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Is this the next growth driver for telecom?

Jun 28, 2010

The Indian telecom market has shown signs of maturity after proliferating for the past several years. Entry of multiple operators has led to intense competition. This has resulted into higher churn and declining ARPUs. The telecom industry dynamics have witnessed an unparalleled shift over the last decade.

Until recently, operators focused mainly on voice content as a major source of revenues. However, increasing competition has changed the industry dynamics. As a result, operators are on the lookout for alternative revenue streams to neutralize the impact of falling ARPUs. In such a challenging environment, Mobile Value Added Services (MVAS) could act as next leg of growth driver.

MVAS includes variety of products/services including caller ring back tone (CRBT), dynamic voice mail, missed call alert service etc. In addition, through MVAS, subscribers can access information and entertainment content in multiple languages including services such as stock, commodity price, sports and news updates, jokes, music and live sports commentary. Through MVAS, subscribers can book online movie tickets and make bill payments through mobile.

In order to understand the scope and opportunity MVAS presents, let us first understand the stakeholders in the MVAS value chain.

Content owners: They fall at the top of the value chain. They enter into agreements with various stakeholders to provide content. All music and film production houses fall under this category.

Technology Enablers: They provide technology platforms to access MVAS. They gather content from the content owner and distribute it according to customer needs. All MVAS companies like OnMobile, Hungama etc fall under this category.

Telecom operators: They act as an intermediary to the various elements in the value chain and the end user. They act as a channel for delivery of the mobile content and thus have higher bargaining power. Since they are at the core of MVAS value chain, they get the largest share of revenue pie.

End users: Are the subscribers who use the content.

Now that you are familiar with the stakeholders in the MVAS value chain, let's try and understand the scope and opportunity MVAS presents in the Indian context.

In India, the MVAS industry is still at the nascent stages and there are small players operating across the value chain. Caller ring back tones (CRBT) form major part of the MVAS content. However, over time the focus is likely to shift to informative and entertainment MVAS.

Right now, non-voice revenue contributes approximately 10-12% of the operator's total revenues. This is significantly lower than the global average of 20-22%, signifying the vast scope of expansion in India.

Further, right now SMS contributes approximately 50% of the total non-voice revenue for Indian operators. And since SMS services are handled by the operators themselves on their own network, the addressable market for rich content MVAS is reduced to that extent.

However, over time the introduction of mobile number portability (MNP) will further intensify competition. Secondly the eventual launch of 3G will lead to increase in demand for high end content. This will result in increase in demand for high end content MVAS relative to SMS.

Thus it is believed that MVAS industry has tremendous scope and can be a potential game changer for the companies in the fiercely competitive telecom space.


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1 Responses to "Is this the next growth driver for telecom?"

mobiThinking

Jul 23, 2010

Mobile data contribution to ARPU for telecom companies has been growing rapidly for the last ten years (look at the contribution it makes to Japanese carriers to see where we're heading). It all started with the humble ringtone. In India several companies spotted this trend a long time ago and now they're milking the rewards. Two of these are Hungama Mobile and Mobile2Win. There are in-depth profile of both companies in this guide covering expertise, geographies, clients, awards etc: mobithinking.com/mobile-agencies-guide

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