VAS up: Cellcos’ revenues ride on ringtones, SMSs
The Economic Times, December 13, 2005

Cellphone companies have found a new way to keep the cash registers ringing. With tariffs falling by the day, value-added services (VAS) such as mobile entertainment, ring tones, games and messaging are their likely saviours. There are daily downloads of about a million paid ringtones and about 100 million SMSs, and these are likely to grow in the coming months, say operators. VAS currently
contribute about 10% of the total telecom revenue and are estimated to grow at an annual rate of 30-40%.

COAI has projected that VAS will contribute up to 20% of total telecom revenue within three years. India has an average revenue per user (ARPU) of $8 per month, the lowest in the world. It is less than half the Asia-Pacific ARPU ($18.9) and not even a fourth of Western Europe’s ($37.40). The global average is $21.30 per month.

“Value-added services are a major source of revenue in an otherwise commoditised voice market. Companies which provide new valueadded services will be able to balance out the declining incomes from the voice stream,” said Bharti Tele-Ventures chairman Sunil Mittal.

However, SMS still contributes a significant part of non-voice service revenues, according to COAI. About 65% of the total nonvoice revenue comes from SMS while caller-line identification (CLIP) accounts for 8% of VAS revenue. The remaining 27% is from services such as games, ring tones, mobile entertainment and multimedia messaging. It is this segment that is expected to register exponential growth.

Caller-line identification was the first VAS introduced in the country. In the beginning, it was free but later became a paid service. SMS followed CLIP. While initially the younger generation took to it, it’s now popular across all the age groups.

However, the real innovation is taking place in gaming.

A large number of companies have emerged in last five years that provide content for VAS.

These include Indiagames, Mauj, Mobile2Win, ACL Wireless, Bharti Telesoft and On Mobile Systems.

“The mobile VAS environment provides an excellent opportunity and the right environment for Indian companies to build innovative products. It is a market which is extremely lucrative wherein the business model is linearly scalable,” said ACL Wireless CEO Sanjay Goyal.

ACL has been ranked as the 15th fastest growing technology company in the Asia
Pacific region by the Deloitte group.

“VAS component in the total revenue is expected to grow at an annual growth rate of between 30% and 40%. This is important in view of the falling voice revenue,” said
COAI secretary-general T V Ramachandran.