Mobile VAS and its implications.

This article is a follow up from a recent interest in a friend’s career scope.

Off late read an Gartner report which declared that the active mobile connections in India will exceed 920 million by 2016, which closely convert to a penetration amount of 73%. According to a telecom report in January 2012, the active mobile connections in India has already reached to 665 million and the total mobile subscriber base stands at 908 million. The Average Revenue Per User is also scaling up for all the operator and reaching close to Rs 220.

I have been trying to understand the changing dynamics of the mobile operators and their increasing focus on VAS. The kind of money which is finding its way through the route of VC funds and PE investments is crazy. The institutional investment scenario is yet to catch up for this space.

Last year, the mobile application market was valued at INR 4.5 billion. This space which was just three years back a predominantly mobile operator driven market, where invariable all apps were developed by their captive development teams.

The stakes on the tables have turned since then. The mobile VAS revenues in India has crossed the mark of INR 122 billion, as on March 2011. A study done by Deloitte expects the market revenues to reach at least INR 480 billion by the end of 2015. A lot of contribution to this development would be from the ballooning mobile advertising and increased demand and supply dynamics of the mobile apps space.

Interestingly, another space is expecting a humungous increase in its scope of business, the analytics industry. The analytics firms are already flooded with contracts which would dissect and enable mobile industry to start focused and targeted advertising. The customization of usage has increased the leverage on individual taste and preferences, according to location and interest. The Deloitte study also revealed that the number of mobile advertisements served in India is the highest compared to rest of the world figures.

Another study which was conducted by a mobile consultancy firm in 2011 came out with interesting insights that only 14 million mobile users access internet through their phone. The reasons are galore right from ranging from the unsuccessful 3G space and the unmet promised speeds from the mobile operators who blame the dearth of bandwidth for the situation. The most accessible space today will be the mobile advertising space which has more access and the attention span than most other mediums today available with the marketers.

The revenue that telecom companies earn from data services comprise just 12% of their total revenue, which is among the lowest in Asia. SMS is responsible for the biggest chunk of data revenue and is followed by music downloads and GPRS. A recent Edelweiss report was of the view that "the biggest impact from the roll out of mobile broadband services would be on data services as it would attract new players, change role of existing players, transform existing revenue sharing models and proliferate new services. Thus, the whole ecosystem comprising content aggregator, content owner, application and software developer and telecom operator will see a major shift in business models.”

The PwC study also highlighted the biggest impediment in the sector. The E-commerce space is still at a nascent stage and the sector overall is suffering from the lack of reliable payment mechanism. Due to this reason, the mobile network operators make 70% of the revenue and content providers account for only 30%. The further development of the consumer’s maturity n the transaction and the trust factor will propel the sector to newer heights as the content providers will automatically retail apps directly to the consumers.

Well this is dedicated to Jeevan, may you grow and prosper in the sector. God Bless.

Sources: www.pwc.com/en_IN/in/assets/pdfs/publications.../vas_landscp.pdf

http://www.deloitte.com/assets/Dcom-Global/Local%20Assets/Documents/TMT/9314A_Mobile_Reports_sm5.pdf