BANGALORE, INDIA: Despite the global mobile phone market recording a slowdown in Q4 2008, the value added services (VAS) industry is on a up- beat mood in India. Thanks to the continuing growth in mobile subscriber base in rural and semi urban areas and the popularity with VAS services among the younger generation.

Cellular majors in India have alreadyt matched each other on prices, technology, and service offerings. Now, how do you differentiate your brand ? The answer lies in providing the unique value added services. In addition,  the rolling out of the third general mobile serives (3G) is all set to take the VAS maket to new heights.

The VAS Industry in India has evolved into a $ 1 billion + industry in 2008 with an estimated annual growth rate of 40 – 50 percent. What makes the industry look ahead is that fact that the mobile service providers
are adding up around 10 million new subscribers every month which is expected to take up the mobile subscribers base from the present 350 million to 550 million by 2015.

According to IDC's Worldwide Mobile Phone Tracker released in February, the worldwide mobile phone market experienced an unusual downturn in the normally robust fourth quarter of 2008. The vendors shipped a total of 289 million units, 12.6 percent lower than the 330.8 million units shipped during Q4, '07, the study says. For the full year 2008, vendors shipped a total of 1.18 billion units worldwide, 3.5 percent greater than the 1.14 billion units shipped during 2007.

“India is experiencing an interesting phenomena as mobile phone acquisitions are happening in semi urban and rural areas. Unlike in the matured markets, voice applications, caller ring back tone, ring tone services are highly popular even among the basic phone users ,"  says Dr Debasis Chatterji, CEO, Netxcell Ltd., a leading VAS provider.

While text messaging is gaining more popularity among the younger generation in urban areas due to falling costs, it's not so popular with subscribers in semi urban and rural areas as they are not as comfortable in text messaging in English as their urban counterparts.

According to a recent study by LIRNEasia, and information and communication technology policy organization, 27 percent of the total mobile owners at the bottom of the pyramid (BOP), or the poorest socio-economic group, were added last year, whereas the urban areas added only 19 percent.

"Just five years ago, the massive momentum developed by the Indian telecom industry did not include rural areas. But now, the picture is different," the study adding that phone ownership - both land line and mobile - at the BOP increased a whopping 131 percent between 2006 and 2008.

'Affordability still remains a key issue for the people at the bottom of the pyramid to buy mobile phones,' Rohan Samarajiva, chairman and chief executive of LIRNEasia, said.

Mobile ownership is as high as 40 percent at the BOP whereas the fixed phone ownership is at 8 percent.

According to the findings in the study, India has a large second hand mobile phone market. "Most of the rural customers, on an average, spend $34.82 to buy a second hand phone and approximately $48 for a new phone," Samarajiva added.

However, a major chunk of the people still utilize only voice services and services like payment through mobile. Other value-added services are still at a negligible level, the study said. 

Next generation VAS

Unlike in the improvised world where a cell phone can be easily used as a Debit/Credit Card using VAS applications, such services has so far remained only a dream in India due to the strictures imposed by TRAI and Reserve Bank of India.

“ The 3G services have just started, we are expecting a review of the restrictions by TRAI later this year. So one can expect a host of new VAS services” says Debasis Chatterji, CEO, Netxcell Ltd adding that his company was already working on a number of such applications.

According to the Netxcell CEO Indian cellular markets, proliferation of technically advanced handsets, and the rapid progress made by the cellular networks. In India, the majority of the telecom circles now have multiple players and fresh competition comes knocking at the door.

The new wave mobile VAS will see the VAS players offer services directly to mobile users, and build up a brand in the process. The operator pipe is set to be commoditized in the manner somewhat similar to Internet
bandwidth.