mobile vas report aug08
TRANSCRIPT
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Mobile VAS in India, August 2008
IAMAI & eTechnology Group@IMRB1
MobileVAS
in
India
AReportbyIAMAI&eTechnologyGroup@IMRB
August2008
InternetandMobileAssociationofIndia,2
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Mobile VAS in India, August 2008
IAMAI & eTechnology Group@IMRB2
Internet & Mobile Association of India (IAMAI), 2008All rights reserved. No part of this report may be reproduced, either in part or
in full, without the prior permission of Internet & Mobile Association of India
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Table
of
Content
ExecutiveSummary ................................................................................................................................. 4
1.0TheIndianMobileTelephonyMarketAnOverview ................................................................ 8
2.0NeedforMVAS ................................................................................................................................ 15
3.0MappingMobileValueAddedServices....................................................................................... 17
3.1DefiningVAS ................................................................................................................................ 17
3.2UnderstandingDifferentMVAScategories ............................................................................. 19
3.3Perceived&PracticalvalueofvariouscategoriesofMVAS ................................................. 22
3.3.1Perceived&PracticalvalueofEntertainmentVAS ............................................................. 22
3.3.2Perceived&PracticalvalueofInfoVAS ............................................................................... 23
3.3.3Perceived&PracticalvalueofMcommerce.......................................................................... 23
3.4PillarsofMVAS ............................................................................................................................ 24
3.5MobileVASinruralmarket ....................................................................................................... 27
4.0UnderstandingMVASEcosystem ................................................................................................. 28
4.1Understandingtheroleofvariousentities............................................................................... 28
4.2Roleoverlapping.......................................................................................................................... 31
4.3Revenuedistribution ................................................................................................................... 31
4.4Thekeyfactorsplayingroleinrevenuedistribution ............................................................. 32
4.5Regulation
of
MVAS
market ...................................................................................................... 33
4.6Comparativeanalysisofrolesandchallengesofvariousstakeholders .............................. 35
5.0MobileVASaccessmodes .............................................................................................................. 36
6.0MobileVASaccessdevices ............................................................................................................. 39
7.03GanditsimpactinIndianMVASmarket.................................................................................. 43
7.1Defining3G ................................................................................................................................... 43
7.2Analyzingstrengthsandweaknessesof3G............................................................................. 43
7.3Impactof3G.................................................................................................................................. 44
8.0DriverstothegrowthofMVASmarketinIndia ........................................................................ 44
9.0BarrierstothegrowthofMVASinIndia ..................................................................................... 47
10.0NewservicesintheMVASmarket ............................................................................................. 49
11.0MobileVASmarketinIndia......................................................................................................... 55
12.0FutureofMobileVASinIndia..................................................................................................... 58
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ExecutiveSummary
Needforthestudy
Over the last5years, the telecom industryhasrealised the importanceofMVAS.Given the
declining ARPU and increasing competition among operators it is imperative to focus on
alternate revenue streams. That is where there is a felt need for capitalizing on the Value
AddedServicesMarket.
Today the various MVAS entities are still struggling with issues such as the correct
definitionofMVAS,therolesandresponsibilitiesofeachentityinthevaluechain,revenue
sharing arrangements between them and other critical issues such as regulation of the
MVAS market. This report presents these key issues in detail and provides a neutral
perspectivetotheindustry.
ItprovidesaclearandprecisedefinitionofMVAS,itsvariouscategoriesexistinginIndia,the
MVAS still evolving and thus changing ecosystem along with the current revenue sharing
schemebetweenvariousentities,itsdriversandbarriersalongwithitsfutureinIndia.
Methodology
The research team at eTechnology Group@IMRB conducted the research through 2 key
modules PrimaryresearchandextensiveDeskresearch.
Primary Research was conducted using indepth interviews across a crosssection of
stakeholders. These included telecom operators, content aggregators, content owners and
technology enablers. The interviews were content analyzed in detail from different
perspectives.
Extensive desk research was done tobuild an indepth understanding of the Mobile VAS
marketinIndia.Detailedanalysisofsecondaryinformationwasusedtoarriveatthespecific
frameworks provided in the report. Information from various published resources such as
TRAI,COAI,etcandotherresearchbodieswerealsousedtovalidatethemarketfiguresand
crossvalidatethedata.
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Key Findings
The Current Mobile VAS industry is estimated at Rs. 5780 crore by end June 2008 and is estimated
to grow steadily at 70% over the next two years to touch Rs. 9760 crores by end June 2009 and
Rs.16520 crores by end June 2010.
ThecurrentMVASmarketcontributionofeachoftheaboveservicesisgivenbelow
5780
7510
9760
16520
4560
2850
Dec 2006 Dec 2007 Jun 2008 Dec 2008 Jun
2009E
Jun
2010E
P2P SMS
37%
Others
2%Games
5%
CRBT/RT
40%
P2A/A2P
SMS
16%
ThecurrentMVASmarket(asofJune2008)isRs5780crores.P2PSMScontributesRs2140
croresto
the
MVAS
market
and
this
goes
only
to
the
operators
(the
balance
Rs
3640
crores
is dividedbetween the different stakeholders including the operators.). Rs 2312 crores
come from CRBT/RT while thebalance Rs 1329 crores is divided amongst the other
services.
VASRevenuecontribution b Services un 2008
MVASmarket
(inCroreRupees)
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MVAScurrentlycontributesaround9%totheoperatorsrevenue.Itisexpectedtoincreaseto
10.4%inthenext1yearand12%byJune2010.
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The Road Ahead
In theageofconvergence, theprominentgrowthdriverofMVASwouldbe theconsumers
desireofgettingmorefromtheirmobilephone.
Whileamongtheyouthentertainmentrelatedserviceswouldbepopular,theotherconsumers
would also look for utilitybased services like location information, mobile commerce (M
Commerce)formobiletransactionsandLocalcontentrichservices.
MobileVASindustryinIndiaisundergoingalotofstructuralchangesandispoisedtogrow
andcontribute
greater
revenues
to
the
telecom
industry
in
years
to
come.
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1.0TheIndianMobileTelephonyMarketAnOverview
The growth of an infrastructure sector such as telecom has a multipliereffect on the entire
economyofthenation.FortunatelythetelecomsectorinIndia,sinceitsliberalizationin1991,
hasregisteredanunprecedentedgrowthandisthereforevaluedat$100bntoday,contributing
significantly(13%)totheGDP.
Globallyintermsofmobilesubscriptions,Indiaistheworldssecondlargestwirelessmarket
afterChina.AttheendofJune2008,thetotalwirelesssubscribers(GSM,CDMA&WLL(F))
basewas286.86million.A totalof8.94millionwireless subscriberswereaddedduring the
monthofJune2008asagainst8.62millionwireless subscribersaddedduring themonthof
May2008.
Asaresulttheoverallteledensityroseto28.33%byendofJune2008asagainst27.59%inMay
2008. This growth of the sector can be clearly attributed to the favorable and improved
regulatorystructure,declininghandsetpricesandinnovativeprepaidtariffstructure.
Source: TRAI Report QE stands for Quarter End while E stands for estimated
AllIndiaMobileSubscriberBase
33.6952.22
98.77
165.11
261.07286.86
500
50
50
150
250
350
450
550
QE-Mar-04 QE-Mar-05 QE-Mar-06 QE-Mar-07 QE-Mar-08 QE-Jun-08 E 2010
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Withincreasingcompetitionandtheneedforincreasingthesubscriberbaseinruralmarkets,
thecall
rates
are
declining.
This
has
led
to
decrease
in
ARPU.
Therefore, in spite of unprecedented growth in the mobile subscriber base, the operator
marginsaredecliningquarteronquarterwithaverymarginalincreaseinMar08.Thoughthe
Minutes of Usage is increasing however the same isbeing offsetby the lowering tariffs of
operators. This couldbe attributed to the major subscription growth that is coming from
bottomof
the
pyramid.
395 414425
454 471476 462 464
493
0
100
200
300
400
500
Mar '06 Jun '06 Sep '06 Dec '06 Mar '07 Jun '07 Sep' 07 Dec '07 Mar '07AverageMinutesofUsagePer
Subscriber
Average Revenue Per User
366352
337316
298 297275
261 264
228215 196 202 206
159176173
256
100
150
200
250
300
350
400
Mar '06 Jun'06 Sep'06 Dec'06 Mar '07 Jun'07 Sep'07 Dec'07 Mar '08Aver
ageRevenuePerUserIn
INR
GSM CDMA
Source: TRAI Quarterly Report
Source: TRAI Quarterly Report
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AsARPUdeclines,thechallengeforoperatorsistoincreaserevenuesbydifferentiatingtheir
offeringsanddevelopalternativerevenuestreamsbyofferingmorevalueaddedservices to
theexisting
subscribers.
ThedecreaseinaveragerevenuecanalsobeattributedtothestructureoftheIndianMobility
Marketwhichislargelyprepaid.Thismeansthatmostofthesubscribersaddedarefromthe
bottomofpyramidwithlowusageresultinginlowARPU.
Intermsofmarketshare,92%ofthesubscriberbaseinIndiaisonprepaidconnection,with
the remaining 8% on postpaid subscriptions. This has also given rise to opportunities for
generatingincreasedrevenue,throughexploringpotentialValueAddedServices(MVAS)like
subscriptionpacksofnews,alertsetcandmoreexclusiveroamingservicestailoredtoprepaid
subscribers.
1.1Exploringtheruraltelecomopportunity
Fuelledby operator expansion and Government support, the growth is taking off in semi
urbanandruralareasnow.Thereforeinnearfuture,majorityofnewsubscribersareexpected
to come from here. With cell phone operators and mobile phone manufacturers seeing an
immensegrowthpotentialintheruralsector,theyarenowdevisingnewwaysandtryingto
grabalargershareoftheruralpie.
Fromlaunchinglowcosthandsetstobringingdownthetariffsandorganizingstreetplaystoadvertise, the real battle among telecom competitors is now being fought in the rural
hinterland.
Itisbelievedthatofthenext250millionpeopleexpectedtogomobile;atleast100millionwill
come from ruralareas.Though the rural mobilepenetration is highest inPunjab (20.69per
cent), followedby Himachal Pradesh (17.09 per cent), Kerala (10.63 per cent) and Haryana
8%
92%
Post Paid Pre Paid
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(10.20percent),mostcompaniesarenowsweating itoutbyhardselling theirproductsand
services in the rural areas of the region. As a result, the geographical coverage of mobile
telephonyin
India
has
gone
up
from
13
percent,
acouple
of
years
ago,
to
39
percent
now.
1.2GrowthintheIndianTelecomMarket
TheIndiantelecommarkethastremendousgrowthopportunities.Asperthecellularindustry
experts, thenationsmobile subscriberbase isalso set toexceed500millionconnectionsby
2010.
Thegrowthinthetelecommarketisafunctionoftwosetoffactors.TheDemandSideFactors
referredtoasthePullfactorsandSupplySideFactors referredtoasthePushFactors.
1.2.1PullFactors
PositiveMacroEconomicTrends
HighDisposableIncome
IndiasGDPwithacurrentgrowthrateof8%makesitthe2ndfastestgrowingeconomiesofthe
world. This growth has resulted in increasing disposable income among the individual
population.Therefore theyoung Indianpopulation is increasingly investingmoremoney in
variousentertainmentandcommunicationservicesthusfuellinggrowthofthetelecomsector.
72%
15 -20%
PopulationContribution
Rural India
Urban India
28%
80-85%
SubscriptionContribution
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MobilityandConnectivity
Thegrowingneedofhighmobilityandstayingconnected is theprimedriver for theentire
category.Thisistrueforpeoplefromdifferentagegroupsandoccupation.Theyouthsegment
thatcomprises30%ofthetotalhandsetsmarketrequireshighmobilityandconnectivityand
the same is true for business and other professionals. This innate need coupled with
availabilityofhandsetsandconnectivityataffordablepricepointshastriggeredthegrowthof
telecominIndia.
1.2.2Push
Factors
InvestmentsinTelecomIndustry
Thetelecomindustryhasseenanestimated$8.5bnininvestmentflowduring200607alone,
ofwhich$550millionwasintheformofforeigndirectinvestment.Allmajortelecomhandsets
manufacturers includingNokia,Samsung,MotorolaandLG havetheirpresence in India,
alongwiththeleadingglobalservicecompaniesandinfrastructuremajors,suchasVodafone,
Singapore Telecom,AT&T,Ericsson,Alcateland Siemens.Thishas triggered the growthof
TelecomSectorinIndia.
GradualProgressioninTelecomSector
The progression chart below depicts the major regulations and events driving the extra
ordinarygrowthofTelecomsectorfromyear1999to2008.
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Inorder tocapitalize thisopportunityofmeeting theconsumerneeds inhighlycompetitive
markettheoperatorshavereducedthetariffstoattractconsumerswithlowpurchasingpower
primarily insemiurbanandruralIndia.Infact lucrativeoffers likebeingpaidfor incomingcalls have transformed the scenario completely. Through these changing regulations and
events,theIndustryplayersareaimingtoachievethefollowing
AcquiringnewsubscribersbyexpandinginSemiUrbanandRuralIndia
Sellingmoreservicestoexistingsubscribers
TherecentTRAIrecommendationpermittingPCtophonecallswhereISPscanoffercheaper
STDcallsandevenfreelocalcalls.Thiswouldresultinfurtherreductionofvoicetariffs.This
wouldleadtoincreasedfocusonMVASbymobileoperators.
AcquiringNewSubscribersthroughexpansioninRuralIndia
Acquiring customers have alwaysbeen a great challenge for companies. Given the current
levelofsaturationinMetrosandUrbanMarketandcutthroatcompetitionamongoperators,
increasingsubscriberbaseinurbanmarketwouldbeallthemorechallenging.Thereforealot
ofoperatorswithadequatesupportfromGovernmentareeyeingtheruralmarketforfuture
growth.
2004
2003
1999
Tariff Cuts Significantly
Introduction of CPP and CDMAServices
Launch of GSM service by BSNL
And 4th GSM operator, Charges for incoming calls
NTP 99- Move to Revenue Sharefrom Fixed License Fee
2008Getting Paid for Receiving
Incoming Calls
2002
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BigoperatorslikeAirtelhaveclaimedthatsoonmobileconnectionsandrechargevouchersetc
willbe
available
at
all
such
places
from
where
people
buy
match
boxes.
This
certainly
explains
thefuturepenetrationoftheseservicesinremotestofvillages.
SellingMoretoExistingSubscribers
This is relatively easier as compared to acquiring new customers. Also since now the new
subscriptions will largely happen at the bottom of the pyramid therefore the new
subscriptionswillfurtherlowertheaveragerevenueperuser.
In such a scenario mobile VAS sector is a potential longterm revenue stream as it willbe
easiertosellmoretotheexistingcustomers.
GovernmentInitiatives
Governmentalsohas supported thegrowth of this sectorby comingoutwitha numberof
initiativesforthelowendsubscribersofruralIndia,andUniversalServiceObligation(USO)
fundwasonesuchinitiatives.TheUSOfundwasaninitiativetakenupbythegovernmentto
increaseruralteledensity.
Inrecentdevelopments,BSNLandtwoprivateoperatorswillerect427towersinremoteareas
offering over four lakh mobile connections. All the towers are expected tobe erected and
commissionedby
December
2008.
Under
the
second
phase,
DoT
aims
at
erecting
11,000
towers
throughoutthecountrytoofferover11millionmobileconnections
ADCwasleviedbyTelecomRegulatoryAuthorityofIndia(TRAI)in2003toprovidesupport
for BSNLs rural telephone obligation. Telecom Regulatory Authority of India (TRAI) has
recently given orders for the withdrawal of the ADC (Access Deficit Charge) and the
subsequentpassingofthebenefittotheconsumersbythetelecomoperators.
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2.0NeedforMVAS
Overthelast5years,thetelecomindustryhasunderstoodtheimportanceofMVAS.Giventhe
declining ARPU and increasing competition among operators its imperative to focus on
alternate revenue streams. Thats where there is a felt need for capitalizing on the Value
AddedServicesMarket.
ThereasonsfortheincreasingimportanceofMVAScanbeclassifiedas:
Decrease
in
ARPU
despite
increase
in
MOU:
Though
the
subscriber
base
is
growing
at
a
rapid pace and has positively impacted industry revenues, operator margins also have
shrunkowingtocompetitionandlowerAverageRevenueperUser(ARPU)asthemajor
growth is coming from bottom of the pyramid. As ARPU declines and voice gets
commoditized, the challenge is to develop alternative revenue streams and retain
customersbycreatingabasisfordifferentiationinhighchurnmarkets.
Need for differentiation: There is a greater need among the telecom operators to
differentiatethemselvesfromeachother.
o Number
of
Licensees: With increasing number of licensees (98 UASL, and 37cellular licenses) in the telecom space the average numbers of operators in many
circleshaveincreasedto56operatorsofferingmorechoicestotheconsumer.Thus
the competition among the operators has increased tremendously. Therefore it is
veryimportantforthemtodifferentiatethemselvesfromtheothers.Nowthatvoice
hasgotcommoditizedtheseoperatorsareusingMVASfortheirdifferentiationand
marketingtheseservicesheavilyforcreatingawarenessamongtheconsumers.
o DecreasingCallRates:Inordertoattractconsumerswithrelativelylowpurchasing
powersprimarily
from
Semi
Urban
and
Rural
India
the
operators
have
drastically
reducedthecallratesmakingitaffordabletoeventhelowersegmentofsociety.The
tariff in India isoneof the lowestatRs.1perminuteas compared to the tariff in
developed nations like USA and UK where the call rates are Rs.13 and Rs78
respectively.
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Country Tariff charges
USA Rs 13/min
UK Rs 7-8/min
France Rs 7-8/min
Brazil Rs 6/min
India Re 1/min
o 3Gbidderswhoarenonoperators:Thearrivalofnewtechnologieswillgiveriseto
greater competition as many non operators are alsobidding for the 3G licenses.
Department of Telecom has planned to allow five 3G operators in each circle
dependingontheavailabilityofspectrum.Thereforetherewouldbeagreaterneed
to differentiate one self in order to attract new customers and retain the existingones.
o SaturationinMetroandUrbanMarket:Themetro/urbanareasofferhigh levelof
penetration and have significant mobile subscribers. In such a highly saturated
market with the entry of MVNOs the competition will get fierce. Therefore
capitalizing on value added services will give operators opportunity to increase
ARPUbyprovidingpremiumservices.
Source:BroadbandandInternetIndia Increasing
need
and
demand
from
consumers:
In addition to the above supply side
reasonsthepulleffectfromconsumersaskingformorethanjustbasictelephonyisalsoa
keydriverforMVASservices.Todaymostoftheconsumersareseekingmorefromtheir
communicationdeviceapartfromjustmobilityanddesiretostayconnected.
Metro Circle Mobile Penetration
Delhi 90%
Mumbai 70%
Chennai 89%
Kolkata 47%
Punjab 46%
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3.0MappingMobileValueAddedServices
Aswehaveseen,Telecommunicationhasmovedbeyondprovidingjustbasicvoicecalls.The
mobile phone has evolved from a mere communication device to an access mode with an
ability to tap a plethora of information and services available in the ecosystem. This is the
reasonwhyitisnowbeingreferredtoasthefourthscreen,afterCinemahalls,Televisionand
PC.
3.1DefiningVAS
ButthefundamentalquestionthatremainsishowVASisdefined.AclearMVASdefinitionis
notonlyrequiredtocleartheairamongtheMVASprovidersbutitwillalsohaveanimpact
onthedynamicsoftheValuechain.AdetaileddefinitionofVASmighthaveanimpactonthe
licensingissuessurroundingVAS.
LetslookatdifferentVASdefinitionsfloatinginthemarket.
3.1.1 BasicdefinitionofaVAS
Value Added Service (VAS) in telecommunication industry refers to noncore services, the
coreorbasicservicesbeingstandardvoicecallsandfaxtransmissionincludingbearerservices.
Thevalueaddedservicesarecharacterizedasunder:
Notaformofcoreorbasicservicebutaddsvalueintotalserviceoffering.
Standsalone in termsofprofitabilityandalso stimulates incrementaldemand for coreor
basicservices
Cansometimesbeprovidedasstandalone.
Donotcannibalizecoreorbasicservice.
Canbeaddontocoreorbasicserviceandassuchcanbesoldatpremiumprice.
Mayprovideoperationalsynergywithcoreorbasicservices.
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A value added service may demonstrate one or more of these characteristics and not
necessarilyallofthem.
Insome
cases,
the
value
added
service
becomes
so
closely
integrated
with
the
basic
offering
thatneithertheusernortheprovideracknowledgeorrealizethedifference.Aclassicexample
isofP2PSMS.SomeoftheoperatorsdonotconsiderP2PSMSaspartoftheirVASrevenue.
3.1.2 DefinitionasperTRAI
IntheUnifiedAccessServiceLicense(UASL),VASisdefinedasfollows
ValueAddedServicesare enhanced serviceswhichaddvalue to thebasic teleservicesandbearerservicesforwhichseparatelicenceareissuedTheGovernmentofIndiaissueslicensesforthefollowingValueAddedServices:
1. Publicmobiletrunkingservice
2. Voicemailservice
3. Closedusersgroupdomestic64kbpsdatanetworkviaINSATsatellitessystem
4. Videotexservice
5. GMPCS
6. Internet
7. Audiotex
8. Unifiedmessagingservice
Theabovedefinitionsupportsafreemarketbutcanbebroadenedtoincorporatenewservice
categoriesandplayersinthesupplychain.
Formobiletelecommunicationmarket,asimpledefinitionofVASwouldbe
MobileValueAddedServicesarethoseservicesthatarenotpartofthebasicvoice
offer and are availed separately by the end user. They are used as a toolfor
differentiation
and
allow
mobile
operators
to
develop
another
stream
of
revenue.
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3.2Understanding
Different
MVAS
categories
All the value added services address some need of the end consumer whether it is
psychological, monetary or convenience. Based on the need fulfillment of the end user, we
havegroupedMobileVASintothreebroadcategories.
EntertainmentVAS ThekeydifferentiatingfactorofEntertainmentVASisthemassappeal it generates. These provide entertainment for leisure time usage. These not only
generateheavyvolume (owing to itsmassappeal)butalsoheavyusage.Anexampleof
thesekindsofservicesisJokes,BollywoodRingtones,CRBT(CallerRingBackTone)and
games.Theseservicescontinuetobepopularandhavebeenkeyrevenuegeneratorsforthe
IndianmobileVASmarket.ThisisahighvalueMVASandwillcontinuetoshowgrowth.
OtherpopularEntertainmentVASdrivingthemarketaredatingandchattingservices.The
servicewas first introduced2yearsback and is nowbeing offeredby all theoperators.
EachcirclegeneratesaboutRs30lakhspermonth.Thisserviceisnotonlygrowingfastbut
also witnessing less churn as compared to other MVAS. Owing to its sticky nature, it
requirescomparativelylessmarketingeffortsandcost.
EntertainmentVAS
has
the
potential
to
remain
akey
contributor
to
Mobile
VAS
industry.
To sustain the MVAS growth, it is the responsibility of the industry to keep
discovering/innovating killer applications like CRBT (Caller Ring Back Tone) at regular
intervals
InfoVASTheseservicesarecharacterizedbytheusefulinformationitprovidestotheenduser.Theuser interestcomes in from thepersonalcomponentand relevanceof the
content.Apartfrommobile,alternatemodesareavailabletoaccessInformationVAS like
Newspaper, TV, and Internet. E.g. of Info VAS is information on movie tickets, news,
bankingaccount
etc.
They
also
include
user
request
for
information
on
other
product
categorieslikerealestate,education,stockupdates,etc.
InformationVASneedstotargettherightpersonattherighttimewiththerightcontent.
mCommerceVAS (Transactionalservices)Theseare the serviceswhich involvesome transaction using the mobile phone. An example of this kind of service isbuying
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Use of mCommercedepends on the vendor
which operator have tiedup. lets say an
operator has tied up witha payment technology
providerwhich has back end tieups with various banksbut if it is not SBI orICICI, it is a useless
service- Operator
movieticketsusingmobilephoneortransferofmoneyfromonebankaccounttotheother.
Thesecanbroadlybeclassifiedinto2types MobilebankingandMobilepayments.
Thoughin
anascent
stage,
off
late
many
initiative
have
been
taken
in
mCommerce
space.
A
numberofapplicationprovidersare in themarketwithdifferentbusinessmodels.Some
are focusing on mpayment, some on incorporating mCommerce into it while others on
mbankingaspects.Thisyearhasseenthelaunchofmbanking
servicebyIndianslargestprivatesectorbankwhichhasgiven
mbankingamuchneededthrust.Almostalltheoperatorsare
conducting pilot exercises for mCommerce services using
differentaccessmodeslikeGPRS,USSD,STK,etc.Abigboost
to mcommerce has come from the RBI which recently came
outwithsomeguidelines.
mCommercepenetrationcontinuestobesmallbutawareness
isincreasing.OperatorsarebettingontechnologieslikeUSSD
tomaketheservicehandsetagnostic.
The current marketing focus is primarily on mobilebill
payment and mbanking. Industry is betting on tripling
number of mCommerce users within this year. This is
discussedingreaterdetailinthesubsequentsections.
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Therevenue
generation
and
popularity
of
any
MVAS
revolves
around
2factors:
PerceivedValue PerceivedvalueofaMVASdependsonperceivedratherthantheactual
utilitytotheenduser.Whentheimmediatebenefitmaynotbecleartothesubscriber,the
valuethat
asubscriber
derives
from
it
largely
depends
on
the
marketing
efforts
and
persona related to the service. The value is gauged more from the intangiblebenefits
derivedfromtheservicelikeemotionalbenefits.
AgoodexampleofaMVASwithhighperceivedvalueisCRBT(CallerRingBackTone).
EntertainmentVAS InformationVAS mCommerce
Definition
These services provide
Entertainmentforleisuretime.
These services usually
generatemassappeal
These are the services which
provide some useful information
to the end user. The user interest
comes from personal or relevant
componentofthecontent.
These are the services which
involve some transaction non
mobile
Currentstatus
Entertainment VAS is driving
theVASmarketboth in terms
of
volume
and
revenue.
Information VAS is getting
popular with different categories
depending
on
the
relevance
mCommerce is currently in
embryonicstage
Drivers
Industryfocusison
Entertainment VAS with new
playerscomingfrommediaand
movie houses e.g. STAR,
Rajshri
Entities using mobile as another
channel to deliver information is
driving information VAS. E.g.
stock updates, bank account
information, travel information,
etc.
RBIguidelinesisexpected
togiveabigboosttomBanking
Challenges
Currently, music is thebiggest
component. Challenge is to
drive the usage of other
content/serviceslikegames
Marketingisthebiggest
challenge since Information need
differsacrossdifferentsegments
Credibilityofthesourceis
another
challenge
since
there
are
alternate channelsavailable toget
InformationVAS
Identifyingthebestaccess
mode to provide mCommerce
isabigchallenge
Handsetpenetrationand
usageof the key access mode
(GPRS)
of
mCommerce
is
low
inIndia
Allayingsecurityconcerns
Futurestatus
EntertainmentVAS isexpected
to remain the VAS driver for
thenextfewyears
InformationVASisgoingto
be key to address the needs of
growingruralmarket
mCommerce has the potential
to emerge as a key VAS
component once security
concernsareaddressed
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PracticalValue Practicalvalueiscompletelybasedontangiblebenefitsderivedfromthe
service. The benefits considered could be based on convenience, time or money. E.g.
Serviceavailed
to
get
the
cheapest
air
fares
available,
money
transfer
using
mobile
These above three categories of MVAS provide a unique combination of perceived and
practicalvaluesforeveryuserandthismaychangeovertimeasthemarket&usersevolve.
Tounderstand thegrowthof thedifferent typesofMVASand their futuregrowth, they
havebeenanalyzedonboththeabovementionedfactors.
3.3Perceived&PracticalvalueofvariouscategoriesofMVAS
3.3.1Perceived&PracticalvalueofEntertainmentVAS
EntertainmentVAS hasbeen responsible for fueling the growthofMobileVAS in India
andcontinues todoso. Ithasbeenable tocapture the imaginationof theendconsumer
andisbeingusednotonlyforselfentertainmentbutalsoforselfexpressionasinthecase
offorwardedP2Pmessages,CRBT,etc.
ThekeycomponentinEntertainmentVASismusicwhichisresponsibleforpopularityof
FMchannels,deviceslikeiPodandevenpreferenceofFMenabledmobilephonesbythe
endconsumer.
This isanotherreason thatwearewitnessingcreationofnewstakeholders in theMVASindustry which are emerging from media houses like STAR mobile entertainment and
movieproductionhouseslikeRajshriProductions
EntertainmentVAShasaveryhighperceivedvaluebutscoreslowonpracticalvalue.
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3.3.2Perceived&PracticalvalueofInfoVAS
The key characteristic of Information VAS is that most of it caters to specific segments
withinVASusersandisseldomofmassappeal.
Thismakesthetaskofmarketingtheseservicesdifficult.Thesehaveamoderatepractical
valueand
low
perceived
value.
But
it
has
the
potential
of
high
practical
value
in
cases
such
asstockupdates,etc.
3.3.3Perceived&PracticalvalueofMcommerce
Mcommerce in India isatanembryonicstageandonlyasmallpercentageof themobile
usersareevenawareofavailabilityofsuchservices.
Though ithasa lowperceivedvalue, thepracticalvalueofmCommercehas thehighest
potentialamongallMVAS.
Thekeybarrier inadoptionofmCommerce is thesecurityaspectrelated to it.Given the
backing from RBI (as per RBI guidelines), consumers are expected to overbarriers and
realizethehighpracticalvalueofmCommerce.
Practical Value
Perceived
Value
High
High
Low
Low
Entertainment
Infotainment
mCommerce
VVAASS MMaarrkkeett 22001133
Practical Value
Perceived
Value
High
High
Low
Low
Entertainment
Infotainment
mCommerce
VVAASS MMaarrkkeett 22000088
Source: IMRB Research Source: IMRB Research
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3.4Pillars
of
MVAS
The growth of MVAS isbased on 4 pillars Access devices, Content, Technology and
Infrastructure.
3.4.1 Accessdevices
AccessdevicesplayanimportantroleintheusageofdifferentMVAScategories.Thelackof
features like GPRS, GPS,Java in handsets make a number of MVAS futile. Therefore the
affordable availability of such features is a key factor in determining the size of the target
audience toa largeextent.Arecentexample isserviceoperatorspreference forUSSDasan
mpaymentmodeinsteadofGPRSforthesimplereasonthatUSSDishandsetagnostic.
AnotheraccessdevicewhichwillsoonseethelightofthedayinIndiaisMID(MobileInternet
Devices).EventechnologycompanieslikeIntelareincreasingthepowerofmobileplatformswithaspeciallydesignedlowcostprocessorcalledAtom.
Technology
Infrastructure
Content
Access
Devices
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Regionalized contenthas already been
success we ourselvesare running a
regionalized Marathiportal which gives usvery high revenues-Content A re ator
3.4.2 Content
Is content really the king? It does not seem so, looking at the percentage revenue sharecollectedbyContent aggregatorsandContentownersof the totalMVAS pie.Add to it the
piratedcontentandsideloadingintheIndiamarket;itdoesnotpresentarosypicture.
Thecontentdependsalotongeographyandisnottransportableacrossborders.BothIPR(e.g.
musiclabel)andwhitelabelcontent(e.g.cricket)isavailableinthemarket.
But on the other hand, much of the contentbeing consumed isbeing generated for other
media. Butbecause of the same reason we say a wide variety of contentbeing available
especiallyintheEntertainmentcategory.
Forcontentaggregators/developers/ownerstoplayasignificantroleinthecategory,relevant
contentneeds tobegenerated.Theyneed toplaya largerrole frommerelybeingacontent
aggregator and transporter. Investment needs tobe made keeping in mind the long term
benefitandnottheshorttermROI.Anotherfactorwhichimpedesthecontentdevelopmentis
marketing of MVAS. A lot of content and services die
prematurelyordonotrealizetheirfullpotentialbecauseoflack
ofsufficientandfocusedmarketingefforts.
Currently, packaging and marketing of content is primarily in
thehandofoperators.Thestakeholdersarecurrentlynotsharing
theburdenagaincitingreasonsoflackofsufficientreturns.
Regional content willgive aboost to theMVASmarket. It has
tasted success in the Indian market but the challenge is to
generate relevant content not only catering to regional
differencesbutalsoindifferentlanguages.
3.4.3 Infrastructure
Infrastructurerequirementneedstobemettoharnessthepotentialofdifferenttechnologies.Setting up infrastructure especially in the rural areas is going to play a major role in the
growthofMVAS.
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3.4.4 Technology
Thereare2aspectstotechnology.Oneisthetechnologyplatformitselfandthesecondisthecommunicationtechnology.
Ononehandtechnologyplatformsareindependentofgeographyandaretransportableacross
bordersunlikecontentwhichneedstohavearegionalflavorfore.g.mobilepaymentplatform,
IVR,etc.Though therearechallenges incaseofplatforms likespeech recognitiongiven the
highnumberoflanguagesanddialectsspokeninIndia.
Communication technology is also independent of geographybut depends on regulation
issuesfore.g.3G
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3.5MobileVASinruralmarket
ThenextwaveofTelecomgrowthwillcomefromthebottomofthepyramid.Formajorityof
thepopulationintheruralsegment,themobilephoneisthefirstcommunicationdevice.Rural
shouldnotalwaysbeinterpretedaspoorandthereforesomecategoriesofMVASmightapply
directlytothem.
ButwhetherthestatementcanbeextendedtoMVASdependsonsomekeyfactors.Oneisto
clearlyidentifytheneedoftheruralsegment,secondistocommunicatetheservicestothem
i.e.generateawarenessand thirdly, toprovideaneasyand cheapaccessmode to the rural
consumers.Allthese3arequitebigchallengesandthereforeneedstobeaddressedadequately
forMVAStotakeoffinRuralIndia.
Apart from the identificationofruralconsumerneedsanddevelopmentofrelevantcontent,
communicationoftheseservicestotheruralpopulationwouldbeabiggerchallenge.Oneway
todothisistocommunicatethroughregionalSMSforwhichaseparateSMSgatewayneedsto
be installed.Literacy levelof thegeographicalareawillbeanother limitation.Therefore the
bettercommunicationoptionisVoiceinregionallanguages.Thechallengewithregionalvoice
isnotonlyinvestmentbutalsoblockageofthealreadyscarcespectrum.
Marketing the content in rural market is going tobe all the more challenging. This wouldrequirerightpackagingandpricingofMVAS.Providingcheapaccessmodetoendconsumer
wouldbe another keybooster to rural MVAS. Current voice MVAS charges are expensive
fromaruralconsumerperspectivethereforethatalsowouldneedtobeaddressedfore.g.the
sachetmodelcouldprovetobesuccessfulhere.
MVASisgoingtoaddresstwomainneedsofruralconsumers connectivityandentertainment
mode.Connectivitywillprovide InformationVASonAgriculturenecessary for the farmers
livelihood e.g. mandi rates, weather, etc. Health, finance,job opportunities etc are potential
areas.Mobilealsohasthepotentialtoevolveasakeyentertainmentmodeconsideringlackof
otherentertainmentoptions inruralareas.The industryhaswitnessedsometypeofcontent
beingdownloadedmoreinsmalltownsofUPandBiharratherthaninmetroslikeDelhiand
Mumbai.ThereforebyleveragingonthesetwoaspectsMVAScanbeasuccessinruralarea.
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4.0UnderstandingMVASEcosystem
ThemobileVASecosystem in India isatanembryonicstage.Thishasresulted in increased
complexityand lackofclaritywithin theecosystem.TheMVASsectorhasseen lotofsmall
playersforayintothedomain.
Consumer
Content Aggregator
Operator
Data Flow
Service Flow
Revenue Flow
Technology enabler
Content
Owner
Handset
manufacturerShort Code
provider
Consumer
Content Aggregator
Operator
Data Flow
Service Flow
Revenue Flow
Technology enabler
Content
Owner
Handset
manufacturerShort Code
provider
4.1Understandingtheroleofvariousentities
ContentAggregators/Developers:
The MVAS growth has given birth to a new entity which aggregates content originally
designedforsomeothermedia,fromdifferentsources.Someofthecontentaggregatorsalso
developcontentespeciallyformobilephonesfore.g.mobilegames.
MMVVAASS EEccoossyysstteemm
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On one hand they coordinate with operators and on the other, with content owners and
smalleraggregators.AnotherkeyroleplayedbythemishandlingoftheIPRrelated issues
thusreducing
the
burden
of
the
mobile
operators.
ContentOwners
Theseare theactualownersof thecontentwhohold thecopyrightof thesame.Though the
contentisdevelopedforsomeothermedia,theMVAShasstartedcontributingsignificantlyto
theiroverallrevenuegeneration.AgoodexampleisofCRBTwhichisgivinggoodrevenueto
themusiclabels.
TheymostlyprovidecontenttoContentAggregatorsbutalsosometimesinteractdirectlywith
the operators. In recent cases, Content owners sell the content directly to handset
manufacturers for e.g. Nokia tied up with Om Shanti Om providing exclusive songs,
wallpapers,games,etc.
TraditionalMediaCompanies
MediacompanieslikeTVchannelsandFMchannelshavealsojoinedthebandwagon.Allthe
big TV channels have started selling their content through short codes. STAR has even
launched a mobile division named STAR Mobile Entertainment to provide mobisodes and
mobilerelated
content.
ThekeyrevenuesourceforthemediachannelsisVotinginshowslikeIndianIdolandcontest
participation inshows likePaanchviPaas.Postthesuccessof talenthuntshowsandcontests
likeKBC,theTVslotshavebeenfloodedwithsuchshowsandotherrealityshows.Thoughthe
initial euphoria has not sustained, voting and contest participation continue to contribute
significantly.
TechnologyEnablers
Technologypartner&platformenablershandlesoftwareplatformsandauthoringtools.Thus
theyprovidethebackbonetoalltheMVASbeingprovided.Thetechnologybackendinclude
solutionslikeTelevotingsystem,Voiceportal,etc.
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ShortCodeProviders
Theseare
the
companies
who
own
ashort
code
(e.g.
58888,
53456
etc)
which
is
sold
to
athird
partyclientforsomekeywordandaspecificperiod.Ononehandtheyneedtotieupwiththe
operatorstoensuretheirshortcodeworksacrosssubscriberbaseandontheotherhandthey
sell their short code to other companies like real estate, hospitals, etc. who advertise their
productsusingtheshortcode.
Handsetmanufacturer
The handset manufacturers have joined the bandwagon and have started tying up with
Contentownerstoprovidepreloadedcontentontheirhandsets.
Contentconverter
SincemostofthecontentinMVASisoriginallydesignedforsomeothermedia,itneedstobe
converted into mobile compatible format. This is where content converters enter the value
chain.Theyinteractwiththeoperatorsandworkcloselywiththem.
unique model is beingfollowed by Indiatimes 58888 where theypackage,marketandbrandtheservicethemselvesusingoperatoronlyasapipe.
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IntheIndianmarkettherevenueweget isquite lowerbut itisagoodplacetotryoutyourservices,perfectthemandthenwetakethemtoothermarkets Technologyenabler
End user pays for
content/service/voting
Mobile operator
keeps 60-80% ofthe revenue
Technology enabler
gets 10-20% of therevenue
Content Aggregator
gets 10-15% of therevenue
Content owner
gets 5-10% of therevenue
End user pays for
content/service/voting
Mobile operator
keeps 60-80% ofthe revenue
Technology enabler
gets 10-20% of therevenue
Content Aggregator
gets 10-15% of therevenue
Content owner
gets 5-10% of therevenue
End user pays for
content/service/voting
Mobile operator
keeps 60-80% ofthe revenue
Technology enabler
gets 10-20% of therevenue
Content Aggregator
gets 10-15% of therevenue
Content owner
gets 5-10% of therevenue
4.4Thekeyfactorsplayingroleinrevenuedistribution
Withoutregulation,therearemanyfactorswhichplayroleinrevenuedistributioninthisfree
market.
RReevveennuuee ddiissttrriibbuuttiioonn ((eexxcclluuddiinngg PP22PP SSMMSS))
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Negotiatingpower
IPRPlatform Revenue deciding factors
Negotiatingpower
IPRPlatform Revenue deciding factors
Platform:Depending on the access mode used to delver MVAS to consumer and the resultant
technologyused,revenuesharegetsdistributed.Fore.g.whentheserviceisdeliveredusing
Voice portal platform, more revenue is released to the technology enabler as compared to
whenSMSplatformisused.
IPR:
The revenue distribution also differs on the type of content. In case of IPR related content,
operators release more revenue while in case of white label content, comparatively less
revenuepercentageisreleased.
4.5RegulationofMVASmarket
TherehasbeenlotofdebatesgoingaroundonregulationofMVASindustry.Recently,TRAI
came out with a consultation paper on MVAS. It has sought opinion from different
stakeholders of the MVAS value chain. Despite the fact that the current MVAS revenue
structure is skewed towards the operators, majority of the stakeholders have voiced their
opinionagainstanyregulation.Thoughsomealsovoicedtheirsupportinfavorofit.
Regulationis
all
about
putting
the
commercial
model
in
place
for
various
services
andtechnologies.regulationisrequiredtostreamlinethingsandprocessesandithastobedonebyabodylikeTRAIregulationtoanextentisgoingtohelpvarious arties O erator
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TRAIshouldconsiderthereleaseofprinciples/guidelinesforfixedoperators/mobileoperators
to have proper and fair commercial negotiations with MVAS providers. Once a proper
frameworkis
in
place,
the
market
conditions
will
determine
the
commercial
negotiations
SizeoftheentityinMVASmarket:
As in caseofany freemarket, thebusinessgeneratedby theentitydetermines the revenue
sharingarrangement.Fore.g.bigmediahousesareabletocommandbetterrevenuesharein
votingfortalenthuntshows.
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4.6
Comparative
analysis
of
roles
and
challenges
of
various
stakeholders
MobileOperator TechnologyEnabler Content
Aggregator/Developer
KeyroleAct as carrier/pipe to the
contentandservices
Providesbackend
technology to deliver MVAS for
e.g.voiceportalplatform
Content
developers/owners develop
content either for mobile or
othermedia
Contentaggregators
aggregate the content from
differentsources
Additional
role
WitnessinghugeMVAS potential, some of the
operators have ventured into
the domain of Technology
enablers. E.g. Bharti Telesoft,
Reliance,Spice
Operatorsalsoundertake
theroleofmarketingtheMVAS
They not only act as platform
providersbutalso as themiddle
men between Mobile operators
andContent Aggregators/ Media
houses. The revenue deals are
regulatedthroughthem
Some of the content
developers have set up a
dedicated content
developmentcenter
Importance of
theirrole
Theirroleis
indispensable in the value
chain as other entities cannot
ventureinto
their
domain
Theirroleis
gradually being diminished with
increasing competition and other
entities (in the value chain)
venturing
into
their
domain
especiallyoperators
Theirroleisvitalbothin
Entertainment as well as
InformationVAS
Therolegetsdilutedin
caseof
white
label
content
and
alsobecauseofpiracyandside
loading
Challenges
Thebiggest
challenge is understanding the
needsandrequirementsof the
endconsumer
Anotherkey
challenge is marketing the
differentcategoriesofMVAS
Withgrowingnumberof
operators,thetaskofaligningwith
operatorsacrosscircleswouldbea
bigchallenge
Anotherchallengeisto
interact with large number of
content aggregators/owners and
handletheIPRissues
Attechnologyfront,the
challenge is to address the
languageneedsacrossregions
Thechallengeistomeet
everchangingneedsandtastes
oftheendconsumer
Generationofrelevant
regional content isanotherbig
challenge which is going to
mount with penetration in
ruralareas.
Contentownerand
aggregatorreceivelowrevenue
shareintheexistingecosystem
Interestingly, sinceoperators are involvedwithmarketingofMVAS, theyarealso the ones who solely decide the sellingprice of content/service. Neithercontentaggregatornorownerhasaroletoplayinit.
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5.0MobileVASaccessmodes
The growth of MVAS market is dependent on the various modes available to the end
consumerforaccessingMVAS.Presently,themodesofMVASaccesscanbeclassifiedas:
ShortMessageService(SMS)Platform
SMSwasthefirstmodeintroducedforaccessingMVAS.MVASmarketiscurrentlydominated
by SMS in terms of revenue. The SMS platform is usedby telecom operators to provide a
variety of services such as information services like news alerts, cricket scores, chatting
services,etc.
VoicePlatform
InteractiveVoiceResponse(IVR)systemisusedtodeliverVoicebasedValueAddedservices
totheconsumers.Inthissystem,theenduserinteractswithacomputerisedsystemtotapthe
service.Theenduserscanselecttheoptionsavailableontheserviceeitherthroughnumbers
onthekeypadorusingspeechrecognitionsystem.
Voicebased services are offered in a varietyof languages to cater to the diversified Indianpopulation.Thismodebecomesmoresignificantwhendealingwiththenonmetrosandrural
India.VoiceaccesscontributestomorethanonethirdofthetotalMVASrevenue
GPRS/WAPPlatform
GPRScurrentlycontributesaround67%oftheoverallMVASrevenue.Thehighpriceofdata
accessactsasabarriertowardsusageofGPRS.
Theprimary
drivers
for
the
adoption
and
usage
of
mobile
internet
are
availability
of
cheap
dataenabledhandsetsandloweringofGPRStariffbymobileoperators.
GPRS is an effective medium of accessing MVAS, but is restricted by relatively lower
consumerbase.
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UnstructuredSupplementaryServicesData(USSD)Platform
USSDisasessionbasedmechanismfordeliveryofservicetotheendconsumer.Theservicesare delivered through a continuous interactive session, unlike SMS where the interaction
needstobrokentoseparatemessages.
USSD presently contributes around 23% of the MVAS revenues,but the industry holds a
positiveperspectivetowardsitsadoptionasameansofaccessingMVAS.
MultimediaMessageService(MMS)Platform
MMSallows
sending
messages
that
include
sending
multimedia
objects
such
as
images,
audio
andvideoalongwithtextmessages.MMSmarketinIndiaisstillinanascentstage.Content
marketinIndiawouldgetaboostwiththeemergenceofMMS.Presently,thegrowthofthis
segmentisrestrainedbyhighpriceandlimitedavailabilityofMMShandsetsinIndia.
ThecurrentMVASmarketisestimatedatRs5930crasonJune2008.Themarketiscurrently
dominatedbySMSasthemodeofaccessingMVAS.
SMScontributesaround49%totheoverallMVASrevenues.ThisconsistsofP2P,A2Pand
P2Aservices.
SMS
49%
USSD
3%
Voice
40%
GPRS
8%
VASRevenue AccessModes
Source:eTechnology Group@IMRB
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5.1ComparativeevaluationofMobileVASaccessmodes
Parameter
SMS Voice GPRS USSD
MMS
Costtoend
consumer
Cheaperthan
voiceCostly
Costlyasuser
isrequiredto
investateach
stage
Cheaperthan
SMS
Premium
SMScharges
Costto
provider
Infrastructure
alreadyin
place
IVR
infrastructure
iscostly
especially
speech
recognition
Needtoinvest
intechnology
infrastructure.
E.g.from2.5G
to3G
Infrastructure
alreadyin
place
SpecialMMS
contentneeds
tobe
developed
ReachHandset
agnostic
Handset
agnostic
Low
penetrationof
GPRSenabled
handsets
Handset
agnostic
Low
penetration
andhigh
priceofMMS
enabled
handsets
Ease
of
usage
Limitedby
literacyand
language
factor
Difficult
to
remember
shortcode
and
keywords
Easiestto
use
Steeplearning
curve
Limitedby
literacyand
language
factor
Convenient
tousethan
SMS
Usageis
restrictedby
low
availability
MarketingVAS
Highbrand
buildingand
awareness
expenditure
Building
awarenessis
easier
through
umbrella
advertising
by
theoperators
Awarenessof
mobileportals
needtobe
created
Low
awareness
among
consumers
Stakeholders
havelow
focuson
MMScontent
Potential
Currentlythe
biggest
contributor
andlikelyto
remainsoin
nearfuture
Withtelecom
growth
expandingto
ruraland
semi rural
areas,Voice
hashuge
potential
Growthof
GPRSis
peggedon
allocationof
3Gspectrum
Lowcostand
convenience
ofusage
wouldleadto
growthof
USSD
Growthof
MMS
dependson
adoptionof
MMSby
service
providers
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Indiahasadiverseandmultilingualpopulationwithavarietyofneeds.MobileValueAdded
Servicesmarketisinthegrowthphase.Theindustrystakeholdersneedtoensurethattheright
mixof
content
and
access
mode
is
made
available
to
the
relevant
user
groups.
Withtheadventofnewtechnologieslike3GandUSSD,thecontributionofvariousmodesto
the overall MVAS revenues is likely to change in the near future. With availability of
vernacular content, Voice would gain prominence. Mobile internet access would also get a
boostwithcheaperdataenabledhandsets,lowerGPRStariffandbetterWAPconnectivityby
telecomoperators.
6.0Mobile
VAS
access
devices
ForaccessofValueAddedServices,featurerichhandsetsareneededwhichenableeasyaccess
anddisplay/storageofcontents.Therehasbeenphenomenalgrowthinmobilesubscriberbase
butthelowfeaturehandsetscontinuetobeinmajority.Basicallypriceisthebiggestdriverin
purchasingofhandsets.Thelackoffeaturerichmobilehandsetsthuscontinuestobeabarrier
to thegrowthofMobileValueAddedServices. It isexpected that thepricesof feature rich
mobile handsets will decline with increasing competition among manufacturers and also
becauseof
technological
advancement.
6.1GPRSHandsets
CurrentlythepenetrationofGPRSenabledhandsetsarecloseto26%inIndiaasagainst99%
inSouthKoreaand76%inJapan.OfthetotalmobilesubscribersinIndia65millionpossess
GPRSenabled handsets. Of all those who posses GPRS enabled handsets only 2025% of
them have got the GPRS activated and only about 15% use it. Even in case of developed
nations like South Korea andJapan not more than 50% of the subscribers owning GPRS
enabledhandsets
use
it.
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Source:TRAIReport,eTechnologyGroup@IMRBThisclearlyindicatesthattheconsumertodayengagemoreintextbasedservicesthantheweb
basedapplications.ThereforeforMVAStogrowtoitsfullpotentialthehandsetmanufacturers
willhavetolookatwaystomanufactureGPRSenabledphoneswhichareaffordableanduser
friendly.MoreovertheywouldalsoneedtoincreaseitsawarenessandeducatetheconsumersonhowtouseGPRS.
6.23GHandsets
The market for 3G in the country is expected to be huge with over 65 million wireless
subscribers,whousetheirhandsetstoaccessdataservicesontheWeb.Thesesubscribersare
currently using mobile handsets which are internetenabled and are potential broadband
subscriberswiththedeploymentofadvancedwirelesstechnologiessuchas3G.
According to Indian Cellular Association (ICA) about 5% of mobile users already have
handsetsthatcanworkon3Gspectrum.Inaddition,outofallthosepossessingthe3Genabled
handsets the number of people who would use 3G services wouldbe determinedby the
qualityofcontentavailable.
GPRS Enabled - 65 mn
Population of India 1,130 mn
GPRS Activated -15 - 16 mn
Mobile subscriber base - 286 mn
GPRS Users -9 mn
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Unlikemostothercountries,wearelookingat3Gservicesnotonlyaspremiumservicesbut
alsoasanextensionof2G.Sinceourbroadbandpenetrationisabysmal,3Gwouldprovidea
muchrequired
boost
to
it.
Given
that
mobile
phones
are
much
cheaper
as
compared
to
PCs,
thedemand forbroadbandonmobile isexpected tobemuchgreater.More importantly,3G
willsolveproblemsmoreinruralIndia.
Therefore the shift towards 3G would depend on affordability of handsets along with the
qualityofcontentavailable.
6.3BluetoothPenetration
The mobile handset market in India is worth $7billion. The handsfree mobile revolution
seems tobe revolutionizing the use of Bluetoothenabled headsets. As a category it is now
comingoutoftheclutchesoftheaccessoriesmarketandestablishinganicheofitsown.
Establishedbranded mobile handset players today are actively looking at making headsets
partoftheirpackageofferingtocustomers.IndiaisamajorIThubanditcomesasnosurprise
thattheIndianBluetoothheadsetmarketisexpectedtogrowatacompoundannualgrowth
rate(CAGR)of74%inIndiavisvis48%inChina.
AccordingtoIndustryexperts,theprofessionalheadsetmarketinIndiaisexpectedtogrowat
aCAGRof21%over thenext fiveyears,whichwillbedrivenby thecontactcentresand ITenterprisesegmentthroughadditionofnewseatsandreplacementofhandsetsbyheadsets.
Intheyear200708,Indiashippedcloseto85millionmobilehandsets,comparedto66million
unitsshippedinthepreviousyear,registeringayearonyeargrowthofaround29percent.
This couldbeattributed to thehuge influx ofultralow costChinese andoperatorbranded
handsets that have sharply brought down the average selling price (ASP) of entrylevel
handsetsandcconsumersneedforchangingphonesasfrequentlyaswithin812months.
Thisgrowth isanoutcomeofaburgeoningmobileservicesmarketand lowerentrybarriers
acrossvariouscustomercategories,asaveragesellingpricesofhandsets isconstantlyfalling
andhasgonedown toas lowasRs.599 in thewakeofahighlycompetitive landscapewith
closeto25vendors.
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Handsetscosting less thanRs3,000account for70%on themarket,andnearlyhalfof these
costless
than
Rs
2,
000.
YetinterestinglytheaveragecostofaphonesoldinIndiaisRs5,000.Thiscouldbeattributed
to the growing number of highend phonesbeing shipped to India. In FY 2008 EDGE and
WCDMAenabledmobilephonescontributed15.4percentand3.1%respectivelyofthetotal
mobilephoneshipmentscomparedto7.4%and1.2%,in200607.
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7.03GanditsimpactinIndianMVASmarket
7.1Defining3G
3G networks are wide area cellular telephone networks which have evolved to incorporate
highspeedinternetaccessandvideotelephony.3Gtechnologiesenablenetworkoperatorsto
offerusersawiderrangeofmoreadvancedserviceswhileachievinggreaternetworkcapacity
throughimprovedspectralefficiency.Servicesincludewideareawirelessvoicetelephonyand
broadbandwirelessdata,allinamobileenvironment.
7.2Analyzing
strengths
and
weaknesses
of
3G
Prosandconsof3G
STRENGTHS WEAKNESSES
3Gspectrumoffers45timesthevoice
capacityof2G spectrumand thus3G isa cost
effectivetooltodelivervoice
InurbanIndia,3Gfacilitatesfaster
data/voice
connectivity
enabling
video
on
demand
InruralIndia,3Gcanenabletelemedicine,
virtualmarketplaceandelearning
Operatorscanensurebetterqualityof
serviceandreductionofnetworkcongestion
Upgradingfrom2.5GandCDMAto3Gis
nota toughchallengecompared to investing in
WiMax
3GtechnologyhaswiderdeploymentsandismorematuredcomparedtoWiMAXand4G.
Thehigh3Gspectrumandlicensecostmay
effectcostofservicetothesubscribers
3Ghandsetsaretooexpensiveforarural
subscriber
InEurope,3Ggrowthhasnotjustifiedthe
costofinvestmentforoperators
Duetohighcostofhandsetsandtechnology
,3Gwouldberestrictedtotheupperclassandis
notexpectedtoreachtothemasses.
TechnologiessuchasWiMax,4Gcangive
3Garunforitsmoney
Toentertheruralmarket,3Gfirsthasto
incorporatelocal
content
in
its
service
delivery.
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Among the promotions carriedoutbyoperators,6070%wouldbe promotions for VAS be italerts, jukebox, messenger,search,mcommerce Operator
ThecurrentfocusofMobileoperators isonsubscriptionbasedofferingstopromote MVAS usage for e.g. subscription based news alerts, sportsupdate,mRadio,etc.
7.3Impact
of
3G
Though3Ghascreatedlotofbuzz,itisunlikelytohaveanimmediateimpact.Currently,there
are not many services which are data speed dependent. But a definite impact wouldbe
considerablyhigherspeedofInternetaccessandavailabilityofcontentforMobileTV,UGA,
etc.
Asignificantspectrumfor3Gmightgointoprovidingbettervoiceservices.Therefore,3Gwill
notonlybeusedtoprovidedataservicesbutalsobetterqualityvoice.
8.0Drivers
to
the
growth
of
MVAS
market
in
India
Indiahasahighproportionofmobilesubscriberstototaltelecomsubscribers,drivenbythe
faster wireless rollout, inexpensive handsets and low cost prepaid cards. The industry
stakeholdersandtheconsumersaredrivingthegrowthofMVASinIndia.Thevariousdrivers
ofthemarketcanbeclassifiedasfollows:
Supplysidedrivers
Marketing Efforts by Operators : Operators are investing heavily in reaching out to
customersmoreeffectivelytomakethemaware
ofvariousservicesbeingofferedbythem.They
areTargetingsmsesandoutbounddialups to
reach out to customers to get alerts n update
subscriptions. Promotions have got more
targeted and operators are investing
significantly in making sure that they offer
direct marketing platforms like out bound
smses,dialupsetc.Incurrentscenarioalltheinvestmentsaredonebyoperatorsonlyand
notsomuchbytheotherplayers.
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IncreaseinUserBase:Onanaverageabout8.5Millionmobilesubscribersarebeingadded
everymonth
and
therefore
the
mobile
industry
is
witnessing
an
unprecedented
growth.
WithincreasinggrowthrateoflowendsubscribersTraditionalMVAS(P2PandP2ASMS)
willhaveahugegrowthpotentialamongthelowendmobilesubscribers.
Price Decline of MVAS services: Looking at the high growth rate of low end mobile
subscribers theMVASservicesarebeingofferedatattractiveprices suchas subscription
packsoffreeSMSornewsalertsetc.
New Technology Adoption By operators: From 3G, new services for premium MVAS
consumers will come like video serviceswhich use fair amountofbandwidth, (live TV,
cricketmatch).Todaybecauseoflackofdataspeeditjustdoesnotwork.
Impactof3G:TheMinistrysdecisiontoopenupthebiddingtoallplayerfor3Gspectrum,
givesachancetotheforeignplayerslikeDeutscheTelecom,AT&TandnewIndianplayers
suchasUnitechandHindujastoenterthehighgrowthtelecomsmarket.
Playerswhowouldget3Gspectrumwouldhaveanupperhandasrelativetoother
players.
Entry of foreign players would encourage the growth of mobile VAS services for
additionalrevenues
Sincequalityandspeedofdatatransferincreases,and3Gisamoresecuremedium,
mobilebankingwouldgetaboostwiththeadventof3G
Also, foreign players mightbring in new technologies for development of MVAS
marketinIndia
Theanticipatedhighpriceof3Gservicesmayactasdeterrent formassmarketpenetration.
Thetelcoswouldhavetoidentifynichesegmentsfor3Gservices
EntryofMVNO:MobileVirtualNetworkOperator(MVNO)modelhasgainedpopularity
in the last few years and there are over 300 MVNOs registered throughout the world.
MVNOs operate through commercial arrangements with licensed Mobile Network
Operator(MNO)andbuybulkminutesoftrafficandresellthemtotheirownsubscribers.
MVNO is seen as a natural progression towards enhancing free market principles and
contributingtotheefficientuseofexistingtelecommunicationinfrastructures.InIndia,
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o TheTRAIsapprovalformobilevirtualnetworkoperators(MVNOs)hasremoveda
strong entrybarrier in the telecom services segment which will enable assetlight
companiesto
set
up
shop
in
the
worlds
fastest
growing
mobile
market
o Entry of MVNOs would give MVAS a boost, since the players would need to
concentrateonitforadditionalMVASrevenues.
o Itwillboosthandsetsalesandalsohelpnewserviceproviders,whichhaverecently
got license, toutilise their capacitybetterandenter service circles forwhich they
donthavelicense.
o Indiahasthelowestmobiletariffsintheworld;whichpushesMVNOtoconcentrate
onservicesitself,whichwouldbringinadditionalrevenues,asthemarginsinthis
sectorarerazorthinandfurtherreductionoftariffsisnotfeasible.
Demandside
drivers
In theageofconvergence, theprominentgrowthdriverofMVASwouldbe theconsumers
desireofgettingmoreandmorefromtheirpersonalcellulardevice.Whileamongtheyouthin
Indiaentertainmentservicewouldbepopular, theotherconsumerswouldalso lookout for
utilitybased services like location information,mobilecommerce (MCommerce) formobile
transactionsandLocalcontentrichservices.
Need for Entertainment: The youth segment that makes up 30% of the total handsets
marketinIndiaseeksentertainmentonmobile.Currently,about44%ofMVASrevenueinIndia is driven by short messaging service applications. The youth segment will also
continuetodrivethemarket,particularlyintheentertainmentMVAS.
After P2P SMS, MVAS wouldbe drivenby music. As far as the technology or product is
concerned,currentlyinvoicebasedservicesCRBTrulesthegame.
McommerceandTransactionbasedservices:Inyeartocomemoneytransfers,drivenby
lackofbankinginfrastructureseemstobeakeyserviceneed.
Mcommerce
would
be
a
large
growth
driver
in
2
3
years
time.
With
a
lot
of
companies
offeringbillpaymentforutilityservicesthroughmobilewillhelpgrowMcommerce.This
will largely come from urbanbecause Mcommerce is related very strongly withbank
accounts,creditcardswhichislargelyanurbanphenomenon.
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LocalContent : Unfortunately todayLocalcontentnotavailableadequately.Thecontent
partnerscurrentlyarenotdevelopingcontentspecifictoevenbigmetropolitantownssuch
asDurg
or
Raipur
not
to
talk
about
relatively
smaller
towns.
Therefore
there
is
agreat
need
of investing right resources indeveloping richcontentwhichmillionsofuserswill start
subscribing.
9.0BarrierstothegrowthofMVASinIndia
MobileValueAddedServicesisagrowingmarketandhasahugepotentialinIndiantelecom
market.Presently,itcontributesasmallpercentagetotheoveralltelecomrevenue.Thereare
various roadblocks that restrain the growth of MVAS market in India. Given the current
scenario,itisimperativeforthestakeholderstoworktogethertoaddresseachroadblockand
enablethemarkettogrow.
TheissuesfacingtheMVASmarkethavebeenclassifiedintotwobroadcategories:
DemandPerspective
Limitedawarenessofservices:Theconsumersarenotfullyawareoftheservicesoffered
in the MVAS market. The promotional SMS sent on the mobile phones are the primarysourceofmakingendconsumerawareofvalueaddedservices.Thismethodofpromoting
MVAShasnowreachedthesaturationstage.
Thestakeholdersneed toensure that theconsumersareeducatedabout thevalueof the
servicesintheMVASmarket.Thiswouldensuremoreacceptabilityandusageofservices
amongtheusers.
Highcostofcontent:Currently,thevalueaddedservicesarepricedatahigherside.This
ishamperinggrowthofMVASmarket.Theconsumers lookforvalue inaservice ifthey
arepaying for it.Presently, theconsumersperceive thatMVAS ispricedhigher than the
actualvalueitisdeliveringtotheconsumers.
The IndianMVASmarketconsistsprimarilyofprepaidusers,whohaverelatively lower
budget forMVAS in theiroverallmobileexpenditure.Thestakeholdersneed topackage
theservicesinamannerthatensurescorrectmixofmoneyandvaluetotheconsumer.
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Thesubscribersarenotawarehowtodeactivatetheserviceitfollowsthetraditionalrouteslikevisitthegalleryorcallupthecallcentrethereshouldbemethodofautorelieval,theservice oesautorelieveda ter30da s O erator
Exit barriers for MVAS consumers are high: The service providers dont make the
consumerswellawareof theprocessofunsubscribing fromany service.The consumers
mayrestrain
from
using
the
services
in
case
the
exit
barriers
are
too
high.
Theserviceprovidersneedtoensurethatthereisacorrectmechanismformakingtheusers
awareofexitingfromtheservice.
SupplyPerspective
TransparencyinRevenuesharingarrangements:RevenuesharingarrangementinIndiais
one of thebiggest hindrances for the growth of MVAS market. The stakeholders are in
conflict with each other about the revenue sharing system in India. Presently, telecom
operatorstakemajorityoftherevenueandtheotherentitiesgetalowershareintheoverall
revenue.This ishampering thegrowthofcontentdevelopment in India,and in turn the
overallMVASmarket.
There isaneed fordesigninga fair revenue structure so thatall the stakeholders in the
ecosystemget
their
share
of
the
revenue.
This
can
be
achieved
by
aligning
the
revenue
structureinaccordancewiththeservices.
Transparencyinbillingsystem:MobileVASmarketfacesissuesoftransparencyinbilling
and payment system. This leads to conflict among the stakeholders about the revenue
share. There is a need for a central authority to monitor the IT system and bring
transparencytothewholebillingsystem.
Limitedavailabilityof localcontent:GrowthofMVASmarket in India ishamperedby
lack of localization of the content. Lack of local content restrains the growth of MVAS
market in regionalareas,whichhasagreatpotential.This requires investment from the
contentproviders.Thestakeholdersareunsureaboutthereturnoninvestment,therefore,
areconcentratingonlyonmassmarketservices.
Thestakeholdersneedtoproducemore localcontentandwork intandem toensure that
theconsumersaremadeawareofthevalueoftheseservices.
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Challengefor operators isthattheycanmarketonabig scale only limitedthings there are somany services and lot ofservices
fall
by
the
wayside as they do notget marketing dollarsbehind themTechnologyenabler
10.0NewservicesintheMVASmarket
10.1MobileMarketing
In the last 3 years, mobile has become the greatest media for communication in India.
Marketers are utilizing this to promote their service using
mobile. Mobile advertising is a form of advertising where
marketers targetmobileusers formarketingof theirproducts
andservices.
While
using
traditional
media
of
marketing
such
as
print,
television, etc, the marketers are not sure whether the
consumerwould takenoticeof thepromotional campaign or
not, themainadvantageofmobilemarketing isthatsincethe
marketing message is delivered on the mobile phone, a
personal device, and the target respondent ends up taking
noticeofthecampaign.
Mobilemarketingservicescanbepullbasedorpushbased.
Push
based
mobile
marketing:In this mode, the service providers send mobile based
advertisementstotheusers.Presently,thisisthemostpopularmodeofmobilemarketingin
India. Manycompaniesareusingthisasaneffectivemediumforreachingouttotheirusers.
Pullbasedmobilemarketing:Inthis,theuserscanaccesscontentbysimplysendinganSMS
orcallinganumber.Forexample,suchmobilemarketingisadoptedbyPepsi,KwalityWalls
etc.theusersareallowedtoaccessthecontentavailablewiththeserviceproviders.
10.1.1Driverstothegrowthofmobilemarketing
Highpenetration
of
mobile
phones:
Currently,thereare286millionmobilephoneusers
in India. With such a huge subscriber base, mobile is a very effective medium for
marketinggoodsandservicestotheenduser.Mobilemarketingwouldenablemarketers
todevelopcustomizedcampaignsasperspecific targetrespondentsprofile.Thiswould
increasetheeffectivenessofmarketing.
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Consumer oriented business model: Mobile marketing model is consumer centric. The
telecom operators charge the marketers and thus the consumer isbenefitted. In some
models,like
mginger,
etc.
the
consumer
is
even
paid
to
receive
advertisements
on
his
mobile.ThismodelwouldstimulatethegrowthofmobilemarketinginIndia.
Usage of voice as a media for mobile marketing:UsageofVoice formobile marketing
wouldhelpthemarketerstoreachouttotheruralsubscribersalso.Thiscanbeachieved
withdeploymentofregionalcontentformobilemarketing.
10.1.2SomeoftheissuesfacingmobilemarketinginIndiaare:
Lack
of
customization
of
mobile
advertisements:
Mobilemarketing
is
at
anascent
stage
in
India.Thecurrentmassmarketingeffortsbythemarketersarenotgeneratingtherequired
impactamong theconsumers.Theneedof thehour is tohavecustomizedmarketingof
productsandservicesaspertheconsumerrequirements.Sincethis isanewconcept,the
stakeholdersareplayingsafebyadoptingmassmarketinginthebeginning.
High penetration of cheaper handsets: Presently, mobile advertising space in India is
dominatedbySMS.Gradually,voiceisalsotakingup.Parachutewasamongthefirstones
to use voice for mobile marketing. Reliance Mobile World users were able to listen to
GorgeousHameshajinglesthroughvoiceportalservices.Butdevelopmentofvideobased
mobilemarketinghasalongwaytogointheIndianMarket.Thisisduetothefactthatthehigher penetration of cheaper handsets restrains the growth of video based mobile
marketing.
LimitedusageofGPRS/WAP:Mobileinternetcanbeusedasaveryeffectivemediumfor
marketingofproductsandservicesonmobile.Thiswouldenableusers toviewvideoas
wellasaudiocontent.LimitedGPRSusageisahindrancetothegrowthofinternetbased
marketingonmobilephones.
DoNot
Disturb
Registry
and
spectrum
requirements:
The
Do
Not
Call
registry
move
by
thegovernmentwouldhamperthegrowthofmobilemarketinginIndia.Itwouldrestrain
theserviceprovidersfromusingvoiceplatformformobilemarketing.Also,usingvoicefor
mobilemarketingwouldincreasetheloadonthespectrumofmobileoperators.
MobilemarketinginIndiaisgrowingandhashugepotentialinIndia.Theincreasingpaceof
adoptionofmobilemarketingbytelecomoperatorsandmarketersindicatesabrightfuture.
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10.2MobileBanking
Mobilebankingistheusageofmobilephoneasaplatformforbankingtransactions.Thehigh
penetrationofmobilephones in India is thebiggestdriver formobilebanking in India.The
Reserve Bank of India is in the process of issuing the final guidelines for mobilebanking
operations in India.Variousbanks suchas ICICI,Barclays,etc,havealready launched their
mobilebankingoperationsinIndia.Aplethoraofservicesareofferedonmobilebanking.In
India, consumers look for value for money, which is the key for proliferation of mobile
bankinginIndia.
Thevarious
modes
available
to
users
for
mobile
banking
are:
SMS:SMSisthesimplestformofmobilebanking.Itislargelyusedforinformationbased
services. SMS has the maximum reach amongst consumers since all the mobile phones
supportSMS.ThepremiumSMSchargesarechargesfromtheendusers.But,thebiggest
challenge in SMS based mobile banking is that, it is the least secure form of mobile
banking.
InteractiveVoiceResponse:IVRallowsacallertoselectoptionsfromavoicemenuand
interactwiththephonesystem.TheIVRsystemwouldthentakethenecessaryinstructions
from the consumerby recording the tones of the number selections that the consumerenters on the key pad, or through spoken commands, and creates an instruction that is
giventotheserviceprovider/bank.ThesecurityinIVRsystemsisrelativelyhighthanSMS.
USSD:InUSSD,theinteractionisintheformofacontinuoussessionasopposedtoSMS.
USSD is available on all handsets. Security in USSD is similar to IVR. Barclays have
launchedtheirmobilebankingservicesonUSSD.
Wireless Internet Protocol: WAP is the usage of internet on mobile for mobilebanking
applications.It
is
similar
to
internet
banking.
The
consumers
handset
needs
to
be
WAP
enabled.WAPbankingisopentosimilarthreatsasinternetbanking.
J2ME: J2ME has dual advantage. One, it can use GPRS, USSD or SMS to carry the
consumer data/ instruction in an encrypted format. Second, it canbe operator agnostic.
J2MEapplicationsaresecuresincetheapplicationresidesonthehandset.
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SIM Application Tool Kit (STK): The SIM Application Toolkit allows for the service
providerorbanktohousetheconsumersmobilebankingmenuwithintheSIMcard.STK
hasbeen
deployed
by
many
mobile
operators
around
the
world
for
many
applications,
whereamenubasedapproachisrequired,suchasmobilebankingandcontentbrowsing.
STK is the most secure method of mobilebanking. It allows thebank to load its own
encryptionkeysonto theSIMcardwith thebanksowndevelopedapplication.Thus the
consumersdatacanbestoredontheSIMCardandtheconsumercanbeauthenticatedon
thehandsetpriortohavingtocarryanydataacrossthemobilenetwork.The industry is
optimisticabouttheusageofSTKapplicationformobilebanking.
10.2.1GrowthintheMobileBankingmarketisdrivenby:
Convenience of banking operations: Mobilebanking serviceswould help users to save
time.It isconvenientforuserstocompletetheirbankingtransactionsattheclickoftheir
mobile.
Greater reach to consumers: Limited number ofbranches was a deterrent forbanks to
increase itsreach to itscustomers.Withtheusageofmobilebanking,thebankscannow
increasetheirconsumerbase.
Integrationofothermcommerceserviceswithmobilebanking:Slowly,banksareusing
mobileasplatform toenableusers toconductall their financial transactions.Thiswouldenhancetheutilityofmobilephones.Also,itwouldenablebankstoprovidebetterservices
totheirconsumers.This,inturn,wouldincreasetheeffectivenessofbankingoperations.
10.2.2KeychallengesinMobilebanking
There are various key factors which have an impact not only on the adoption of mobile
bankingbutalsothedesignofmobilebankingapplications.
SecurityConcerns:Theconsumersarenotconfidentabout the securityaspectofmobile
banking.SinceIndianconsumersarestillwaryofthesecurityinfinancialtransactions,itis
imperativeforoperatorstoemphasisethisaspect.
Limited usage of GPRS: GPRS is a very effective channel for mobilebanking. But the
growthisrestrictedbylimitedusageofGPRSintheIndianMarket.Theconsumersarenot
verywellversedwithdatatransmissionchannels.
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RegulatoryImpediments:RBIisinthefinalstagesofformulatingtheguidelinesformobile
bankingin
India.
Since
it
involves
security
concerns
from
consumer
perspective,
arobust