Monday, April 5, 2010

VAS in Indian Scenario

VAS, India and Revenue Share

There are many VAS players in India. Typically VAS industry value chain is comprised of telecom operators and Others. At the top of value chain, Sharks in the ocean are telecom operators-having access to the end-users. Another big fish is branded content providers like Disney, Yash Raj films, CP like Marvel, people like Bejan Daruwal where content got branded, have powerful brand values, stronger brand recognition and high level of brand pull

All other players could be technology platform providers like Xius, Roamware, system integrator like Patni Computers. And then some of the players also add value by doing service management, content aggregation, content processing (production). This is the domain mainly known as pure VAS players (VASP – Value Added Service Providers). There are players like IMImobile into technology platform, managing services, content aggregation and content production. Onmobile has strong presence in technology platform, service management.Mauj is pure content aggregator. Pyro has technology platforms and develops its own content as well. Voice services are forte for One97 while Cellebrum is stronger in sms services. India Times 58888 services have strong back-up of India Times group’s media muscles.

Nazara, Value first, ACL, Cellnext, Onyx, Banglore based WiFi networks are few other players in the market. There are new entrants in Indian VAS market like Hyderabad based Tanla, Reliance ADAG group’s Big Digital. Then there are international players like Jamba, EA, Mach, Bonjono, end2end sms etc having strong interest in Indian VAS market. And there are countless other VAS companies specialized to provide couple of application based services or stronger in regional flavor.

Point I am trying to drive is that now Indian VAS has grown reasonably big in size. There are more than 30 VAS service providers, employing above 10,000 employees directly and double the counts indirectly employed across India. It is expected that VAS services will generate revenue of INR 4,000 crore (INR 40 bn) per annum by 2012. And still there is no forum to address issues and concerns of VASP. VC funding to this budding VAS industry is almost dried up. Indian telecom market is growing, but financial condition of VASP is weak to moderate.

Some of the reasons are:-

# Lack of standardization
# Availability of short code
-Huge dependability of operator
-Difference in price point and configuration
-Extremely long wait period for short code integration - 6 to 12 months
# Scarcity of skilled employees
# Poor financial management
# Intense competition in fragmented market for increasing market share
# Lesser brand equity to hold on to the professionals
# Price pressure, cost side pressure
# Collection cycle @ 120 days, payment cycle @ 75 days – negative cash flow
# Entry barrier, long gestation period, deep pocket for content aggregation
# Paltry revenue share (Telcos keep biggest pie normally 70 to 80%)

Poor performance of VASP may cause revenue impact on telecom operators, media and content providers and content owners. And biggest sufferer is the end-user (consumers).

Concerns for end-users :-
# Deprived from innovative services
# High quality, premium content not available
# In-consistency in VAS service performance leads to dissatisfaction
# Non-uniformity of VAS services leads to frustrating experience
# No value for money
What can be achieved possibly by having common forum?
1. Service standardization
2. Service/ payment aggregations at short code levels
3. Plug-and-play model for various innovative VAS services
4. To reduce lead time for across operators, pan India integration of services like short codes for voice, sms and premium WAP contents
5. Bring DoT regulation for connectivity and price points (Rev share better left on market forces to decide)
6. A common forum for VASP and operators for VAS development in India
7. Being couples of more mobile operators coming in each circle, common forum for
addressing connectivity and standardization issues will become necessity.

Can we have common forum in India for VAS services like in USA.Where Indian VAS provider has to be a member of the forum to provide VAS services.And where TRAI can regulate it with loose hand providing just guiding principals. Anyway TRAI had shown interest in making VAS to grow.
Few things could be done:-
There shall be mobile advertising guidelines. Make compulsory to all VAS providers to have customer support centre, penalty for non-performance or poor service quality and put economical pressure to bring revenue share at least up to 50: 50 (Telcos: Others)
In SEA market it is understood that operator keeps only access charges and shares almost 75% of revenue collected for VAS services. But looking at Indian scenario, it should do well with 50:50 or 40:60 rev share in favor of VASP.

Going forward there will be tremendous boost in services like clean pipe, various mobile applications sold on SAAS model and never the less there will be huge thrust on LBS (location based services) and UGC (user generated content)..
3G auction is on their way and by end of this year 3G will become true reality with various commercial launches and compelling services forcing early adaptors to take 3G based services
Yahoo!, Microsoft and Google of the world will then join the party of mobile VAS.
3G will ensure high penetration of VAS into neglected area of Enterprise segment as well.

Finally Maximum of Strength of Value Chain = Limit to (Strength of Weakest Link)

Friends let me know your views!!!


Sunil said...

Well you have covered a lot of the current issues in the market, yet lot needs to be contributed by others to make this message more effective.

Anonymous said...

More and more VAS lovers needs to contribute. Some one some where needs to start, Single Indian VAS forum is Need of the Time

Suchita said...

Do you have more financial data about VAS industry? Is there any good VAS company listed in stock market?

Sunil said...

Onmobile, tanla, now cellebrum is gona be listed so is one97 planing.

Reza said...

Good words.