The Indian Mobile Value Added Services (MVAS) industry is projected to register a turnover of Rs 280 billion by 2013 from the current Rs. 97 billion after the rollout of 3G services in India, according to The Associated Chambers of Commerce and Industry of India (ASSOCHAM) ASSOCHAM.

The ASSOCHAM Financial Pulse (AFP) Study titled “Emerging Landscape in Mobile VAS Industry”pointed out that VAS which constitutes 10-12 per cent of the total revenues for telecom operators would also see a rise of 20 per cent during the same period. High speed data services like mobile TV, video calls which have been in their nascent stage so far are going to be the main contributors to this growth, the study said.

Growth of MVAS is based on 3G rollout on a serious scale. This involves in huge investments in network equipment and network construction. However, very high 3G license bids are likely to result in under investments in networks. To add to this, 3G licensees in India are the incumbent mobile service providers. There are chances that the incumbent operators are likely to resort to non competitive practices and the nation will derive business and social benefits from the allotted spectrum.

AFP analyzed that 3G will open new horizons for the telecom operators and the companies engaged in value added service. Competitive strategies of the players will unlock the true market potential of the segment. Effective bundling and packaging of services, innovative practices and extension of coverage areas will also augment the market size.

The Study highlighted, India is the world’s second largest mobile market after China in terms of mobile subscriptions. At the end of April 2010, the total mobile subscriber’s base was more than 600 million. Out of which only 18 to 20 per cent of the users use 3G- enabled handsets, of which mostly are from the urban area.

Value Added Services Market
(value in billion Rupees)

Year Amount Y-o-Y change
(in %)
2006 28.0 —
2007 46.5 66.1
2008 75.1 61.5
2009 97.6 30.0
2010 122.0 25.0
2011 158.6 30.0
2012 214.1 35.0
2013 278.3 30.0

Source: Assocham Financial Pulse

In terms of market share, 87 per cent of the subscriber base in India is on pre-paid connection, with the remaining 13 per cent on post-paid subscriptions. This has also given rise to opportunities for generating increased revenue, through exploring potential Value Added Services (VAS).

After roll out of 3G services mobile users will access high speed data services such as web browsing, mobile TV, video calls, music & video, applications download are on the top of the list which mobile users use frequently.

The youth segment that makes up 30 per cent of the total handsets market in India seeks entertainment on mobile. Currently, about 51 per cent of MVAS revenue in India is driven by short messaging service applications. The youth segment will also continue to drive the market, particularly after the 3G rollout.

In spite of this growth in the mobile subscriber base, the operator margins are declining quarter on quarter. Though the minutes of usage is increasing however the same is being offset by the lowering tariffs of operators. This could be attributed to the major subscription growth that is coming from bottom of the pyramid.

As ARPU declines, the challenge for operators is to increase revenues by differentiating their offerings and develop alternative revenue streams by offering more value added services to the existing subscribers.

The decrease in average revenue can also be attributed to the structure of the Indian mobility market which is largely prepaid (87 per cent). This means that most of the subscribers added are from the bottom of pyramid with low usage resulting in low ARPU.

Now the telecom companies have to identify the need of the rural user segment, which is not yet penetrated as compared to the urban users. For generating more revenues telecom players have to generate awareness among the rural population about the benefits of the value added services, concluded the AFP Study.

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