In February this year, state-owned telco Mahanagar Telephone Nigam Ltd (MTNL) launched Jaadu, its third generation (3G) services. With 3G, MTNL is offering value added services (VAS) including live TV, download of movies and high speed internet on mobile phones. The tariff is $12 (Rs 599) per month and 0.60 paise per minute with an additional fixed activation charge of $10 (Rs 500).

Other telcos are eagerly awaiting the auction of 3G spectrum. According to the government, new players would also be able to bid, thereby leading to advancement in technology, competition, faster roll out and ultimately greater choice for customers at competitive tariffs. However, the auction itself has been delayed due to various reasons, and the delay itself could be a major deterrent for VAS in India.

While 3G spectrum will provide the bandwidth to transmit content as videos and images, there are various roadblocks for offering VAS in India. The mobile handsets, which can support VAS are beyond the buying power of an average user and should be more affordable to attract users. This is an important factor in the case of cost-conscious Indians in a time of economic slowdown. The mobile devices that offer VAS should also be simplified for an average user. Navigating a complex mobile phone may make them reluctant to use VAS. It is also important to spread awareness about VAS.

According to the Telecommunications Regulatory Authority of India (TRAI), 3G will facilitate the availability of e-governance services like e-medicine, e-ticketing, and e-education through broadband to the large section of rural population. However, this could prove to be a Herculean task, as many different regional languages are spoken across India. The telcos would be required to offer content in local languages, especially to appeal to the rural population, which is an important target sector.

In India, the VAS market is overwhelmingly SMS-based, according to Price Waterhouse Coopers, at nearly 44 per cent of the market, with the next largest sectors being ring tones and caller ring back tones. Content is dominated by Bollywood and cricket. Monthly services for news and astrology are also popular. In India the SMS voting options for television reality shows have reportedly helped increase the use of SMS.

Tata Teleservices president for VAS Pankaj Sethi said that entertainment led services and personalisation were also pushing VAS use, along with mobile and social networking.

But the cost of offering VAS is another constraint. While ad-sponsored content could help offset this, it is not a much-explored option. TRAI recommends that telecom access service providers should publish their VAS charges. Further, access charges should also be published, if these are different from the charges under the tariff plan applicable to consumers and are not included under VAS. Sharing of revenue among telcos, content providers and content aggregators is also a major concern. TRAI suggested that concerned parties should enter into mutual commercial agreements for revenue share in the provisioning of VAS.

All over the world, mobile data revenues have continued to grow and the voice market has registered a decline, according to a report by Strategy Analytics. Mobile voice revenues fell by more than three per cent while mobile data revenues increased by 20 per cent worldwide in the third quarter of 2008. However, the case may be different with India. Telcos hoping to launch 3G considering 3G spectrum will be mainly used for voice rather than data. With the cost of voice calls being low, this would make it almost impossible for any of the 3G players to increase mobile tariffs. The telcos winning the spectrum may have to bear the burden.

Telcos are hoping that an increase in the use of data services would boost the growth of VAS in India. Abhay Savargaonkar, senior vice president for 3G at Bharati Airtel, has predicted that total revenues from VAS would increase faster than that from voice services in future. However, he felt scalability of services would be a bigger problem in a country of India’s size.

According to a report by the Internet and Mobile Association of India (IAMAI), the mobile value added services industry will reach $3 billion (Rs 16520) by 2010. The industry is worth $1 billion (Rs 5780 crore) as of June 2008. The report states that the industry currently constitutes nine per cent of the operator’s revenues and is expected to increase by 12 per cent by 2010.

Dr Subho Ray, president of IAMAI, said that for the industry to grow to its projected size it would be absolutely necessary for telcos and mobile value added service providers to work in true spirit of a partnership. The government, too, needs to set some ground rules for engagement between telcos and mobile VAS companies”, he added. X

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