The Smart Techie was renamed Siliconindia India Edition starting Feb 2012 to continue the nearly two decade track record of excellence of our US edition.

March - 2008 - issue > Technology

Plummeting ARPU: VAS gaining momentum

Jayakishore Bayadi
Friday, February 29, 2008
Jayakishore Bayadi
Now, to watch the gorgeous Aishwarya and macho Hrithik sizzling in the movie Jodhaa Akbar one need not waste precious weekend time running behind its tickets. Thanks to mobile value added services (VAS), all that one needs to do to book one’s choice of seats is to send an SMS to the theater that screens the movie and block them. All this is through your petite mobile. The confirmation of the booking is sent back to the phone in text form. Mobile Box Office is the same kind of service launched by Tagit, a Singapore based M-commerce Company, in all cinema halls of AdLabs. This is how VAS is changing the way we live.

Don’t be stunned if the voice-based service in your mobile will be a freebie in the next few years and you will be paying only for VAS, such as SMS, MMS, Internet, Email, games, TV, and ticket booking over your mobile. In India, despite an explosive growth of the subscriber base, the mounting competition is purging a large chunk of profit margin from the mobile operators, making them to look beyond the voice-based service. Whether it is a landline or mobile, VAS, which includes a bundle of non-voice based data services, act as enablers that boost the plummeting Average Revenue per User (ARPU) of operators. The ARPU, which was Rs.1, 000 plus per month in the year 2000, had plunged to about Rs. 250 in June 2007.

Further, the advent of new networks, high bandwidth availability, transition from circuit-switched to packet networks, and upgrades in handset standards and technologies that support new formats (3G, SIP) that are happening on a global scale are increasingly creating more space to exploit VAS as an important commercial opportunity. People now widely use their handsets to play games, download ring tones, read news alerts, access the Internet, listen to music, access information from banks, check exam results, book tickets for movies, trains, and flights, participate in contests, and view one touch ads, amongst others.

The telecom sector contributes to just one percent of India’s GDP. Out of India’s 1.1 billion population, 220 million are mobile subscribers and this base is growing by
7 million a month and is expected to reach a staggering 500 million by 2011. According to the Associated Chambers of Commerce and Industry of India (Assocham), the total size of the mobile VAS market is estimated to be about $1.2 billion (Rs. 4,950 crore) and is growing by 50-65 percent every year. SMS contributes to 55 percent of VAS, though it has started slumping now. Hence the telecom companies are betting big on music, the principal money-spinner after SMS. Caller ring back tones (CRBTs) have a 15-25 percent market share, followed by ring tones that have a share of 15-20 percent, while the remaining portion of revenues can be attributed to full song downloads. But, currently, VAS contributes only 10 percent of the mobile operator’s revenues and is expected to increase to approximately 20 percent by 2009.

A roam around the VAS market

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