Market dynamics will sort out revenue disparities

NEW DELHI, INDIA: 3G rollout in the county has opened up new vistas for MVAS players in India. With $2-billion industry beckoning for these companies, MVAS players in India and abroad are ironing their strategies to tap this lucrative market.

Telcos are also looking at working out new relationships with MVAS players to augment their MVAS strategies. However, for MVAS players, the current lopsided revenue sharing agreement they have telcos is cause of heartburn.

Market analysts estimate mobile operators take up 60-70 per cent of the revenue generated and remaining peanut share is given to the MVAS players.

MVAS companies have been knocking doors of telecom regulator to set up a benchmark to determine the revenue share. The VAS providers have claimed that existing commercial terms are heavily in favour of mobile operator.

However Cellular Operators Association of India (COAI) doesn't want any regulation regulate revenue sharing between the various stakeholders involved in the Value-Added Service chain. "This should be left to the commercial negotiations and mutual agreement between the various stakeholders involved as is the current practice", COAI had opined.

Vishwanath Alluri, founder and CEO of IMImobile, a leading player in the mobile Value-Added Services market, VAS, feels the market dynamics will automatically iron out the revenue disparities between telcos and MVAS players in the market.

"This revenue disparity though skewed, will be sorted out on its own when we reach to some kind of saturation point in the market," forecasts Alluri

"Once the push towards data services happens, operators will devise better revenue share for MVAS players as they need better VAS services and better VAS players", says Alluri who founded IMImobile in 1999 with a vision of harnessing the intellectual resources of India to develop an IPR centric technology company.

"Currently mobile operators are only focused on expanding their networks and improving their subscriber base. Revenues accrued through data services isn't much and hence not being given much priority either. Once operators achieve saturation point and witness further dip in ARPU's, they will pay more attention on the MVAS services", adds Alluri.



In an interaction with Idhries Ahmad of CIOL, Alluri talks in length about the issues confronting VAS industry in IMI mobile push to tap the lucrative market.

Alluri also talks about IMI mobile's technology platforms, company's relationship with Indian media companies and the potential of mobile advertising in the coming years. Alluri also has a word or two for new entrants to in MVAS space. Excerpts from an interview:

IMI mobile was also recently conferred the prestigious Voice & Data Emerging Company of the Year for their significant contribution in the value added services (VAS) space.

CIOL: Congratulations for bagging award. To start off, can you brief me about IMI mobile, the segments and countries IMI operates in.

Vishwanath Alluri: IMI mobile is a next-generation enabler of Mobile Value Added Services (VAS) for mobile operators, media companies and enterprises. We are one of the leading content aggregators in Asia, having assembled a library of high-quality content from 220 diverse sources.

IMImobile has a global presence across India, Europe, Latin America, Caribbean Islands, Middle East and Africa and is equipped to deliver and manage mobile applications and services anywhere in the world.

We have telcos like Airtel, Vodafone Essar and Virgin Mobile as our customers. On the enterprise side we have Google and Reuters as our customers and Yahoo!, Sony, Disney and Universal as content partners and portal customers.

CIOL: Is the partnership restricted to operators alone or is it expanded to mobile vendors also?

VA: We have relationship with major media companies. We work with DNA, Star TV, and online portals like Google and Orkut. See, basically these companies want to have interactivity with users through mobiles to promote their services. The interactivity is made possible by our technology platform which is integrated with operators platforms.

CIOL: Coming to the IMI's technology platform, does your Service delivery platform work standalone or can operators also integrate your platform into their existing delivery platforms.

VA: See, our technology works both as standalone and also can switch into a technology platform that sits behind the operator. Any operator, which wants to run their services can connect with our platform and run all their services across all networks.

CIOL: With 3G rollout finally given go ahead by the DoT, Mobile value-added services (MVAS) players are going all out to offer content, How is IMI geared up for the challenge to help operators roll out 3G services in the country?

VA: In India, 3G services are still in infancy and will take two years before they get popular. Networks need to be tested and integrated for rolling out 3G services which will take some time.

Having said that, IMI has a strong technology road map with strong emphasis on 3G services. We understand the space and have a distinct advantage in this space.

We have proprietary suite of robust core VAS platform, messaging gateways, a service delivery platform and a content management system called DaVinci that is deployed on a managed services model across the globe. 

CIOL: VAS providers in India are particularly unhappy with regards to the revenue sharing arrangement with service providers. A revenue share of 70:30, say service providers is heavily loaded in favor of telcos? How does IMI mobile look at this revenue disparity and do you think this imbalance can be ironed out in near future?

VA: This revenue disparity though skewed, will be sorted out on its own when we reach some kind of saturation point in the market. Once the push towards data services happens, operators will devise better revenue share for MVAS players as they need better VAS services and better VAS players.

Currently, mobile operators are only focused on expanding their networks and improving their subscriber base. For them revenues accrued through data services is not huge and hence not been given much priority now. Once they achieve the saturation point, they will pay more attention to VAS services.

I see, maybe after three years, when mobile penetration will hit saturation, operators would think of sharing the revenues equitably.

Today for telcos, it's about grabbing more voice customers, not about revenues accrued through VAS services.

Having said that, going forward, revenues from mobile data will be 40% of total revenues of operators and hence operators will seriously think of addressing the issue.

Also, because of stiff competition operators will have to lower their voice tariffs even more, so it becomes important for operators to carve a well though out data strategy to increase their ARPUs and better arrangement with VAS providers.

CIOL: Mobile VAS is now touted as a $2-billion industry and not surprisingly many new companies are jumping in the fray. How do you see market for them and what will it take for new entrants to be successful in this industry?

VA: The key here will be how these companies will approach the market. In MVAS space, new players keep coming all the time. But consolidation is the key. Coming up with killer application here and there can't work. You need a holistic end to end approach to stay in the market.

See, as the VAS market matures, we distinctly classify VAS companies into two categories i.e. technology providers and content providers. You have to be clear as whether you are a technology player or you are a content player.

If you are a technology player, you have to switch into a technology platform that sits behind the operator. And if you want to go on your own, MVAS player has to have huge infrastructure and clear go to market plan.

If you come up with innovative killer SMS or MMS application, that doesn't mean you can sell the application to operators throughout the world. You have to work at integrating this application across platforms. That requires a complicated holistic approach.

With new technologies coming up, companies have to keep pace with that and companies who don't know how to go to the next level will get stuck.

CIOL: How do you see the MVAS industry coming in India if you take into account the cost of MVAS services in India? Won't the growth of industry be hampered by high cost of MVAS services?

VA: I expect the industry to grow at 25%-30% Y-o-Y. I agree that the costs of VAS services are pretty high. You don't expect users to Pay Rs. 15 for a ring tone or a song.  I expect a model in lines with traditional media coming up where advertisers, not users pay for the content.

Advertising will definitely come in to subsidise the content delivery. That calls for innovative VAS which would pull advertisers to pay for the content and technology.

It is all about coming with contextual driven ads around VAS for advertisers to get interested. If advertisements come in a very big way there is possibility for more services and advertisers will find value to spend.

IMImobile is in a good position to capitalise on this forecasted future growth with its unique Ad- Ring platform Ad-Ring provides an environment in which multi-format ad campaigns can be created and delivered to consumers over SMS, MMS, voice, WAP, ringback tones or video streaming.

CIOL: Coming to IMImobile R&D centre in India. What kind of work goes there and are you planning to expand your centre across India or even abroad?

VA: Engineering and development work is done in Hyderabad. We don't do any development work outside the country and won't be expanding our R&D centre in near future. We are now setting up a 3G lab in our Hyderabad centre. The work at the centre is highly technology oriented.

CIOL: On the acquisition front, is IMImobile, looking to acquire some companies in the MVAS space in the near future?

VA: We are looking at acquiring some companies in Europe which fall into our technology road map. We are looking at companies who augment our technologies and expand our strategic operations in new geographies.

CIOL: Are operators like Bharti or Vodafone showing interest in acquiring IMImobile to add weight to their in-house VAS portfolio?

VA: This is speculative question. You should ask Bharti that question. If and when it comes, we will think.