Adding Value to Mobility: The growing VAS Industry in India

aaj-tak.gif   itimes.gif  mauj-logo1.gif  hungama.jpg There’s a storm that’s been brewing in the last two months in the already whizzing world of mobile telephony in India. The nation has become the fastest growing mobile market in the world with over 100 million of its population already part of the mobile subscriber base. This growth has been accompanied by the cultural transformation that the concept has witnessed from being a voice base device to an extension of one’s personality. The catapult in this regard has been the Value Added Services. According to a recent IAMAI report, the VAS industry in India is estimated at Rs. 2,850 crore and is suppose to grow at 60% to touch Rs. 4560 crore at the end of 2007.  

The VAS segment can be categorized into Entertainment, Infotainment and mCommerce. While analysts predict that the real value addition in times to come will be generated by mCommerce and user generated content, at the moment the segment continues to be dominated by the entertainment content. This can largely be attributed to the fact that VAS consumption is currently by youth who has a high appetite for P2P networking and mobile entertainment. Companies in the VAS segment are ready with their running shoes on ! Anupam Mittal, CMD of the People Group- Mauj Telecom, observes, “Within a short span, Mauj Telecom has carved a significant niche for itself in India in the mobile value added services industry. As we scale to the next level, operational excellence, disruptive innovation, and an unflinching focus on discovering customer needs is what we will need to distinguish ourselves.

The key players in the category like the telecom companies, marketers, content providers and aggregators alike have realized this and are trying to reach out for the low hanging fruit. The interesting part is that even though mCommerce continues to be promising, there has been very little investment and interest in the same. The low level of awareness, coupled with the apprehension of conducting transactions on mobile are the key reasons for the sluggish growth in this segment. There appears to be a need on the part of the regulatory authorities to take initiatives and policy measures to increase mobile based transactions.   The other prominent challenge that faces the industry at the moment and is likely to be the determining factor in its growth in the future is the revenue sharing mechanism in the industry between aggregator, copyright owner and the operator. The categories sometimes overlap as more and more copyright owners like the media companies get down to bypassing the services of technology companies who provide short codes by buying their own short codes. Revenue sharing is going to be a major issue as the content providers gear up to meet the demand for regional content. This is a real concern according to Rajiv Hiranandani of Mobile2win, one of the biggest players in the segment. “A lot of investments and resources go into creating and developing regional content. This can only be covered if telecom carriers give us a higher revenue share.” In fact, the discrepancy in revenue sharing is deterring a lot of VCs from investing in the segment. With operators retaining the biggest chunk of the revenues, the proposition of investing in content companies from the point of view investors becomes less lucrative.  The other major challenge that the company will face is that of brand building and creating a mindshare for these players which will make them an interesting value proposition. To maintain and retain a stronghold on the market, companies now need to create a strong demand for their applications instead of coming across as accidental distractors! 

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