Mobile VAS players ringing in more profits

While the world reels under recession, emerging players in the mobile value added services (mVAS) business in India are not just growing but chalking out new plans with the introduction of 3G (third generation) telecom services.

Using ingenious strategies, companies like Net4Nuts, One97 Communications, Ziva Software, Mauj Telecom and Hungama are now gunning for expansion into fresh markets with new, innovative offerings.

Combating the recessionary winds on the horizon comes first for Chirag Patel, CEO of Net4Nuts, a technology company that provides a range of mVAS to operators like Vodafone, Airtel, Spice, and BPL Mobile. He thinks this is the perfect time to expand beyond the domestic market. His target-countries in the Middle East and South-east Asia.

The technology will remain the same with a bit of tweaking to localise services. mVAS applications are going to be a hit with networks that carry 3G, and Patel expects 3-4 times higher margins in the new markets than what he makes in India. "Those applications are priced higher than 2G and have better margins, and so we will be competing full throttle there," he says. Net4Nuts had developed SMS-based software for the Indian Railways, which helps users get information on train schedules and reservation status through their regular mobile phones. Now, when consumers are likely to cut down spending, Patel has a plan ready.

"We have launched promotional schemes like referral programmes with operators, where users can refer names and use our services free-of-cost." The company expects to do a turnover of Rs 6 crore this fiscal, which is a 50% more than last year.

With mobile penetration in India at 20% against a paltry 2% reach of the Internet, it is estimated that one out of every five mobile users in India connects to the Internet through the mobile handset. Such users own WAP (Wireless Application Protocol) enabled phones allowing access to the Internet through a WAP browser, which adapts web content for the small screen displays of mobile phones. According to PricewaterhouseCoopers, mVAS revenues in India are expected to touch over $2 billion by the end of this year. Currently, about 44% of mVAS revenues are driven by short messaging service (SMS) applications.

That spells good cheer for smaller mVAS players who are poised to make the best of this trend. One97 Communications, for instance, is now readying new applications to serve the market that will open up with 3G services. Market estimates indicate that nearly 8 million customers would start using mVAS every month in India in the coming year, with much of the urban population a waiting target for fast downloads.

"We are aggressively working on mass-market applications to broad-base our market reach at relatively lower rates in these cost-cutting times," says Vijay Shekhar Sharma, managing director, One97 Communications. Sharma says he has re-negotiated with players like HP and IBM for their voice based platforms, and expanding his team to meet the work that would come their way in the 3G era. "Our team is working on low-cost applications for telecom service providers which will be offered to subscribers, and some premium applications for 3G," says Sharma. He adds that demand for broad-based application like tariff plans, call-for-information and voice-based services have been increasing at more than 80% every month. The number of mobile subscribers has reached 325 million, making India the second-largest

wireless market in the world. And as subscribers keep getting added, mVAS players are the logical beneficiaries. "We are adding three million subscriptions a month," says Manoj Kohli, CEO and Joint MD, Bharti Airtel, speaking on the sidelines of the Strategic Management Society's India Special Conference in Hyderabad recently. According to a study by the Internet and Mobile Association of India (IAMAI), one impediment that can stunt the telecom growth story is the lack of availability of such services in cheaper handsets. Typically low-priced handsets do not support high speed data transfer, a key enabler of 3G services.

This is already being addressed by companies such as DigiBee Microsystems, which has developed feature-rich handsets at half the cost of their big brand counterparts. With handsets priced at Rs 1,000 it tied up with BSNL last June to offer service bundled handsets in tier-II and tier-III markets.

The success of mVAS going forward will depend critically on faster adoption of specific applications among different segments of mobile subscribers. Bangalore-based Ziva Software is pinning its mVAS hopes on search, made simple and easy. Its search engine works to understand ambiguity, so if you enter a broad phrase like 'flowers in Chennai', the application guides you through more detailed queries to throw up results accordingly. The best part is that language won't be a bar in this search application. Says the company's founder Ajay Sethi, "For us, concentrating on such innovations is fundamental to being on top of the currents economic situation."

Neeraj Roy, CEO of Hungama Mobile, one of the largest developers of mobile and digital entertainment content, couldn't agree more. His company has made the best of mVAS services around the entertainment industry. The latest is voice-based services for Bollywood's latest blockbuster, Rab Ne Bana Di Jodi, where a caller can share his/her special romantic experience with Shah Rukh Khan.