Indian mobile firms bank on data users

Shailendra Bhatnagar

NEW DELHI: Any mobile phone operator would cherish a customer like Peeyush Tiwari, a 19-year-old medical student in the northern Indian city of Lucknow.

Tiwari downloaded 19 mobile games to his handset in one month, each adding as much as 100 rupees to his monthly bill.

"Games are great stress-busters -- great fun," said Tiwari, who recently came third in a national mobile cricket game run by Hutchison Essar Telecom Ltd., India's third-largest mobile firm. "Our gang spends between one and two hours a day on these games."

Carriers in the world's fastest-growing major mobile market need more customers for expensive services such as mobile games, ring tones and Internet downloads as vicious competition pushes down voice tariffs.

A key measure of customer spending -- average revenues per user (ARPU) -- fell 6.7 percent between April and June from the previous quarter to Rs 12 rupees, according to industry data covering 60 percent of the Indian market.

"Voice is a commodity and something that anybody can offer. As a differentiator, carriers have to offer services way beyond voice," said Harit Nagpal, chief marketing officer at Hutchison Essar.

The company, 49 percent owned by Hong Kong's Hutchison Whampoa Ltd., has licenses in 13 of India's 23 wireless regions and is a big player in the market for games and other so-called value-added services (VAS).

Its 6 million users deliver the industry's highest ARPU at 491 rupees. It has 200,000 users of value-added services and is adding 10 to 15,000 a month, Nagpal said.

INTENSE PRESSURE

"For the industry, VAS is the right way forward," said Prashant Singhal, head of Indian telecom practice at consultancy Ernst & Young. "These services improve profitability at a time when ARPUs are facing intense pressure."

Singhal estimates services such as text messages, phone ring tones, news and video clips constitute 8 to 10 percent of revenue for leading operators, double last year's proportion.

Still, that's well below the 16.3 percent recorded at Vodafone Group Plc, the world's largest international mobile phone company.

The Indian figure is also low by the standards of Asia. Malaysian carriers earn 12 percent of revenue from data services and those in Singapore record 15 percent.

For the Indian companies, "a target of 20 to 30 percent of revenue should be reached in up to three years," said Singhal.

Research firm Gartner is more conservative, forecasting 20.5 percent by 2008.

India's wireless sector is expected to more than double in size from its current 40 million users in just over a year as some of the world's lowest call charges lure more and more users.

In anticipation of that growth, Essar's larger rivals such as Bharti Tele-Ventures Ltd., 28 percent owned by Singapore Telecommunications Ltd., and market leader Reliance Infocomm Ltd. are building up their data services.

TREMENDOUS GROWTH

"Mobile data services in the last one-and-a-half years have shown tremendous growth, and we still believe there is huge room for growth," said Mahesh Prasad, president for mobile applications at Infocomm.

The company, with more than 7.6 million users, gets up to 35 million hits a month on its mobile information service, R-World, a figure that is growing 10 to 15 percent a month, Prasad said.

Kobita Desai, principal analyst at Gartner, said carriers are chasing two distinct segments -- the corporate market and young workers. More than half of India's billion-plus population is younger than 25.

"The emerging youth market is the one to watch out for," Desai said. "They're innovators and get easily habituated to new services. Plus there is a peer pressure to try new things."

For the corporate market, mobile e-mail will be the most popular service, she said.

Faster networks being rolled out by carriers are helping the services proliferate.

Tiwari says more than half his class of 251 students have phones enabling faster Internet access, a key requisite for data-hungry services such as picture messaging.

"Six months back it would take six to eight minutes to download a game. Now, it takes about two minutes because of sophisticated networks and feature-rich phones," says Arun Gupta, head of Mauj, a wireless application and content provider.

(Additional reporting by Sugita Katyal in New Delhi).

Reuters