Telecom operators bank on value-added services for 3G revenues

By Pupul Dutta, New Delhi, Nov 5 : With third generation (3G) mobile services set to roll out early next year in India, service providers are banking on the value-added services (VAS) segment to ring in additional revenues, with many new features like personalised radio, mobile blogging and social networking.

The VAS market, currently valued at Rs.65 billion (USD 1.35 billion), constitutes about 9-10 percent of the total revenues for telecom operators in India with short messaging service (SMS) alone accounting for 44 percent of that share.

With 3G services to be rolled out by next year, the VAS industry is expected to increase its share manifold, with some industry estimates pegging the figure at Rs.200 billion by 2015.

"Almost 20-25 percent of market share is occupied by ring back tones (RBT), which have 40-50 million users," Saket Agarwal, chief operating officer of Cellebrum Technologies, an industry leader in the VAS segment, told IANS.

According to him, once the 3G services are launched, social networking, blogging on mobile and advanced use of mobile radio will become more popular.

"Very few people are now using personalised radio services as they are not aware of it. With personalisation of radio, the mobile phone can become 'poor man's I-pod'," Agarwal added.

The 3G services will enable mobile users to access high-speed data services such as movies on demand, mobile TV, high-speed Web access, video calls, fast music and video downloads, interactive gaming and global positioning over the Internet.

Currently, VAS includes those services that add value to standard voice calls such as ringtones, caller ring back tones (CRBT), video games, imagery, jokes and information services.

According to various telecom experts, mobile phones will soon double up as a smart card, replacing plastic cards.

Remittances of funds through mobile phones is also expected to fulfil the gap in rural banking infrastructure, industry officials said, adding this would be yet another growth driver for the Indian VAS industry.

However, cost of service will be the key ingredient for growth of this industry.

"Affordability is going to be a factor. Over a period of time, with lots of freebies, it will certainly be there," said Vineesh Khaturia, president of strategy and business development with Mobisoc Technology, a mobile software leader.

Though m-commerce is still at a nascent stage, telecom players are already increasing their advertising spends to promote their VAS offerings, he said.

"The challenge, however, lies with handsets enabled with 3G to be available at lower costs. Very few consumers are now equipped with 3G enabled handsets," said Vijay Shekhar Sharma, managing director of One97 Communications.

For the telecom operators and VAS content providers, average revenue per user (ARPU) should reach Rs.100 and the entry level handsets should be priced at Rs.9,900 for success in this arena, Sharma said.

Another VAS provider Onmobile chief executive and co-founder Arvind Rao agreed with the opinion.

"3G will be an acceleration of VAS. But everything will depend on how fast 3G is rolled out and the number of cheap/affordable 3G-enabled handsets available in the market."