With the saturating urban voice market and falling ARPUs, operators have been focusing on the growth of data and value-added services (VAS). To provide a fillip to 3G uptake, which has been slow since service launch in 2011, operators have reduced 3G tariffs significantly. This has changed the value proposition of these services.
According to a report by Nokia Siemens Networks, mobile data services will pave the way for the next level of growth in the telecom sector. These services grew by 54 per cent between December 2011 and June 2012, primarily due to a 78 per cent increase in 3G service usage. Moreover, the report states that the reduction in 3G tariffs in May 2012 increased the user base by 17 per cent between May and June 2012. In comparison, 3G traffic grew by only 7 per cent between December 2011 and June 2012. Though 2G services, including GPRS and EDGE, still account for about three-fourths of the total mobile data traffic, data consumption by a 3G service user is four times that by a 2G subscriber. This can be attributed to the high bandwidth on 3G networks which facilitates the provision of data-intensive VAS.
3G and 4G services, which involve high speed data downloads, offer a major opportunity for VAS providers. Traditional 2G-based VAS, including SMS and caller ringback tones, has been the biggest contributor to operators? non-voice revenues as bandwidth constraints restricted the growth of data-intensive VAS. However, with the roll-out of 3G networks, operators? ability to provide data-intensive services has increased. It is important for operators to introduce innovative VAS content to differentiate their services. In this regard, operators have expanded their portfolio with services such as devotional applications, mobile TV, m-commerce, live streaming of cricket matches, m-advertising and social networking. For instance, Bharti Airtel has launched the m-wallet service, which allows users to pay utility bills, shop at merchant outlets, etc. Also, Idea Cellular has introduced the PreTone service in the Andhra Pradesh circle, allowing subscribers to access information on cricket, astrology, movies, etc. In addition, MTS has launched the mAd service, which allows customers to make free local calls for watching a video advertisement.
The launch of 4G services will allow operators to cater to the demand for high definition entertainment content. It will also empower subscribers with high speed broadband connectivity, enabling them to access data-rich content seamlessly.
Meanwhile, there has been an increase in consumer awareness about VAS and data services. According to a recent survey conducted by PricewaterhouseCoopers, there is a high propensity among consumers to pay for regional and multilingual content. Therefore, the adoption of these services will increase with the availability of local content. Bharti Airtel, Vodafone India, Reliance Communications and Idea Cellular, in partnership with handygo, have launched a new service ? Behtar Zindagi ? for rural customers. The service provides information on weather, market rates, livestock and agriculture. This VAS has witnessed high uptake due to its availability in Hindi and 17 regional languages at a subscription rate of only Rs 30 per month.
Another growth driver for VAS and data services is the availability of low-cost smartphones and 3G-ready tablets. Trad-itional phones were equipped with technology platforms that could not offer a rich data experience and, therefore, did not meet data requirements. However, smartphones, which have advanced computing and multimedia capabilities, have changed the dynamics of the data service ecosystem. These devices have driven the demand for mobile applications and VAS. In mature telecom markets, operators such as AT&T and NTT DOCOMO witnessed high data usage only after the introduction of the iPhone and Android-based smartphones. Moreover, built-in and downloadable applications, and 3G connectivity ensured high uptake of VAS and data services in these markets. Though the mass adoption of smartphones in India is likely to take another three-four years, the increasing penetration of smartphones and tablets is resulting in a growing demand for data-intensive VAS.
Further, handset manufacturers and operators have started developing in-house applications that are bundled with the devices. For instance, Bharti Airtel has launched an application store comprising about 1,250 applications across 25 VAS categories. These applications have been gaining traction because of their ability to deliver several value-added services directly to consumers.
Going forward, innovative data offerings, smartphone penetration and the launch of 4G services will drive the demand for VAS. The availability of local content, accessible applications and user-friendly data plans will also ensure the mass adoption of these services.
