Trend

Cellular operators look at value-added services

A host of vendors are catering to telecom service providers, helping them address lower ARPUs and reduce churn, says Sushma Naik.

We are in the era of entertainment through mobile handsets. Downloading a ringtone, watching your favourite movie or tracking cricket scores—the list of activities that you can do using your cell phone is growing. Not surprisingly, network providers and lesser-known companies helping them provide these value-added services (VAS) are smiling.

“The market for mobile VAS is currently about Rs 380 crore, and it is expected to grow to around 3,500 crore by 2010,” says Arun Gupta, COO, Mauj Telecom. The telecom industry in India is growing at a fast pace, with over 55 million mobile phone users (according to TRAI).

To supplement stagnant voice revenues, which have reached an average of approximately Rs 275 per subscriber according to recent studies, cellular operators are now turning to VAS to boost revenue in both data and value-added voice services. “Revenue from the VAS segment is growing at the rate of 30 to 40 percent annually. At present, this segment accounts for 10 to 13 percent of the total revenue of a service provider,” says Tim DeLuca Smith, Communications Manager, SmartTrust.

Saturated voice market

Analysts feel that the mobile industry is at an inflection point. In Europe and some Asian markets such as Hong Kong, Singapore and Malaysia, the mobile penetration levels are very high and stagnation is already setting in. However, in markets like China, Africa and Asia (including India and several other markets), mobile growth is fast paced. So we have two sections of the global market—one that is approaching stagnation and the other which has significant growth opportunity in the short term.

In markets where there is stagnation, the ARPU (Average Revenue Per User) is expected to remain consistent, and in some cases go up based on the introduction of new services such as 3G and EVDO (Evolution Data Only). Though call prices in fast-growing markets are likely to fall, as also prices of mobile infrastructure and handsets, there will be an increase in revenue because of subscriber growth.

“It is proven that mobile penetration has direct correlation with economic growth and the standard of living. While dropping ARPU is a concern for every carrier, if the drop is accompanied by a 50 percent growth in subscriber base, the overall results are bound to be positive considering the increased revenue,” says Abraham Punnoose, Director, Marketing & Business Development, Roamware. Given the fact that most of the incremental growth comprises prepaid subscribers, it provides a healthy cash flow for carriers, Punnoose adds.

Assorted players

A lucrative market is bound to have players offering a range of services. Most of these companies offer entertainment (such as mobile games) though their strategies differ. Other services provided include premium roaming. Roamware, a player in mobile roaming solutions, is segmented across two business areas—roaming and local mobile services. Activities include accelerating roaming tie-ups, enhancing roaming services and managing quality of service in a roaming environment.

Let us take the case of an international mobile customer who is roaming in India. To bracket him in the same network as others does not make sense to the telco because he is a privileged customer, so a company such as Roamware helps identify this customer, put him on another network, and automatically allocates the services that need to be provided to him. Given that annual roaming revenues globally exceed $50 billion, the market size is estimated to be at least $700 million in India,” states Punnoose.

Mauj, another company that concentrates on this niche, provides several services including SMS, GPRS, WAP, EDGE and 3G. It offers news, jokes, astrology, 3D and Bluetooth games, cricket scores and movie ticket bookings.

As opposed to these content providers, SmartTrust provides the technology platform that allows mobile operators to build interactive menus on a SIM card. These menus contain links to operator services such as news, sports results, horoscopes and even mobile banking services. The menus are configurable, allowing operators to modify service entries to reflect changes in available services, thus enabling SIM personalisation.

Instead of having users launch a browser or connect to a mobile portal, these service menus can be viewed offline. When a user wishes to use an application, the SIM sends a request to the operator or content provider, and the data is pushed to the device via SMS. Several applications have been built and deployed for mobile subscribers using this technology.

When it comes to entertainment, there exists pure mobile gaming vendors. For instance, Indiagames has been in the international mobile gaming space for over two years. The big break for Indiagames came last year when it acquired the rights for Spiderman and released it worldwide. The company uses mascots such as Spiderman and Bruce Lee that have a global fan following in an attempt to find customers worldwide.

OnMobile, another player in this space, provides a range of services that includes voice-automated customer care services. A recent deal is with Airtel for Kaun Banega Crorepati. “We manage the end-to-end portal; Airtel’s activity is limited to marketing and promotion. VAS is growing because there is a genuine demand,” says Arvind Rao, CEO, OnMobile.

The market for mobile value-added services is currently about Rs 380 crore, and is expected to grow to around Rs 3,500 crore by 2010 Arun Gupta COO Mauj Telecom	Revenue from the VAS segment is growing at the rate of 30 to 40 percent a year. At present, this segment accounts for 10 to 13 percent of the total revenue of a service provider Tim DeLuca Smith Communications Manager SmartTrust

ARPU concerns

An expanding customer base is good news for the mobile industry. However, increasing customers with low ARPU is the flip side of the coin for a telco. “As far as the operator is concerned, this helps them differentiate in an environment where voice is maxed out and ARPU is falling. Mobile VAS helps them increase ARPU, and VAS is between 5 to 12 percent of an operator’s total revenues now,” says Gupta of Mauj.

Roamware’s solution enables carriers such as BSNL, Idea, MTNL, Hutch and Reliance to provide international roaming both to their customers travelling overseas and visiting inbound roaming customers. “Our applications provide an ROI in less than 12 months. Compare this to the capital expenditure of network infrastructure which runs into several million dollars and has an ROI spread across several years,” Punnoose remarks.

Operators in India and other emerging markets must come up with a business model that allows them to maximise subscriber ARPU while overcoming technology limitations. Mobile operators in western countries have been well positioned to exploit data services. Their counterparts in GSM regions with low per-capita incomes face the problem of proliferation of entry-level, feature-poor handsets. Data applications that can be delivered over SMS will help them overcome the challenge, feels Smith.

Most VAS vendors share revenues with network providers. Roamware says that their average deal size ranges from $5,00,000 to $7,50,000, and they estimate the relationship potential with each customer to be in the region of 4 to 6 million dollars. With an increase in ARPU, both network providers and VAS vendors win in a market that is characterised by low ARPU and constant churn.

sushma@expresscomputeronline.com