With revenues from voice services hrinking by the day, value-added ervices (VAS) have begun to feature prominently in telecom operators’ strategies as users look beyond voice.
With multi-million dollar funding coming their way, VAS providers, mainly small and medium enterprises (SMEs), are riding the IT and telecom boom in the country. Major VAS players in India include Mauj Telecom, On-Mobile, Mobile2win, Cellebrum, IndiaGames, IMImobile and Roam-ware.
VAS providers’ contribution to the total revenues of telecom players has been increasing over the past two to three years from 2-3 per cent to 8-10 per cent currently. Industry observers expect this figure to touch 15-20 per cent over the next year.
Each of these players has revenues of between Rs 250 million and Rs 2.5 billion and claims an EBITDA (earnings before interest, tax, depreciation and amortisation) of 15-35 per cent. On the back of a growing mobile population, they too are growing, though figures are hard to estimate. They are scaling up operations, doubling their workforce, and building technology platforms aggressively.
Mauj Telecom
Founded in 2003, Mauj Telecom is a telecom solutions company offering services in three areas ?? mobile content and applications, mobile software and services, and mobile media solutions. A specialist in gaming, the company also develops services on platforms including J2ME, Smartphone, BREW, Symbian, SS7 and I-Mode, and has partnered with some of the leading wireless operators in the world.
The company has been witnessing 100 per cent year-on-year growth and has clearly grown from strength to strength in a short span of four years. It has an employee base of over 130 people and offices in India, Dubai, London and New York.
In February 2006, venture capitalist firms WestBridge Capital Partners, Intel Capital and Sequoia Capital made an investment of $10 million in Mauj Telecom. The capital was used to develop the business organically. This included scaling up its infrastructure and expanding into markets like the US, Britain, Canada and Africa in the areas of mobile music and gaming.
The company also ploughed back funds to create a market for 3G applications as it is looking forward to the launch of 3G services (as and when the spectrum issues are resolved). Manoj Dawane, CEO, Mauj Telecom, says: “With the advent of 3G technology in mobile phones in the country, the mobile gaming industry will grow by leaps and bounds.”
Capitalising on the potential offered in B and C category towns which are currently driving growth in the Indian wireless space, Mauj Telecom launched an “Indianisation” initiative in December 2005. This meant providing mobile games in Hindi and regional languages including Marathi, Gujarati, Bengali, Tamil and Urdu.
The move was targeted at regional audiences since only 3 to 5 per cent of the population is familiar with English. Now almost 40 per cent of its revenues come from regional language gaming.
Mobile music is another key driver of VAS revenues. “With close to 400,000 ringtones being downloaded on a daily basis and the mobile VAS market accounting for 25 per cent of the total music business in the country, the company has an entire range of music categories and subcategories to cater to this demand. It is currently witnessing almost 50,000 downloads per day,” says Dawane.
At the beginning of the year, Eros International, one of the largest content owners in the Indian film business with a number of films in the pipeline, signed a licence deal involving minimum guarantee revenues with Mauj Telecom for distribution of mobile content.
In its latest venture, the company has joined hands with Bharti Telesoft to provide a range of value-added content including astrology, cricket information and news over unstructured supplementary service data (USSD) to operators in India and abroad.
While the two companies currently cater to mobile subscribers based in northern India, they are now looking at tapping demand in the Middle East. The partnership leverages the platform and applications strengths of Bharti Telesoft, and the vast variety of content of Mauj Telecom.
With search engine Google recently opening up its AdSense program to mobile content providers, publishers or content providers can place search ads on their sites and get a revenue share out of them.
According to Dawane, AdSense will actually help in the growth of independent mobile sites. “Mobile ad networks are the way things will work in the future, especially for non-operator sites. Operators will have to change their “closed garden” concept and let other players showcase their sites,” he says. Mauj Telecom is also working on developing its own mobile ad network, as it already has an inventory of online publishers on its portals.
While it is currently a small player in the global market with its overseas revenues accounting for less than 5 per cent of total revenues, Mauj is now focusing strongly on this front and has recently won a contract to develop a platform from an operator in the Middle East. “By March 2008, our overseas operations will account for approximately 20 per cent of our revenues,” says Dawane.
IMImobile
With over 300 employees and operations in 51 countries, IMImobile is a key player in the VAS space. While the company does not create content, it has spent the better part of its existence building a content management and delivery platform that has been tested in live deployments globally.
These platforms include carrier grade messaging platforms (SMSC, MMSC), messaging gateways (MMS, SMS, USSD, WAP), a service delivery platform and content management system (“DaVinci SDP”), and a host of client and server side applications and content. The company also has a range of voice platforms (IVR, voicemail, CRBT).
“Since we host these services on our platforms at the VSNL data centres in Mumbai, operators do not have to spend on technology. As a result, it is a win-win situation for both. While the operator benefits from new services, we gain from transaction-based revenues,” says A.R. Vishwanath, CEO, IMImobile.
Currently, IMImobile is providing its content and technology services to over 80 million subscribers though agreements with most of the leading mobile operators in India including Bharti Airtel, Reliance, BSNL, Aircel, Hutch and Idea. It has also partnered with media players like Yahoo, Google and StarTV.
The mobile entertainment market in India is estimated at $100 million and accounts for 8-10 per cent of the revenues of mobile operators. IMImobile claims to control over 70 per cent of such services. It had over 3 billion downloads in 2006.
In May 2005, IMImobile signed an agreement with Terraplay to offer connected mobile games to the market.Utilising Terraplay’s leading connected gaming technology, IMImobile has provided a compelling gaming service to its Indian subscriber base.
Recently, it tied up with Pressmart to offer mPaper (mobile paper) for people on the move. The venture takes electronic publishing to the next level, providing newspapers on WAP-enabled mobile devices. They partner with networks and help even local papers to go global and global publications tap into local markets.
While the tier II cities of Kerala, Tamil Nadu, Andhra Pradesh and Karnataka are the leading markets for IMI, it has also seen growth in Uttar Pradesh, Punjab, Gujarat and, to some extent, Maharashtra.
Interestingly, the company was among the first few to generate significant interest among venture fund managers. In 2000, within a year of starting operations, the company raised $1 million. Then in 2005 it raised about $3 million from Spark Plc, a UK-based venture capital fund, for the expansion of local development teams, research and development, and overseas expansion. In 2006, it raised another $10 million from Pequot Ventures.
It is also a major player in the overseas market with operators outside India accounting for approximately one-third of IMImobile’s total revenues. In 2005, the company won three large overseas deals, including one from Trinidad and Tobago, Dialog in Sri Lanka, and Emtel in Mauritius.
While Africa and Latin America have been the key thrust areas for the company, it is now making a foray into the European market and is in the process of tying up with existing content aggregators there. “We have built a centre in Hyderabad to support our growing business across the globe, including the Middle East,” says Vishwanath.
The company is also signing deals with international players to offer services in the MENA (Middle East and North Africa) region as major US and European companies are eyeing this growing market. These services include localised directory search, innovative Push (for new projects through research and development), video streaming, blog and user-generated content.
The company has recently signed up with the local partner of a US telecom major to provide VAS services to 25 MENA countries through 55 operators. This managed service model includes SMS and MMS gateways, WAP portal management and content management system.
It is now setting up a $5 million research lab in Mauritius dedicated to 3G.It will develop mobile video portals and other applications on the 3G platform in Mauritius. That means a better deal with international operators for whom it is already handling 3G applications.
The company has clearly capitalised on the growing demand for VAS in the country. With revenues of approximately Rs 1 billion and 100 per cent year-onyear growth, the company is now planning an IPO.
OnMobile
An early entrant into India’s mobile VAS space, OnMobile was incubated at IT services giant Infosys Technologies in 2000 and launched its first products in 2002. Initially offering voice-based applications such as IVR, contests and ringtones, the company has since expanded into data services.
It is among the larger VAS providers in India and is valued at $300 million.Headquartered in Bangalore with offices in India, Singapore and Sydney, the company has over 350 employees. It provides turnkey solutions including platforms, applications, content and professional services to deploy and operate VAS for telecom operators, media houses and content providers. Its key clients include Airtel, Vodafone, Idea, BSNL, SingTel, Reliance Communications and MTNL.
In March 2006, OnMobile launched a set of value-added services in Marathi, Hindi and English for BSNL in Maharashtra for its CellOne and landline subscribers. Later, it also launched a wide range of m-commerce and enterprise applications including wireless vertical market solutions.
Since R&D is the backbone of the business for VAS providers, OnMobile spends Rs 500 million on R&D annually.”A good part of the R&D spend goes into ensuring that the service is compatible with handsets as well as the operator network,” says Arvind Rao, CEO, OnMobile.
It was the first company to launch a comprehensive language model for the Indian market. Its Automatic Speech Recognizer (ASR) for Indian languages enables users to interact with automated services with simple voice commands in their native languages.
OnMobile had earlier raised about $18 million in 2001 from Argo Global Capital Partners whose investors include France Telecom, Deutsche Telekom and Singapore Telecom. In October 2006, Deutsche Bank, Goldman Sachs and Polygon Investment Partners invested $27.8 million in the company. The funds were used for expansion.
OnMobile, which has been serving telecom companies with its technology solutions, is now entering the mobile marketing space represented in India by companies such as Mobile2win, Hungama Mobile and Mobile Worx.
The company has recently acquired French telecom software company VoxMobili for Rs 1.5 billion. With this acquisition, the company, which has primarily focused on voice-based value-added products for its telecom customers, will strengthen its VAS data product portfolio.The acquisition will also give OnMobile a springboard into Europe and North America, where VoxMobili’s customers include big names like Orange Communications SA, T-Mobile International AG, the Vodafone Group and AT&T. The company is now making the transition from an India-focused player to a more global player.
This is OnMobile’s second acquisition after ITfinity Solutions, which it had bought in December 2006 after receiving funding from Deutsche Bank, Goldman Sachs and Polygon Investment Partners.
Financially one of the stronger players in this segment, its annual revenues are approximately $50 million (Rs 2.1 billion) and it is growing at 100 per cent. Like some of its other counterparts, the company is planning to visit the capital market this financial year with an IPO of Rs 5-6 billion and intends to invest the IPO proceeds for its foray into the GPRS segment.
Mobile2win
Mobile2win set up operations in 2003 with a team of three people. In three years, it has expanded to more than 145 people.
The company focuses on what it calls “lifestyle applications” ?? mobile yoga instructions, food recipes and religious teachings. According to Rajiv Hiranandani, country head, Mobile2win, the company is tapping the traditionally non-downloading audience and this strategy seems to be working well for them.
For instance, one of its products, the “mobile pet” (a virtual pet like a fish, which has to be fed daily) was downloaded 18,000 times during 2006. Recognising the strong demand for entertainment content, the company has also developed mobile games based on movies.
Mobile2win is a strong player in the international arena and makes 30 per cent of its revenues from operators outside the country. It has worked with OmanTel and Saudi Telecom and is exploring other West Asian markets.
The company has recently received funding of $5 million from Nexus India Capital. With mobile advertising becoming the new buzzword in digital marketing and everyone from online publishers to content providers working on developing mobile ad platforms, the company intends to use these funds to make a foray into mobile advertising.
Hiranandani expects mobile advertising to grow from its current value of Rs 50 million to Rs 80-150 million in 2008.
Mobile2win has a clientele of 120 brands with which it has worked for shortcode advertising and other campaigns.The company expects most of these brands to emigrate to more engaging advertising on the mobile through these platforms which include branded gaming, in-game advertising, wrap-around video ads and ad-supported content.
Most of these services, except branded games, are not well known in India. Apart from Mobile2win’s imminent launch, firms like Enpocket currently offer such platforms. The company is already in talks with several FMCG companies and intends to launch its first ad game within six months.
According to Hiranandani, ad gaming provides them with an alternative source of revenue as FMCGs pay gaming companies anywhere between Rs 400,000 and Rs 800,000 to develop a game.
Conclusion
The Indian VAS space is growing by leaps and bounds with most companies witnessing 100 per cent growth every year.However, the number of companies jumping onto the VAS bandwagon has also increased manifold. “While there may be a large number of players cropping up, only a few companies have achieved critical mass and these companies will be in for the long haul,” says Dawane.
The growing competition is likely to result in consolidations in the next two to three years. Nevertheless, the sector holds great promise for existing as well as aspiring players.
