VAS: Is revival in sight?
Voice-over-LTE would throw in new opportunities while further growth could come from areas such as location-based services, home automation and the mobile payments play.
While the rising uptake of mobile broadband has brought growth back to the telecom service providers in India, it has also led to a cannibalization of the value added service (VAS). From a stage where it used to form 12-13 percent of telcos’ revenues, the revenue share of VAS today is down to a mere six to seven percent. As is common knowledge, the mobile broadways are prompting users to give VAS buses the miss and ride the apps bandwagons instead.
As far as the traditional VAS of ABC — astrology, Bollywood, cricket—is con- cerned, its days can at best be considered as counted. That revenue stream is drying up faster than one would have liked it to. The greater concern for the industry, however, is that the shortfall is not being made up by any other VAS streams.
Telcos, for most of the part, have literally sat on the sidelines and watched the
app waves wash away their walled VAS gardens. A question that industry onlookers have asked themselves is: should the telecom industry indeed have acted as haplessly as it has or could it have responded with at least some degree of innovation?
Inhibitors for VAS innovation
Historically, telecom industry in India has depended on thirdparty platform providers for creation and delivery of VAS rather than focusing much on in-house development. Also, there was a very
heavy dependence on a handful of VAS streams like ringback tones and caller ring-back tones, the success of which partly thwarted the development of other streams. A greater reason for the recent slide in VAS revenues, however, may be attributed to an earlier complacency in the VAS companies and their lack of readiness in tackling the disruption caused by a rapid onslaught of the apps.
Also, the VAS activation processes were reportedly fraught with bugs and ambiguities and the stakeholders were able to do little to rid the offerings of the gaps and make them foolproof. So, when a Telecom Regulatory Authority of India (TRAI) regulation specified clear conditions for the activation of VAS subscriptions, compliance became difficult to achieve and the VAS revenues of telcos got negatively impacted.
Lessons from apps
As opposed to VAS, which typically relied on SMS-based steps for activation and access of services and hence had its addressable market limited to a select segment of reasonably educated subscribers, apps tend to have intuitive interfaces and are therefore able to appeal to a potentially larger customer base.
So, as the smartphone adoption grows, apps are placed at a natural advantage over VAS. Moreover, since a vast number of apps on the app stores are free, that becomes a further incentive for users who would need to pay up for
On VAS growth and evolution:
The definition and scope of VAS have gone through complete change, warranted by the changes in business models and focus of telcos in the last couple of years.
Mahindra Comviva traditionally started offering basic VAS services like CRBT and messaging solutions to telcos in India and in the global market. Keeping pace with the market and based on the demand, we have invested in four key verticals of Commerce, Content, Data and Analytics. As part of Commerce, we work with telcos and banks and offer them solutions in mobile money and payments, digital wallet and mobile POS. In Content, we work with telcos and offer them traditional VAS, call completion suite, digital content and some niche revenue generating point solutions. Given the uptake of ‘data’ due to social media applications, we’re helping them to offer data packs in an appropriate manner and maintaining QoS for their end users. There is also an effort by telcos to go after their subscribers and push them contextual offers. We have some unique platforms that work with existing infrastructure of telcos and let them go in a targeted manner and generate additional revenues.
On areas of innovation:
Commerce, Content, Data and Analytics are the pillars and drivers for our innovation. We will evolve around these four areas and continue to engage with telcos and come up with point solutions for growth.
We’re helping some of key players in India and globally to roll out their digital wallet and mobile money solutions. A majority of tier 1 telcos depend on Mahindra Comviva to enable their recharge platforms across Asia and globe. On data side, we have enabled mobile data platform for telcos and are helping them monetize their data plans and offer flexible bundled offers. Content is a mature offering for us and we have a large footprint of VAS platforms, comprehensive repository of digital content, both local and international. We also have call completion solutions deployed at telcos that help them generate quick uptake and revenue. The growing demand of relevant and focused offers by telcos is leading to deployment of Analytics solutions.
Additionally, we’re also incubating few other point solutions around the above areas, which are in the oven at this point of time. subscribing to a comparable VAS service.
The app stores have successfully followed the massification approach versus VAS platforms which continue to be sticking to the premiumization models. It is due to this massification that despite sharing 70 percent or more revenues with the app developers in case of paid apps, the app store model has been sustainable. At the same time, a favorable revenue share attracts app and content developers more to the stores as opposed to the VAS platforms, which have historically shared as less as 10 to 15 percent of the revenue with the creators and developers.
Areas of potential opportunities
Location Based Service:
By virtue of the subscriber presence information that telcos have due to the sheer exclusivity to SIMs in the mobile devices, it is possible for them to offer location-based services (LBS) in highly differentiated ways and thus potentially steal an edge over apps in these service segments.
Two broad business models are possible here. One, subscribers could pay for LBS-based information, say, when visiting a new city or even within their own city a location that they have little knowledge of. A mash-up of SIMbased presence information and map data could enable telcos to deliver hyper-localized information needs of users, even better if supported in local languages.
The app stores have followed the massification approach versus VAS platforms which are sticking to the premiumization models.
On VAS growth and evolution:
Altruist has worked with several brands for which it has developed quality apps. It has also acquired the erstwhile Bubble Motion, now called Bubbly which is one of the widely used Voice Blogging tool on Android and iOS.
The company has taken the inorganic route to grow. In terms of mobile VAS, the company works on IVR/ USSD/SMS and WAP. The flagship VAS product of the company is Friendz Chat and Bubbly. Whereas Friendz chat was developed indigenously, Bubbly, the voice blogging platform was acquired last year. Bubbly and Friendz Chat together are live with more than 30 telcos across the world (including 12 in Africa). It acquired another company IConnectiva in 2014, which is one of the foremost companies in the field of revenue assurance and fraud management. Airtel, both in India and Africa, uses the platform along with more than 35 other telcos across the world. British Telecom uses the messaging platform of Altruist’s subsidiary Teligent which was acquired by Altruist in 2012.
Altruist has also entered into a preliminary agreement with Italy’s Acotel Group for the purchase of Info2cell. com from Acotel Group. The sale con- sideration, amounting to $5.5 million, will be fully paid at the signing of the act of transfer of ownership, expected in September, subject to clearance from the relevant authorities in Dubai, where the subsidiary being sold is registered.
On the OTT threat to telcos:
Altruist has been working very closely with leading telcos to provide them with a way to counter the OTT threat and has co-developed solutions with them. The solution as per Altruist lies in getting the operators to offer solutions that have mass appeal and have a simple GUI which can be used by anyone who can use a mobile phone with the same mobile number.
On the transformation of VAS:
VAS is being plagued more by perception and the fact that it has been a source for customer complaints and customer dissatisfaction in the past. Now the VAS industry is focusing on getting more products that can ride on the changing taste of the customer, i.e., either a combination of voice and data or pure data play.
It’s a difficult transformation because the rules of the games have changed. For the VAS providers, the biggest source of strength was the operator promotion, on which they used to ride for revenues and growth. With operators not being dependent on VAS for additional growth, which is now being fuelled by growth in data revenues, and therefore denying the VAS providers any promotions, the VAS players are being forced to look at digital marketing for their products. In June 2015, Altruist acquired SoftProdigy, which was a leading player in the field of mobile and digital marketing to bolster its digital marketing capabilities.