Mumbai: The mobile value-added services (VAS) market in India is growing at 40% annually, but industry players say that price points have to come down and a more user-friendly experience ushered in if growth is to be sustained.
“As markets saturate, focus will be on increased average revenue per user (Arpu) and VAS is the easiest Arpu driver,” said Motorola India’s director (marketing of mobile devices), Lloyd Mathias.
One of the bigger challenges for VAS and telecom services providers is getting the customers to use the services in the first place. In most cases, customers find the download process frustrating and expensive and very often lose interest altogether.
Another challenge is moving away from music, which accounts for 50-60% of the revenue from VAS now.
“Music drove the first set of users. For the next set, we have to look at other areas,” said Arvind Rao, chief executive officer of Bangalore-headquartered VAS provider OnMobile Global.
The mobile VAS market in India is estimated to reach Rs5,500-6,000 crore in 2007-08, Rao said. It currently contributes about 10% to telecom companies’ revenue.
VAS comes at a price that is on the higher side for consumers. “We need to re-evaluate and look at a reasonable price point because the consumers are making the choice,” said Mathias.
Buying an audio CD of an album would be more cost-effective than downloading a single track on the mobile, he added.
“Copyright owners seem to be extracting a significant amount of money,” said Idea Cellular Ltd’s chief marketing officer Pradeep Shrivastava. So, the application providers and aggregators, who buy the content, have to suitably price their offering.
Under the current pricing model, telecom operators keep up to 70% of VAS revenues, the remainder being shared by the aggregators and the content owners, adding to the final price.
Pricing will go down only with size, Shrivastava said.
Of the 242 million mobile subscribers in India, roughly 4-5% use GPRS-enabled phones. Of this, only four-five million would be active GPRS users, said Sanjit Chatterjee of UK’s Flytxt Ltd, which offers mobile marketing technology.
GPRS, or general packet radio system, is a technology standard used for transmitting data wirelessly.
“It is necessary to enable 3G (third generation mobile phone standards) to sustain current growth,” he added.
While music downloads are driven by messaging and voice, services such as mobile commerce, video downloads and ticketing would require GPRS since they involve substantial data transfer.
“Music’s share in revenues will go down and it is the other thing (services) which will drive the VAS market,” said OnMobile’s Rao.
In the next three years, revenue of telecom firms from VAS is seen rising to 20%, Shrivastava said.
“It has to go up. There is a critical mass of mobile users who are savvy and willing go beyond voice and SMS,” he added.