubscribersbyexpandinginSemiUrbanandRuralIndia

Sellingmoreservicestoexistingsubscribers

TherecentTRAIrecommendationpermittingPCtophonecallswhereISPscanoffercheaper

STDcallsandevenfreelocalcalls.Thiswouldresultinfurtherreductionofvoicetariffs.This

wouldleadtoincreasedfocusonMVASbymobileoperators.

AcquiringNewSubscribersthroughexpansioninRuralIndia

Acquiring customers have alwaysbeen a great challenge for companies. Given the current

levelofsaturationinMetrosandUrbanMarketandcutthroatcompetitionamongoperators,

increasingsubscriberbaseinurbanmarketwouldbeallthemorechallenging.Thereforealot

ofoperatorswithadequatesupportfromGovernmentareeyeingtheruralmarketforfuture

growth.

2004

2003

1999

Tariff Cuts Significantly

Introduction of CPP and CDMAServices

Launch of GSM service by BSNL

And 4th GSM operator, Charges for incoming calls

NTP 99- Move to Revenue Sharefrom Fixed License Fee

2008Getting Paid for Receiving

Incoming Calls

2002


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BigoperatorslikeAirtelhaveclaimedthatsoonmobileconnectionsandrechargevouchersetc

willbe

available

at

all

such

places

from

where

people

buy

match

boxes.

This

certainly

explains

thefuturepenetrationoftheseservicesinremotestofvillages.

SellingMoretoExistingSubscribers

This is relatively easier as compared to acquiring new customers. Also since now the new

subscriptions will largely happen at the bottom of the pyramid therefore the new

subscriptionswillfurtherlowertheaveragerevenueperuser.

In such a scenario mobile VAS sector is a potential longterm revenue stream as it willbe

easiertosellmoretotheexistingcustomers.

GovernmentInitiatives

Governmentalsohas supported thegrowth of this sectorby comingoutwitha numberof

initiativesforthelowendsubscribersofruralIndia,andUniversalServiceObligation(USO)

fundwasonesuchinitiatives.TheUSOfundwasaninitiativetakenupbythegovernmentto

increaseruralteledensity.

Inrecentdevelopments,BSNLandtwoprivateoperatorswillerect427towersinremoteareas

offering over four lakh mobile connections. All the towers are expected tobe erected and

commissionedby

December

2008.

Under

the

second

phase,

DoT

aims

at

erecting

11,000

towers

throughoutthecountrytoofferover11millionmobileconnections

ADCwasleviedbyTelecomRegulatoryAuthorityofIndia(TRAI)in2003toprovidesupport

for BSNLs rural telephone obligation. Telecom Regulatory Authority of India (TRAI) has

recently given orders for the withdrawal of the ADC (Access Deficit Charge) and the

subsequentpassingofthebenefittotheconsumersbythetelecomoperators.


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2.0NeedforMVAS

Overthelast5years,thetelecomindustryhasunderstoodtheimportanceofMVAS.Giventhe

declining ARPU and increasing competition among operators its imperative to focus on

alternate revenue streams. Thats where there is a felt need for capitalizing on the Value

AddedServicesMarket.

ThereasonsfortheincreasingimportanceofMVAScanbeclassifiedas:

Decrease

in

ARPU

despite

increase

in

MOU:

Though

the

subscriber

base

is

growing

at

a

rapid pace and has positively impacted industry revenues, operator margins also have

shrunkowingtocompetitionandlowerAverageRevenueperUser(ARPU)asthemajor

growth is coming from bottom of the pyramid. As ARPU declines and voice gets

commoditized, the challenge is to develop alternative revenue streams and retain

customersbycreatingabasisfordifferentiationinhighchurnmarkets.

Need for differentiation: There is a greater need among the telecom operators to

differentiatethemselvesfromeachother.

o Number

of

Licensees: With increasing number of licensees (98 UASL, and 37cellular licenses) in the telecom space the average numbers of operators in many

circleshaveincreasedto56operatorsofferingmorechoicestotheconsumer.Thus

the competition among the operators has increased tremendously. Therefore it is

veryimportantforthemtodifferentiatethemselvesfromtheothers.Nowthatvoice

hasgotcommoditizedtheseoperatorsareusingMVASfortheirdifferentiationand

marketingtheseservicesheavilyforcreatingawarenessamongtheconsumers.

o DecreasingCallRates:Inordertoattractconsumerswithrelativelylowpurchasing

powersprimarily

from

Semi

Urban

and

Rural

India

the

operators

have

drastically

reducedthecallratesmakingitaffordabletoeventhelowersegmentofsociety.The

tariff in India isoneof the lowestatRs.1perminuteas compared to the tariff in

developed nations like USA and UK where the call rates are Rs.13 and Rs78

respectively.


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Country Tariff charges

USA Rs 13/min

UK Rs 7-8/min

France Rs 7-8/min

Brazil Rs 6/min

India Re 1/min

o 3Gbidderswhoarenonoperators:Thearrivalofnewtechnologieswillgiveriseto

greater competition as many non operators are alsobidding for the 3G licenses.

Department of Telecom has planned to allow five 3G operators in each circle

dependingontheavailabilityofspectrum.Thereforetherewouldbeagreaterneed

to differentiate one self in order to attract new customers and retain the existingones.

o SaturationinMetroandUrbanMarket:Themetro/urbanareasofferhigh levelof

penetration and have significant mobile subscribers. In such a highly saturated

market with the entry of MVNOs the competition will get fierce. Therefore

capitalizing on value added services will give operators opportunity to increase

ARPUbyprovidingpremiumservices.

Source:BroadbandandInternetIndia Increasing

need

and

demand

from

consumers:

In addition to the above supply side

reasonsthepulleffectfromconsumersaskingformorethanjustbasictelephonyisalsoa

keydriverforMVASservices.Todaymostoftheconsumersareseekingmorefromtheir

communicationdeviceapartfromjustmobilityanddesiretostayconnected.

Metro Circle Mobile Penetration

Delhi 90%

Mumbai 70%

Chennai 89%

Kolkata 47%

Punjab 46%


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3.0MappingMobileValueAddedServices

Aswehaveseen,Telecommunicationhasmovedbeyondprovidingjustbasicvoicecalls.The

mobile phone has evolved from a mere communication device to an access mode with an

ability to tap a plethora of information and services available in the ecosystem. This is the

reasonwhyitisnowbeingreferredtoasthefourthscreen,afterCinemahalls,Televisionand

PC.

3.1DefiningVAS

ButthefundamentalquestionthatremainsishowVASisdefined.AclearMVASdefinitionis

notonlyrequiredtocleartheairamongtheMVASprovidersbutitwillalsohaveanimpact

onthedynamicsoftheValuechain.AdetaileddefinitionofVASmighthaveanimpactonthe

licensingissuessurroundingVAS.

LetslookatdifferentVASdefinitionsfloatinginthemarket.

3.1.1 BasicdefinitionofaVAS

Value Added Service (VAS) in telecommunication industry refers to noncore services, the

coreorbasicservicesbeingstandardvoicecallsandfaxtransmissionincludingbearerservices.

Thevalueaddedservicesarecharacterizedasunder:

Notaformofcoreorbasicservicebutaddsvalueintotalserviceoffering.

Standsalone in termsofprofitabilityandalso stimulates incrementaldemand for coreor

basicservices

Cansometimesbeprovidedasstandalone.

Donotcannibalizecoreorbasicservice.

Canbeaddontocoreorbasicserviceandassuchcanbesoldatpremiumprice.

Mayprovideoperationalsynergywithcoreorbasicservices.


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A value added service may demonstrate one or more of these characteristics and not

necessarilyallofthem.

Insome

cases,

the

value

added

service

becomes

so

closely

integrated

with

the

basic

offering

thatneithertheusernortheprovideracknowledgeorrealizethedifference.Aclassicexample

isofP2PSMS.SomeoftheoperatorsdonotconsiderP2PSMSaspartoftheirVASrevenue.

3.1.2 DefinitionasperTRAI

IntheUnifiedAccessServiceLicense(UASL),VASisdefinedasfollows

ValueAddedServicesare enhanced serviceswhichaddvalue to thebasic teleservicesandbearerservicesforwhichseparatelicenceareissuedTheGovernmentofIndiaissueslicensesforthefollowingValueAddedServices:

1. Publicmobiletrunkingservice

2. Voicemailservice

3. Closedusersgroupdomestic64kbpsdatanetworkviaINSATsatellitessystem

4. Videotexservice

5. GMPCS

6. Internet

7. Audiotex

8. Unifiedmessagingservice

Theabovedefinitionsupportsafreemarketbutcanbebroadenedtoincorporatenewservice

categoriesandplayersinthesupplychain.

Formobiletelecommunicationmarket,asimpledefinitionofVASwouldbe

MobileValueAddedServicesarethoseservicesthatarenotpartofthebasicvoice

offer and are availed separately by the end user. They are used as a toolfor

differentiation

and

allow

mobile

operators

to

develop

another

stream

of

revenue.


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3.2Understanding

Different

MVAS

categories

All the value added services address some need of the end consumer whether it is

psychological, monetary or convenience. Based on the need fulfillment of the end user, we

havegroupedMobileVASintothreebroadcategories.

EntertainmentVAS ThekeydifferentiatingfactorofEntertainmentVASisthemassappeal it generates. These provide entertainment for leisure time usage. These not only

generateheavyvolume (owing to itsmassappeal)butalsoheavyusage.Anexampleof

thesekindsofservicesisJokes,BollywoodRingtones,CRBT(CallerRingBackTone)and

games.Theseservicescontinuetobepopularandhavebeenkeyrevenuegeneratorsforthe

IndianmobileVASmarket.ThisisahighvalueMVASandwillcontinuetoshowgrowth.

OtherpopularEntertainmentVASdrivingthemarketaredatingandchattingservices.The

servicewas first introduced2yearsback and is nowbeing offeredby all theoperators.

EachcirclegeneratesaboutRs30lakhspermonth.Thisserviceisnotonlygrowingfastbut

also witnessing less churn as compared to other MVAS. Owing to its sticky nature, it

requirescomparativelylessmarketingeffortsandcost.

EntertainmentVAS

has

the

potential

to

remain

akey

contributor

to

Mobile

VAS

industry.

To sustain the MVAS growth, it is the responsibility of the industry to keep

discovering/innovating killer applications like CRBT (Caller Ring Back Tone) at regular

intervals

InfoVASTheseservicesarecharacterizedbytheusefulinformationitprovidestotheenduser.Theuser interestcomes in from thepersonalcomponentand relevanceof the

content.Apartfrommobile,alternatemodesareavailabletoaccessInformationVAS like

Newspaper, TV, and Internet. E.g. of Info VAS is information on movie tickets, news,

bankingaccount

etc.

They

also

include

user

request

for

information

on

other

product

categorieslikerealestate,education,stockupdates,etc.

InformationVASneedstotargettherightpersonattherighttimewiththerightcontent.

mCommerceVAS (Transactionalservices)Theseare the serviceswhich involvesome transaction using the mobile phone. An example of this kind of service isbuying


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Use of mCommercedepends on the vendor

which operator have tiedup. lets say an

operator has tied up witha payment technology

providerwhich has back end tieups with various banksbut if it is not SBI orICICI, it is a useless

service- Operator

movieticketsusingmobilephoneortransferofmoneyfromonebankaccounttotheother.

Thesecanbroadlybeclassifiedinto2types MobilebankingandMobilepayments.

Thoughin

anascent

stage,

off

late

many

initiative

have

been

taken

in

mCommerce

space.

A

numberofapplicationprovidersare in themarketwithdifferentbusinessmodels.Some

are focusing on mpayment, some on incorporating mCommerce into it while others on

mbankingaspects.Thisyearhasseenthelaunchofmbanking

servicebyIndianslargestprivatesectorbankwhichhasgiven

mbankingamuchneededthrust.Almostalltheoperatorsare

conducting pilot exercises for mCommerce services using

differentaccessmodeslikeGPRS,USSD,STK,etc.Abigboost

to mcommerce has come from the RBI which recently came

outwithsomeguidelines.

mCommercepenetrationcontinuestobesmallbutawareness

isincreasing.OperatorsarebettingontechnologieslikeUSSD

tomaketheservicehandsetagnostic.

The current marketing focus is primarily on mobilebill

payment and mbanking. Industry is betting on tripling

number of mCommerce users within this year. This is

discussedingreaterdetailinthesubsequentsections.


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Therevenue

generation

and

popularity

of

any

MVAS

revolves

around

2factors:

PerceivedValue PerceivedvalueofaMVASdependsonperceivedratherthantheactual

utilitytotheenduser.Whentheimmediatebenefitmaynotbecleartothesubscriber,the

valuethat

asubscriber

derives

from

it

largely

depends

on

the

marketing

efforts

and

persona related to the service. The value is gauged more from the intangiblebenefits

derivedfromtheservicelikeemotionalbenefits.

AgoodexampleofaMVASwithhighperceivedvalueisCRBT(CallerRingBackTone).

EntertainmentVAS InformationVAS mCommerce

Definition

These services provide

Entertainmentforleisuretime.

These services usually

generatemassappeal

These are the services which

provide some useful information

to the end user. The user interest

comes from personal or relevant

componentofthecontent.

These are the services which

involve some transaction non

mobile

Currentstatus

Entertainment VAS is driving

theVASmarketboth in terms

of

volume

and

revenue.

Information VAS is getting

popular with different categories

depending

on

the

relevance

mCommerce is currently in

embryonicstage

Drivers

Industryfocusison

Entertainment VAS with new

playerscomingfrommediaand

movie houses e.g. STAR,

Rajshri

Entities using mobile as another

channel to deliver information is

driving information VAS. E.g.

stock updates, bank account

information, travel information,

etc.

RBIguidelinesisexpected

togiveabigboosttomBanking

Challenges

Currently, music is thebiggest

component. Challenge is to

drive the usage of other

content/serviceslikegames

Marketingisthebiggest

challenge since Information need

differsacrossdifferentsegments

Credibilityofthesourceis

another

challenge

since

there

are

alternate channelsavailable toget

InformationVAS

Identifyingthebestaccess

mode to provide mCommerce

isabigchallenge

Handsetpenetrationand

usageof the key access mode

(GPRS)

of

mCommerce

is

low

inIndia

Allayingsecurityconcerns

Futurestatus

EntertainmentVAS isexpected

to remain the VAS driver for

thenextfewyears

InformationVASisgoingto

be key to address the needs of

growingruralmarket

mCommerce has the potential

to emerge as a key VAS

component once security

concernsareaddressed


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PracticalValue Practicalvalueiscompletelybasedontangiblebenefitsderivedfromthe

service. The benefits considered could be based on convenience, time or money. E.g.

Serviceavailed

to

get

the

cheapest

air

fares

available,

money

transfer

using

mobile

These above three categories of MVAS provide a unique combination of perceived and

practicalvaluesforeveryuserandthismaychangeovertimeasthemarket&usersevolve.

Tounderstand thegrowthof thedifferent typesofMVASand their futuregrowth, they

havebeenanalyzedonboththeabovementionedfactors.

3.3Perceived&PracticalvalueofvariouscategoriesofMVAS

3.3.1Perceived&PracticalvalueofEntertainmentVAS

EntertainmentVAS hasbeen responsible for fueling the growthofMobileVAS in India

andcontinues todoso. Ithasbeenable tocapture the imaginationof theendconsumer

andisbeingusednotonlyforselfentertainmentbutalsoforselfexpressionasinthecase

offorwardedP2Pmessages,CRBT,etc.

ThekeycomponentinEntertainmentVASismusicwhichisresponsibleforpopularityof

FMchannels,deviceslikeiPodandevenpreferenceofFMenabledmobilephonesbythe

endconsumer.

This isanotherreason thatwearewitnessingcreationofnewstakeholders in theMVASindustry which are emerging from media houses like STAR mobile entertainment and

movieproductionhouseslikeRajshriProductions

EntertainmentVAShasaveryhighperceivedvaluebutscoreslowonpracticalvalue.


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3.3.2Perceived&PracticalvalueofInfoVAS

The key characteristic of Information VAS is that most of it caters to specific segments

withinVASusersandisseldomofmassappeal.

Thismakesthetaskofmarketingtheseservicesdifficult.Thesehaveamoderatepractical

valueand

low

perceived

value.

But

it

has

the

potential

of

high

practical

value

in

cases

such

asstockupdates,etc.

3.3.3Perceived&PracticalvalueofMcommerce

Mcommerce in India isatanembryonicstageandonlyasmallpercentageof themobile

usersareevenawareofavailabilityofsuchservices.

Though ithasa lowperceivedvalue, thepracticalvalueofmCommercehas thehighest

potentialamongallMVAS.

Thekeybarrier inadoptionofmCommerce is thesecurityaspectrelated to it.Given the

backing from RBI (as per RBI guidelines), consumers are expected to overbarriers and

realizethehighpracticalvalueofmCommerce.

Practical Value

Perceived

Value

High

High

Low

Low

Entertainment

Infotainment

mCommerce

VVAASS MMaarrkkeett 22001133

Practical Value

Perceived

Value

High

High

Low

Low

Entertainment

Infotainment

mCommerce

VVAASS MMaarrkkeett 22000088

Source: IMRB Research Source: IMRB Research


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3.4Pillars

of

MVAS

The growth of MVAS isbased on 4 pillars Access devices, Content, Technology and

Infrastructure.

3.4.1 Accessdevices

AccessdevicesplayanimportantroleintheusageofdifferentMVAScategories.Thelackof

features like GPRS, GPS,Java in handsets make a number of MVAS futile. Therefore the

affordable availability of such features is a key factor in determining the size of the target

audience toa largeextent.Arecentexample isserviceoperatorspreference forUSSDasan

mpaymentmodeinsteadofGPRSforthesimplereasonthatUSSDishandsetagnostic.

AnotheraccessdevicewhichwillsoonseethelightofthedayinIndiaisMID(MobileInternet

Devices).EventechnologycompanieslikeIntelareincreasingthepowerofmobileplatformswithaspeciallydesignedlowcostprocessorcalledAtom.

Technology

Infrastructure

Content

Access

Devices


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Regionalized contenthas already been

success we ourselvesare running a

regionalized Marathiportal which gives usvery high revenues-Content A re ator

3.4.2 Content

Is content really the king? It does not seem so, looking at the percentage revenue sharecollectedbyContent aggregatorsandContentownersof the totalMVAS pie.Add to it the

piratedcontentandsideloadingintheIndiamarket;itdoesnotpresentarosypicture.

Thecontentdependsalotongeographyandisnottransportableacrossborders.BothIPR(e.g.

musiclabel)andwhitelabelcontent(e.g.cricket)isavailableinthemarket.

But on the other hand, much of the contentbeing consumed isbeing generated for other

media. Butbecause of the same reason we say a wide variety of contentbeing available

especiallyintheEntertainmentcategory.

Forcontentaggregators/developers/ownerstoplayasignificantroleinthecategory,relevant

contentneeds tobegenerated.Theyneed toplaya largerrole frommerelybeingacontent

aggregator and transporter. Investment needs tobe made keeping in mind the long term

benefitandnottheshorttermROI.Anotherfactorwhichimpedesthecontentdevelopmentis

marketing of MVAS. A lot of content and services die

prematurelyordonotrealizetheirfullpotentialbecauseoflack

ofsufficientandfocusedmarketingefforts.

Currently, packaging and marketing of content is primarily in

thehandofoperators.Thestakeholdersarecurrentlynotsharing

theburdenagaincitingreasonsoflackofsufficientreturns.

Regional content willgive aboost to theMVASmarket. It has

tasted success in the Indian market but the challenge is to

generate relevant content not only catering to regional

differencesbutalsoindifferentlanguages.

3.4.3 Infrastructure

Infrastructurerequirementneedstobemettoharnessthepotentialofdifferenttechnologies.Setting up infrastructure especially in the rural areas is going to play a major role in the

growthofMVAS.


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3.4.4 Technology

Thereare2aspectstotechnology.Oneisthetechnologyplatformitselfandthesecondisthecommunicationtechnology.

Ononehandtechnologyplatformsareindependentofgeographyandaretransportableacross

bordersunlikecontentwhichneedstohavearegionalflavorfore.g.mobilepaymentplatform,

IVR,etc.Though therearechallenges incaseofplatforms likespeech recognitiongiven the

highnumberoflanguagesanddialectsspokeninIndia.

Communication technology is also independent of geographybut depends on regulation

issuesfore.g.3G


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3.5MobileVASinruralmarket

ThenextwaveofTelecomgrowthwillcomefromthebottomofthepyramid.Formajorityof

thepopulationintheruralsegment,themobilephoneisthefirstcommunicationdevice.Rural

shouldnotalwaysbeinterpretedaspoorandthereforesomecategoriesofMVASmightapply

directlytothem.

ButwhetherthestatementcanbeextendedtoMVASdependsonsomekeyfactors.Oneisto

clearlyidentifytheneedoftheruralsegment,secondistocommunicatetheservicestothem

i.e.generateawarenessand thirdly, toprovideaneasyand cheapaccessmode to the rural

consumers.Allthese3arequitebigchallengesandthereforeneedstobeaddressedadequately

forMVAStotakeoffinRuralIndia.

Apart from the identificationofruralconsumerneedsanddevelopmentofrelevantcontent,

communicationoftheseservicestotheruralpopulationwouldbeabiggerchallenge.Oneway

todothisistocommunicatethroughregionalSMSforwhichaseparateSMSgatewayneedsto

be installed.Literacy levelof thegeographicalareawillbeanother limitation.Therefore the

bettercommunicationoptionisVoiceinregionallanguages.Thechallengewithregionalvoice

isnotonlyinvestmentbutalsoblockageofthealreadyscarcespectrum.

Marketing the content in rural market is going tobe all the more challenging. This wouldrequirerightpackagingandpricingofMVAS.Providingcheapaccessmodetoendconsumer

wouldbe another keybooster to rural MVAS. Current voice MVAS charges are expensive

fromaruralconsumerperspectivethereforethatalsowouldneedtobeaddressedfore.g.the

sachetmodelcouldprovetobesuccessfulhere.

MVASisgoingtoaddresstwomainneedsofruralconsumers connectivityandentertainment

mode.Connectivitywillprovide InformationVASonAgriculturenecessary for the farmers

livelihood e.g. mandi rates, weather, etc. Health, finance,job opportunities etc are potential

areas.Mobilealsohasthepotentialtoevolveasakeyentertainmentmodeconsideringlackof

otherentertainmentoptions inruralareas.The industryhaswitnessedsometypeofcontent

beingdownloadedmoreinsmalltownsofUPandBiharratherthaninmetroslikeDelhiand

Mumbai.ThereforebyleveragingonthesetwoaspectsMVAScanbeasuccessinruralarea.


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4.0UnderstandingMVASEcosystem

ThemobileVASecosystem in India isatanembryonicstage.Thishasresulted in increased

complexityand lackofclaritywithin theecosystem.TheMVASsectorhasseen lotofsmall

playersforayintothedomain.

Consumer

Content Aggregator

Operator

Data Flow

Service Flow

Revenue Flow

Technology enabler

Content

Owner

Handset

manufacturerShort Code

provider

Consumer

Content Aggregator

Operator

Data Flow

Service Flow

Revenue Flow

Technology enabler

Content

Owner

Handset

manufacturerShort Code

provider

4.1Understandingtheroleofvariousentities

ContentAggregators/Developers:

The MVAS growth has given birth to a new entity which aggregates content originally

designedforsomeothermedia,fromdifferentsources.Someofthecontentaggregatorsalso

developcontentespeciallyformobilephonesfore.g.mobilegames.

MMVVAASS EEccoossyysstteemm


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On one hand they coordinate with operators and on the other, with content owners and

smalleraggregators.AnotherkeyroleplayedbythemishandlingoftheIPRrelated issues

thusreducing

the

burden

of

the

mobile

operators.

ContentOwners

Theseare theactualownersof thecontentwhohold thecopyrightof thesame.Though the

contentisdevelopedforsomeothermedia,theMVAShasstartedcontributingsignificantlyto

theiroverallrevenuegeneration.AgoodexampleisofCRBTwhichisgivinggoodrevenueto

themusiclabels.

TheymostlyprovidecontenttoContentAggregatorsbutalsosometimesinteractdirectlywith

the operators. In recent cases, Content owners sell the content directly to handset

manufacturers for e.g. Nokia tied up with Om Shanti Om providing exclusive songs,

wallpapers,games,etc.

TraditionalMediaCompanies

MediacompanieslikeTVchannelsandFMchannelshavealsojoinedthebandwagon.Allthe

big TV channels have started selling their content through short codes. STAR has even

launched a mobile division named STAR Mobile Entertainment to provide mobisodes and

mobilerelated

content.

ThekeyrevenuesourceforthemediachannelsisVotinginshowslikeIndianIdolandcontest

participation inshows likePaanchviPaas.Postthesuccessof talenthuntshowsandcontests

likeKBC,theTVslotshavebeenfloodedwithsuchshowsandotherrealityshows.Thoughthe

initial euphoria has not sustained, voting and contest participation continue to contribute

significantly.

TechnologyEnablers

Technologypartner&platformenablershandlesoftwareplatformsandauthoringtools.Thus

theyprovidethebackbonetoalltheMVASbeingprovided.Thetechnologybackendinclude

solutionslikeTelevotingsystem,Voiceportal,etc.


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ShortCodeProviders

Theseare

the

companies

who

own

ashort

code

(e.g.

58888,

53456

etc)

which

is

sold

to

athird

partyclientforsomekeywordandaspecificperiod.Ononehandtheyneedtotieupwiththe

operatorstoensuretheirshortcodeworksacrosssubscriberbaseandontheotherhandthey

sell their short code to other companies like real estate, hospitals, etc. who advertise their

productsusingtheshortcode.

Handsetmanufacturer

The handset manufacturers have joined the bandwagon and have started tying up with

Contentownerstoprovidepreloadedcontentontheirhandsets.

Contentconverter

SincemostofthecontentinMVASisoriginallydesignedforsomeothermedia,itneedstobe

converted into mobile compatible format. This is where content converters enter the value

chain.Theyinteractwiththeoperatorsandworkcloselywiththem.

unique model is beingfollowed by Indiatimes 58888 where theypackage,marketandbrandtheservicethemselvesusingoperatoronlyasapipe.


31/61


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IntheIndianmarkettherevenueweget isquite lowerbut itisagoodplacetotryoutyourservices,perfectthemandthenwetakethemtoothermarkets Technologyenabler

End user pays for

content/service/voting

Mobile operator

keeps 60-80% ofthe revenue

Technology enabler

gets 10-20% of therevenue

Content Aggregator


Content owner


End user pays for


Mobile operator


Technology enabler


Content Aggregator


Content owner


End user pays for


Mobile operator


Technology enabler


Content Aggregator


Content owner


4.4Thekeyfactorsplayingroleinrevenuedistribution

Withoutregulation,therearemanyfactorswhichplayroleinrevenuedistributioninthisfree

market.

RReevveennuuee ddiissttrriibbuuttiioonn ((eexxcclluuddiinngg PP22PP SSMMSS))


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Negotiatingpower

IPRPlatform Revenue deciding factors

Negotiatingpower

IPRPlatform Revenue deciding factors

Platform:Depending on the access mode used to delver MVAS to consumer and the resultant

technologyused,revenuesharegetsdistributed.Fore.g.whentheserviceisdeliveredusing

Voice portal platform, more revenue is released to the technology enabler as compared to

whenSMSplatformisused.

IPR:

The revenue distribution also differs on the type of content. In case of IPR related content,

operators release more revenue while in case of white label content, comparatively less

revenuepercentageisreleased.

4.5RegulationofMVASmarket

TherehasbeenlotofdebatesgoingaroundonregulationofMVASindustry.Recently,TRAI

came out with a consultation paper on MVAS. It has sought opinion from different

stakeholders of the MVAS value chain. Despite the fact that the current MVAS revenue

structure is skewed towards the operators, majority of the stakeholders have voiced their

opinionagainstanyregulation.Thoughsomealsovoicedtheirsupportinfavorofit.

Regulationis

all

about

putting

the

commercial

model

in

place

for

various

services

andtechnologies.regulationisrequiredtostreamlinethingsandprocessesandithastobedonebyabodylikeTRAIregulationtoanextentisgoingtohelpvarious arties O erator


34/61



TRAIshouldconsiderthereleaseofprinciples/guidelinesforfixedoperators/mobileoperators

to have proper and fair commercial negotiations with MVAS providers. Once a proper

frameworkis

in

place,

the

market

conditions

will

determine

the

commercial

negotiations

SizeoftheentityinMVASmarket:

As in caseofany freemarket, thebusinessgeneratedby theentitydetermines the revenue

sharingarrangement.Fore.g.bigmediahousesareabletocommandbetterrevenuesharein

votingfortalenthuntshows.


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4.6

Comparative

analysis

of

roles

and

challenges

of

various

stakeholders

MobileOperator TechnologyEnabler Content

Aggregator/Developer

KeyroleAct as carrier/pipe to the

contentandservices

Providesbackend

technology to deliver MVAS for

e.g.voiceportalplatform

Content

developers/owners develop

content either for mobile or

othermedia

Contentaggregators

aggregate the content from

differentsources

Additional

role

WitnessinghugeMVAS potential, some of the

operators have ventured into

the domain of Technology

enablers. E.g. Bharti Telesoft,

Reliance,Spice

Operatorsalsoundertake

theroleofmarketingtheMVAS

They not only act as platform

providersbutalso as themiddle

men between Mobile operators

andContent Aggregators/ Media

houses. The revenue deals are

regulatedthroughthem

Some of the content

developers have set up a

dedicated content

developmentcenter

Importance of

theirrole

Theirroleis

indispensable in the value

chain as other entities cannot

ventureinto

their

domain

Theirroleis

gradually being diminished with

increasing competition and other

entities (in the value chain)

venturing

into

their

domain

especiallyoperators

Theirroleisvitalbothin

Entertainment as well as

InformationVAS

Therolegetsdilutedin

caseof

white

label

content

and

alsobecauseofpiracyandside

loading

Challenges

Thebiggest

challenge is understanding the

needsandrequirementsof the

endconsumer

Anotherkey

challenge is marketing the

differentcategoriesofMVAS

Withgrowingnumberof

operators,thetaskofaligningwith

operatorsacrosscircleswouldbea

bigchallenge

Anotherchallengeisto

interact with large number of

content aggregators/owners and

handletheIPRissues

Attechnologyfront,the

challenge is to address the

languageneedsacrossregions

Thechallengeistomeet

everchangingneedsandtastes

oftheendconsumer

Generationofrelevant

regional content isanotherbig

challenge which is going to

mount with penetration in

ruralareas.

Contentownerand

aggregatorreceivelowrevenue

shareintheexistingecosystem

Interestingly, sinceoperators are involvedwithmarketingofMVAS, theyarealso the ones who solely decide the sellingprice of content/service. Neithercontentaggregatornorownerhasaroletoplayinit.


36/61



5.0MobileVASaccessmodes

The growth of MVAS market is dependent on the various modes available to the end

consumerforaccessingMVAS.Presently,themodesofMVASaccesscanbeclassifiedas:

ShortMessageService(SMS)Platform

SMSwasthefirstmodeintroducedforaccessingMVAS.MVASmarketiscurrentlydominated

by SMS in terms of revenue. The SMS platform is usedby telecom operators to provide a

variety of services such as information services like news alerts, cricket scores, chatting

services,etc.

VoicePlatform

InteractiveVoiceResponse(IVR)systemisusedtodeliverVoicebasedValueAddedservices

totheconsumers.Inthissystem,theenduserinteractswithacomputerisedsystemtotapthe

service.Theenduserscanselecttheoptionsavailableontheserviceeitherthroughnumbers

onthekeypadorusingspeechrecognitionsystem.

Voicebased services are offered in a varietyof languages to cater to the diversified Indianpopulation.Thismodebecomesmoresignificantwhendealingwiththenonmetrosandrural

India.VoiceaccesscontributestomorethanonethirdofthetotalMVASrevenue

GPRS/WAPPlatform

GPRScurrentlycontributesaround67%oftheoverallMVASrevenue.Thehighpriceofdata

accessactsasabarriertowardsusageofGPRS.

Theprimary

drivers

for

the

adoption

and

usage

of

mobile

internet

are

availability

of

cheap

dataenabledhandsetsandloweringofGPRStariffbymobileoperators.

GPRS is an effective medium of accessing MVAS, but is restricted by relatively lower

consumerbase.


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UnstructuredSupplementaryServicesData(USSD)Platform

USSDisasessionbasedmechanismfordeliveryofservicetotheendconsumer.Theservicesare delivered through a continuous interactive session, unlike SMS where the interaction

needstobrokentoseparatemessages.

USSD presently contributes around 23% of the MVAS revenues,but the industry holds a

positiveperspectivetowardsitsadoptionasameansofaccessingMVAS.

MultimediaMessageService(MMS)Platform

MMSallows

sending

messages

that

include

sending

multimedia

objects

such

as

images,

audio

andvideoalongwithtextmessages.MMSmarketinIndiaisstillinanascentstage.Content

marketinIndiawouldgetaboostwiththeemergenceofMMS.Presently,thegrowthofthis

segmentisrestrainedbyhighpriceandlimitedavailabilityofMMShandsetsinIndia.

ThecurrentMVASmarketisestimatedatRs5930crasonJune2008.Themarketiscurrently

dominatedbySMSasthemodeofaccessingMVAS.

SMScontributesaround49%totheoverallMVASrevenues.ThisconsistsofP2P,A2Pand

P2Aservices.

SMS

49%

USSD

3%

Voice

40%

GPRS

8%

VASRevenue AccessModes

Source:eTechnology Group@IMRB


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5.1ComparativeevaluationofMobileVASaccessmodes

Parameter

SMS Voice GPRS USSD

MMS

Costtoend

consumer

Cheaperthan

voiceCostly

Costlyasuser

isrequiredto

investateach

stage

Cheaperthan

SMS

Premium

SMScharges

Costto

provider

Infrastructure

alreadyin

place

IVR

infrastructure

iscostly

especially

speech

recognition

Needtoinvest

intechnology

infrastructure.

E.g.from2.5G

to3G

Infrastructure

alreadyin

place

SpecialMMS

contentneeds

tobe

developed

ReachHandset

agnostic

Handset

agnostic

Low

penetrationof

GPRSenabled

handsets

Handset

agnostic

Low

penetration

andhigh

priceofMMS

enabled

handsets

Ease

of

usage

Limitedby

literacyand

language

factor

Difficult

to

remember

shortcode

and

keywords

Easiestto

use

Steeplearning

curve

Limitedby

literacyand

language

factor

Convenient

tousethan

SMS

Usageis

restrictedby

low

availability

MarketingVAS

Highbrand

buildingand

awareness

expenditure

Building

awarenessis

easier

through

umbrella

advertising

by

theoperators

Awarenessof

mobileportals

needtobe

created

Low

awareness

among

consumers

Stakeholders

havelow

focuson

MMScontent

Potential

Currentlythe

biggest

contributor

andlikelyto

remainsoin

nearfuture

Withtelecom

growth

expandingto

ruraland

semi rural

areas,Voice

hashuge

potential

Growthof

GPRSis

peggedon

allocationof

3Gspectrum

Lowcostand

convenience

ofusage

wouldleadto

growthof

USSD

Growthof

MMS

dependson

adoptionof

MMSby

service

providers


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Indiahasadiverseandmultilingualpopulationwithavarietyofneeds.MobileValueAdded

Servicesmarketisinthegrowthphase.Theindustrystakeholdersneedtoensurethattheright

mixof

content

and

access

mode

is

made

available

to

the

relevant

user

groups.

Withtheadventofnewtechnologieslike3GandUSSD,thecontributionofvariousmodesto

the overall MVAS revenues is likely to change in the near future. With availability of

vernacular content, Voice would gain prominence. Mobile internet access would also get a

boostwithcheaperdataenabledhandsets,lowerGPRStariffandbetterWAPconnectivityby

telecomoperators.

6.0Mobile

VAS

access

devices

ForaccessofValueAddedServices,featurerichhandsetsareneededwhichenableeasyaccess

anddisplay/storageofcontents.Therehasbeenphenomenalgrowthinmobilesubscriberbase

butthelowfeaturehandsetscontinuetobeinmajority.Basicallypriceisthebiggestdriverin

purchasingofhandsets.Thelackoffeaturerichmobilehandsetsthuscontinuestobeabarrier

to thegrowthofMobileValueAddedServices. It isexpected that thepricesof feature rich

mobile handsets will decline with increasing competition among manufacturers and also

becauseof

technological

advancement.

6.1GPRSHandsets

CurrentlythepenetrationofGPRSenabledhandsetsarecloseto26%inIndiaasagainst99%

inSouthKoreaand76%inJapan.OfthetotalmobilesubscribersinIndia65millionpossess

GPRSenabled handsets. Of all those who posses GPRS enabled handsets only 2025% of

them have got the GPRS activated and only about 15% use it. Even in case of developed

nations like South Korea andJapan not more than 50% of the subscribers owning GPRS

enabledhandsets

use

it.


40/61



Source:TRAIReport,eTechnologyGroup@IMRBThisclearlyindicatesthattheconsumertodayengagemoreintextbasedservicesthantheweb

basedapplications.ThereforeforMVAStogrowtoitsfullpotentialthehandsetmanufacturers

willhavetolookatwaystomanufactureGPRSenabledphoneswhichareaffordableanduser

friendly.MoreovertheywouldalsoneedtoincreaseitsawarenessandeducatetheconsumersonhowtouseGPRS.

6.23GHandsets

The market for 3G in the country is expected to be huge with over 65 million wireless

subscribers,whousetheirhandsetstoaccessdataservicesontheWeb.Thesesubscribersare

currently using mobile handsets which are internetenabled and are potential broadband

subscriberswiththedeploymentofadvancedwirelesstechnologiessuchas3G.

According to Indian Cellular Association (ICA) about 5% of mobile users already have

handsetsthatcanworkon3Gspectrum.Inaddition,outofallthosepossessingthe3Genabled

handsets the number of people who would use 3G services wouldbe determinedby the

qualityofcontentavailable.

GPRS Enabled - 65 mn

Population of India 1,130 mn

GPRS Activated -15 - 16 mn

Mobile subscriber base - 286 mn

GPRS Users -9 mn


41/61



Unlikemostothercountries,wearelookingat3Gservicesnotonlyaspremiumservicesbut

alsoasanextensionof2G.Sinceourbroadbandpenetrationisabysmal,3Gwouldprovidea

muchrequired

boost

to

it.

Given

that

mobile

phones

are

much

cheaper

as

compared

to

PCs,

thedemand forbroadbandonmobile isexpected tobemuchgreater.More importantly,3G

willsolveproblemsmoreinruralIndia.

Therefore the shift towards 3G would depend on affordability of handsets along with the

qualityofcontentavailable.

6.3BluetoothPenetration

The mobile handset market in India is worth $7billion. The handsfree mobile revolution

seems tobe revolutionizing the use of Bluetoothenabled headsets. As a category it is now

comingoutoftheclutchesoftheaccessoriesmarketandestablishinganicheofitsown.

Establishedbranded mobile handset players today are actively looking at making headsets

partoftheirpackageofferingtocustomers.IndiaisamajorIThubanditcomesasnosurprise

thattheIndianBluetoothheadsetmarketisexpectedtogrowatacompoundannualgrowth

rate(CAGR)of74%inIndiavisvis48%inChina.

AccordingtoIndustryexperts,theprofessionalheadsetmarketinIndiaisexpectedtogrowat

aCAGRof21%over thenext fiveyears,whichwillbedrivenby thecontactcentresand ITenterprisesegmentthroughadditionofnewseatsandreplacementofhandsetsbyheadsets.

Intheyear200708,Indiashippedcloseto85millionmobilehandsets,comparedto66million

unitsshippedinthepreviousyear,registeringayearonyeargrowthofaround29percent.

This couldbeattributed to thehuge influx ofultralow costChinese andoperatorbranded

handsets that have sharply brought down the average selling price (ASP) of entrylevel

handsetsandcconsumersneedforchangingphonesasfrequentlyaswithin812months.

Thisgrowth isanoutcomeofaburgeoningmobileservicesmarketand lowerentrybarriers

acrossvariouscustomercategories,asaveragesellingpricesofhandsets isconstantlyfalling

andhasgonedown toas lowasRs.599 in thewakeofahighlycompetitive landscapewith

closeto25vendors.


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Handsetscosting less thanRs3,000account for70%on themarket,andnearlyhalfof these

costless

than

Rs

2,

000.

YetinterestinglytheaveragecostofaphonesoldinIndiaisRs5,000.Thiscouldbeattributed

to the growing number of highend phonesbeing shipped to India. In FY 2008 EDGE and

WCDMAenabledmobilephonescontributed15.4percentand3.1%respectivelyofthetotal

mobilephoneshipmentscomparedto7.4%and1.2%,in200607.


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7.03GanditsimpactinIndianMVASmarket

7.1Defining3G

3G networks are wide area cellular telephone networks which have evolved to incorporate

highspeedinternetaccessandvideotelephony.3Gtechnologiesenablenetworkoperatorsto

offerusersawiderrangeofmoreadvancedserviceswhileachievinggreaternetworkcapacity

throughimprovedspectralefficiency.Servicesincludewideareawirelessvoicetelephonyand

broadbandwirelessdata,allinamobileenvironment.

7.2Analyzing

strengths

and

weaknesses

of

3G

Prosandconsof3G

STRENGTHS WEAKNESSES

3Gspectrumoffers45timesthevoice

capacityof2G spectrumand thus3G isa cost

effectivetooltodelivervoice

InurbanIndia,3Gfacilitatesfaster

data/voice

connectivity

enabling

video

on

demand

InruralIndia,3Gcanenabletelemedicine,

virtualmarketplaceandelearning

Operatorscanensurebetterqualityof

serviceandreductionofnetworkcongestion

Upgradingfrom2.5GandCDMAto3Gis

nota toughchallengecompared to investing in

WiMax

3GtechnologyhaswiderdeploymentsandismorematuredcomparedtoWiMAXand4G.

Thehigh3Gspectrumandlicensecostmay

effectcostofservicetothesubscribers

3Ghandsetsaretooexpensiveforarural

subscriber

InEurope,3Ggrowthhasnotjustifiedthe

costofinvestmentforoperators

Duetohighcostofhandsetsandtechnology

,3Gwouldberestrictedtotheupperclassandis

notexpectedtoreachtothemasses.

TechnologiessuchasWiMax,4Gcangive

3Garunforitsmoney

Toentertheruralmarket,3Gfirsthasto

incorporatelocal

content

in

its

service

delivery.


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Among the promotions carriedoutbyoperators,6070%wouldbe promotions for VAS be italerts, jukebox, messenger,search,mcommerce Operator

ThecurrentfocusofMobileoperators isonsubscriptionbasedofferingstopromote MVAS usage for e.g. subscription based news alerts, sportsupdate,mRadio,etc.

7.3Impact

of

3G

Though3Ghascreatedlotofbuzz,itisunlikelytohaveanimmediateimpact.Currently,there

are not many services which are data speed dependent. But a definite impact wouldbe

considerablyhigherspeedofInternetaccessandavailabilityofcontentforMobileTV,UGA,

etc.

Asignificantspectrumfor3Gmightgointoprovidingbettervoiceservices.Therefore,3Gwill

notonlybeusedtoprovidedataservicesbutalsobetterqualityvoice.

8.0Drivers

to

the

growth

of

MVAS

market

in

India

Indiahasahighproportionofmobilesubscriberstototaltelecomsubscribers,drivenbythe

faster wireless rollout, inexpensive handsets and low cost prepaid cards. The industry

stakeholdersandtheconsumersaredrivingthegrowthofMVASinIndia.Thevariousdrivers

ofthemarketcanbeclassifiedasfollows:

Supplysidedrivers

Marketing Efforts by Operators : Operators are investing heavily in reaching out to

customersmoreeffectivelytomakethemaware

ofvariousservicesbeingofferedbythem.They

areTargetingsmsesandoutbounddialups to

reach out to customers to get alerts n update

subscriptions. Promotions have got more

targeted and operators are investing

significantly in making sure that they offer

direct marketing platforms like out bound

smses,dialupsetc.Incurrentscenarioalltheinvestmentsaredonebyoperatorsonlyand

notsomuchbytheotherplayers.


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IncreaseinUserBase:Onanaverageabout8.5Millionmobilesubscribersarebeingadded

everymonth

and

therefore

the

mobile

industry

is

witnessing

an

unprecedented

growth.

WithincreasinggrowthrateoflowendsubscribersTraditionalMVAS(P2PandP2ASMS)

willhaveahugegrowthpotentialamongthelowendmobilesubscribers.

Price Decline of MVAS services: Looking at the high growth rate of low end mobile

subscribers theMVASservicesarebeingofferedatattractiveprices suchas subscription

packsoffreeSMSornewsalertsetc.

New Technology Adoption By operators: From 3G, new services for premium MVAS

consumers will come like video serviceswhich use fair amountofbandwidth, (live TV,

cricketmatch).Todaybecauseoflackofdataspeeditjustdoesnotwork.

Impactof3G:TheMinistrysdecisiontoopenupthebiddingtoallplayerfor3Gspectrum,

givesachancetotheforeignplayerslikeDeutscheTelecom,AT&TandnewIndianplayers

suchasUnitechandHindujastoenterthehighgrowthtelecomsmarket.

Playerswhowouldget3Gspectrumwouldhaveanupperhandasrelativetoother

players.

Entry of foreign players would encourage the growth of mobile VAS services for

additionalrevenues

Sincequalityandspeedofdatatransferincreases,and3Gisamoresecuremedium,

mobilebankingwouldgetaboostwiththeadventof3G

Also, foreign players mightbring in new technologies for development of MVAS

marketinIndia

Theanticipatedhighpriceof3Gservicesmayactasdeterrent formassmarketpenetration.

Thetelcoswouldhavetoidentifynichesegmentsfor3Gservices

EntryofMVNO:MobileVirtualNetworkOperator(MVNO)modelhasgainedpopularity

in the last few years and there are over 300 MVNOs registered throughout the world.

MVNOs operate through commercial arrangements with licensed Mobile Network

Operator(MNO)andbuybulkminutesoftrafficandresellthemtotheirownsubscribers.

MVNO is seen as a natural progression towards enhancing free market principles and

contributingtotheefficientuseofexistingtelecommunicationinfrastructures.InIndia,


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o TheTRAIsapprovalformobilevirtualnetworkoperators(MVNOs)hasremoveda

strong entrybarrier in the telecom services segment which will enable assetlight

companiesto

set

up

shop

in

the

worlds

fastest

growing

mobile

market

o Entry of MVNOs would give MVAS a boost, since the players would need to

concentrateonitforadditionalMVASrevenues.

o Itwillboosthandsetsalesandalsohelpnewserviceproviders,whichhaverecently

got license, toutilise their capacitybetterandenter service circles forwhich they

donthavelicense.

o Indiahasthelowestmobiletariffsintheworld;whichpushesMVNOtoconcentrate

onservicesitself,whichwouldbringinadditionalrevenues,asthemarginsinthis

sectorarerazorthinandfurtherreductionoftariffsisnotfeasible.

Demandside

drivers

In theageofconvergence, theprominentgrowthdriverofMVASwouldbe theconsumers

desireofgettingmoreandmorefromtheirpersonalcellulardevice.Whileamongtheyouthin

Indiaentertainmentservicewouldbepopular, theotherconsumerswouldalso lookout for

utilitybased services like location information,mobilecommerce (MCommerce) formobile

transactionsandLocalcontentrichservices.

Need for Entertainment: The youth segment that makes up 30% of the total handsets

marketinIndiaseeksentertainmentonmobile.Currently,about44%ofMVASrevenueinIndia is driven by short messaging service applications. The youth segment will also

continuetodrivethemarket,particularlyintheentertainmentMVAS.

After P2P SMS, MVAS wouldbe drivenby music. As far as the technology or product is

concerned,currentlyinvoicebasedservicesCRBTrulesthegame.

McommerceandTransactionbasedservices:Inyeartocomemoneytransfers,drivenby

lackofbankinginfrastructureseemstobeakeyserviceneed.

Mcommerce

would

be

a

large

growth

driver

in

2

3

years

time.

With

a

lot

of

companies

offeringbillpaymentforutilityservicesthroughmobilewillhelpgrowMcommerce.This

will largely come from urbanbecause Mcommerce is related very strongly withbank

accounts,creditcardswhichislargelyanurbanphenomenon.


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LocalContent : Unfortunately todayLocalcontentnotavailableadequately.Thecontent

partnerscurrentlyarenotdevelopingcontentspecifictoevenbigmetropolitantownssuch

asDurg

or

Raipur

not

to

talk

about

relatively

smaller

towns.

Therefore

there

is

agreat

need

of investing right resources indeveloping richcontentwhichmillionsofuserswill start

subscribing.

9.0BarrierstothegrowthofMVASinIndia

MobileValueAddedServicesisagrowingmarketandhasahugepotentialinIndiantelecom

market.Presently,itcontributesasmallpercentagetotheoveralltelecomrevenue.Thereare

various roadblocks that restrain the growth of MVAS market in India. Given the current

scenario,itisimperativeforthestakeholderstoworktogethertoaddresseachroadblockand

enablethemarkettogrow.

TheissuesfacingtheMVASmarkethavebeenclassifiedintotwobroadcategories:

DemandPerspective

Limitedawarenessofservices:Theconsumersarenotfullyawareoftheservicesoffered

in the MVAS market. The promotional SMS sent on the mobile phones are the primarysourceofmakingendconsumerawareofvalueaddedservices.Thismethodofpromoting

MVAShasnowreachedthesaturationstage.

Thestakeholdersneed toensure that theconsumersareeducatedabout thevalueof the

servicesintheMVASmarket.Thiswouldensuremoreacceptabilityandusageofservices

amongtheusers.

Highcostofcontent:Currently,thevalueaddedservicesarepricedatahigherside.This

ishamperinggrowthofMVASmarket.Theconsumers lookforvalue inaservice ifthey

arepaying for it.Presently, theconsumersperceive thatMVAS ispricedhigher than the

actualvalueitisdeliveringtotheconsumers.

The IndianMVASmarketconsistsprimarilyofprepaidusers,whohaverelatively lower

budget forMVAS in theiroverallmobileexpenditure.Thestakeholdersneed topackage

theservicesinamannerthatensurescorrectmixofmoneyandvaluetotheconsumer.


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Thesubscribersarenotawarehowtodeactivatetheserviceitfollowsthetraditionalrouteslikevisitthegalleryorcallupthecallcentrethereshouldbemethodofautorelieval,theservice oesautorelieveda ter30da s O erator

Exit barriers for MVAS consumers are high: The service providers dont make the

consumerswellawareof theprocessofunsubscribing fromany service.The consumers

mayrestrain

from

using

the

services

in

case

the

exit

barriers

are

too

high.

Theserviceprovidersneedtoensurethatthereisacorrectmechanismformakingtheusers

awareofexitingfromtheservice.

SupplyPerspective

TransparencyinRevenuesharingarrangements:RevenuesharingarrangementinIndiais

one of thebiggest hindrances for the growth of MVAS market. The stakeholders are in

conflict with each other about the revenue sharing system in India. Presently, telecom

operatorstakemajorityoftherevenueandtheotherentitiesgetalowershareintheoverall

revenue.This ishampering thegrowthofcontentdevelopment in India,and in turn the

overallMVASmarket.

There isaneed fordesigninga fair revenue structure so thatall the stakeholders in the

ecosystemget

their

share

of

the

revenue.

This

can

be

achieved

by

aligning

the

revenue

structureinaccordancewiththeservices.

Transparencyinbillingsystem:MobileVASmarketfacesissuesoftransparencyinbilling

and payment system. This leads to conflict among the stakeholders about the revenue

share. There is a need for a central authority to monitor the IT system and bring

transparencytothewholebillingsystem.

Limitedavailabilityof localcontent:GrowthofMVASmarket in India ishamperedby

lack of localization of the content. Lack of local content restrains the growth of MVAS

market in regionalareas,whichhasagreatpotential.This requires investment from the

contentproviders.Thestakeholdersareunsureaboutthereturnoninvestment,therefore,

areconcentratingonlyonmassmarketservices.

Thestakeholdersneedtoproducemore localcontentandwork intandem toensure that

theconsumersaremadeawareofthevalueoftheseservices.


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Challengefor operators isthattheycanmarketonabig scale only limitedthings there are somany services and lot ofservices

fall

by

the

wayside as they do notget marketing dollarsbehind themTechnologyenabler

10.0NewservicesintheMVASmarket

10.1MobileMarketing

In the last 3 years, mobile has become the greatest media for communication in India.

Marketers are utilizing this to promote their service using

mobile. Mobile advertising is a form of advertising where

marketers targetmobileusers formarketingof theirproducts

andservices.

While

using

traditional

media

of

marketing

such

as

print,

television, etc, the marketers are not sure whether the

consumerwould takenoticeof thepromotional campaign or

not, themainadvantageofmobilemarketing isthatsincethe

marketing message is delivered on the mobile phone, a

personal device, and the target respondent ends up taking

noticeofthecampaign.

Mobilemarketingservicescanbepullbasedorpushbased.

Push

based

mobile

marketing:In this mode, the service providers send mobile based

advertisementstotheusers.Presently,thisisthemostpopularmodeofmobilemarketingin

India. Manycompaniesareusingthisasaneffectivemediumforreachingouttotheirusers.

Pullbasedmobilemarketing:Inthis,theuserscanaccesscontentbysimplysendinganSMS

orcallinganumber.Forexample,suchmobilemarketingisadoptedbyPepsi,KwalityWalls

etc.theusersareallowedtoaccessthecontentavailablewiththeserviceproviders.

10.1.1Driverstothegrowthofmobilemarketing

Highpenetration

of

mobile

phones:

Currently,thereare286millionmobilephoneusers

in India. With such a huge subscriber base, mobile is a very effective medium for

marketinggoodsandservicestotheenduser.Mobilemarketingwouldenablemarketers

todevelopcustomizedcampaignsasperspecific targetrespondentsprofile.Thiswould

increasetheeffectivenessofmarketing.


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Consumer oriented business model: Mobile marketing model is consumer centric. The

telecom operators charge the marketers and thus the consumer isbenefitted. In some

models,like

mginger,

etc.

the

consumer

is

even

paid

to

receive

advertisements

on

his

mobile.ThismodelwouldstimulatethegrowthofmobilemarketinginIndia.

Usage of voice as a media for mobile marketing:UsageofVoice formobile marketing

wouldhelpthemarketerstoreachouttotheruralsubscribersalso.Thiscanbeachieved

withdeploymentofregionalcontentformobilemarketing.

10.1.2SomeoftheissuesfacingmobilemarketinginIndiaare:

Lack

of

customization

of

mobile

advertisements:

Mobilemarketing

is

at

anascent

stage

in

India.Thecurrentmassmarketingeffortsbythemarketersarenotgeneratingtherequired

impactamong theconsumers.Theneedof thehour is tohavecustomizedmarketingof

productsandservicesaspertheconsumerrequirements.Sincethis isanewconcept,the

stakeholdersareplayingsafebyadoptingmassmarketinginthebeginning.

High penetration of cheaper handsets: Presently, mobile advertising space in India is

dominatedbySMS.Gradually,voiceisalsotakingup.Parachutewasamongthefirstones

to use voice for mobile marketing. Reliance Mobile World users were able to listen to

GorgeousHameshajinglesthroughvoiceportalservices.Butdevelopmentofvideobased

mobilemarketinghasalongwaytogointheIndianMarket.Thisisduetothefactthatthehigher penetration of cheaper handsets restrains the growth of video based mobile

marketing.

LimitedusageofGPRS/WAP:Mobileinternetcanbeusedasaveryeffectivemediumfor

marketingofproductsandservicesonmobile.Thiswouldenableusers toviewvideoas

wellasaudiocontent.LimitedGPRSusageisahindrancetothegrowthofinternetbased

marketingonmobilephones.

DoNot

Disturb

Registry

and

spectrum

requirements:

The

Do

Not

Call

registry

move

by

thegovernmentwouldhamperthegrowthofmobilemarketinginIndia.Itwouldrestrain

theserviceprovidersfromusingvoiceplatformformobilemarketing.Also,usingvoicefor

mobilemarketingwouldincreasetheloadonthespectrumofmobileoperators.

MobilemarketinginIndiaisgrowingandhashugepotentialinIndia.Theincreasingpaceof

adoptionofmobilemarketingbytelecomoperatorsandmarketersindicatesabrightfuture.


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10.2MobileBanking

Mobilebankingistheusageofmobilephoneasaplatformforbankingtransactions.Thehigh

penetrationofmobilephones in India is thebiggestdriver formobilebanking in India.The

Reserve Bank of India is in the process of issuing the final guidelines for mobilebanking

operations in India.Variousbanks suchas ICICI,Barclays,etc,havealready launched their

mobilebankingoperationsinIndia.Aplethoraofservicesareofferedonmobilebanking.In

India, consumers look for value for money, which is the key for proliferation of mobile

bankinginIndia.

Thevarious

modes

available

to

users

for

mobile

banking

are:

SMS:SMSisthesimplestformofmobilebanking.Itislargelyusedforinformationbased

services. SMS has the maximum reach amongst consumers since all the mobile phones

supportSMS.ThepremiumSMSchargesarechargesfromtheendusers.But,thebiggest

challenge in SMS based mobile banking is that, it is the least secure form of mobile

banking.

InteractiveVoiceResponse:IVRallowsacallertoselectoptionsfromavoicemenuand

interactwiththephonesystem.TheIVRsystemwouldthentakethenecessaryinstructions

from the consumerby recording the tones of the number selections that the consumerenters on the key pad, or through spoken commands, and creates an instruction that is

giventotheserviceprovider/bank.ThesecurityinIVRsystemsisrelativelyhighthanSMS.

USSD:InUSSD,theinteractionisintheformofacontinuoussessionasopposedtoSMS.

USSD is available on all handsets. Security in USSD is similar to IVR. Barclays have

launchedtheirmobilebankingservicesonUSSD.

Wireless Internet Protocol: WAP is the usage of internet on mobile for mobilebanking

applications.It

is

similar

to

internet

banking.

The

consumers

handset

needs

to

be

WAP

enabled.WAPbankingisopentosimilarthreatsasinternetbanking.

J2ME: J2ME has dual advantage. One, it can use GPRS, USSD or SMS to carry the

consumer data/ instruction in an encrypted format. Second, it canbe operator agnostic.

J2MEapplicationsaresecuresincetheapplicationresidesonthehandset.


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SIM Application Tool Kit (STK): The SIM Application Toolkit allows for the service

providerorbanktohousetheconsumersmobilebankingmenuwithintheSIMcard.STK

hasbeen

deployed

by

many

mobile

operators

around

the

world

for

many

applications,

whereamenubasedapproachisrequired,suchasmobilebankingandcontentbrowsing.

STK is the most secure method of mobilebanking. It allows thebank to load its own

encryptionkeysonto theSIMcardwith thebanksowndevelopedapplication.Thus the

consumersdatacanbestoredontheSIMCardandtheconsumercanbeauthenticatedon

thehandsetpriortohavingtocarryanydataacrossthemobilenetwork.The industry is

optimisticabouttheusageofSTKapplicationformobilebanking.

10.2.1GrowthintheMobileBankingmarketisdrivenby:

Convenience of banking operations: Mobilebanking serviceswould help users to save

time.It isconvenientforuserstocompletetheirbankingtransactionsattheclickoftheir

mobile.

Greater reach to consumers: Limited number ofbranches was a deterrent forbanks to

increase itsreach to itscustomers.Withtheusageofmobilebanking,thebankscannow

increasetheirconsumerbase.

Integrationofothermcommerceserviceswithmobilebanking:Slowly,banksareusing

mobileasplatform toenableusers toconductall their financial transactions.Thiswouldenhancetheutilityofmobilephones.Also,itwouldenablebankstoprovidebetterservices

totheirconsumers.This,inturn,wouldincreasetheeffectivenessofbankingoperations.

10.2.2KeychallengesinMobilebanking

There are various key factors which have an impact not only on the adoption of mobile

bankingbutalsothedesignofmobilebankingapplications.

SecurityConcerns:Theconsumersarenotconfidentabout the securityaspectofmobile

banking.SinceIndianconsumersarestillwaryofthesecurityinfinancialtransactions,itis

imperativeforoperatorstoemphasisethisaspect.

Limited usage of GPRS: GPRS is a very effective channel for mobilebanking. But the

growthisrestrictedbylimitedusageofGPRSintheIndianMarket.Theconsumersarenot

verywellversedwithdatatransmissionchannels.


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RegulatoryImpediments:RBIisinthefinalstagesofformulatingtheguidelinesformobile

bankingin

India.

Since

it

involves

security

concerns

from

consumer

perspective,

arobust

mobile vas report aug08

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