The Federation of Indian Chambers of Commerce and Industry (FICCI), and KPMG recently published a report, m-Powering India. It was released by Prime Minister Dr Manmohan Singh at the India Telecom 2011 event.

The report focuses on the future of mobile value-added services (MVAS) in India and their role in empowering the masses. It highlights key m-services such as m-banking, m-education, m-governance, m-health and m-agriculture, and discusses the growth drivers and challenges in their uptake.

The report also underlines the role that equipment manufacturing and infrastructure development will play in driving the growth of MVAS.

Excerpts…

The importance of the telecom sector is implicit, given its increasing contribution to the country’s GDP, which increased from 1.6 per cent in 2006 to 3 per cent in 2010.

Over the last decade, sector growth has been driven by the voice segment. The telecom subscriber base, including wireless and wireline users, stood at 899.8 million in August 2011 from 41 million in 2000. The country’s overall teledensity reached 74.9 per cent in August 2011, a growth of 15.3 percentage points over the preceding year.

However, the Indian telecom market is far from saturated. A large part of the country’s population, primarily in rural areas, still does not have access to quality telecom services and, therefore, presents significant business opportunities.

The Indian mobile segment is still largely a voice market. Data revenues accounted for about 15 per cent of the total mobile revenues in March 2011, as compared to nearly 30 per cent in China and the UK.

Going forward, however, data is expected to be the key growth driver for the mobile market.

With the introduction of 3G services and the likely launch of BWA services in the near future, MVAS is expected to become an integral and indispensable part of the telecom value chain.

MVAS market size and growth

The size of the MVAS market is expected to increase from Rs 122 billion in 2010 to Rs 482 billion by 2015, driven by the growing uptake of high-end entertainment and communication services in urban areas and the increasing adoption of utility-driven data services and applications in rural areas.

The non-SMS VAS market continues to be dominated by music–centric services such as ringtones and colour ring back tones (CRBT). Both continue to account for over 30 per cent of non-SMS VAS.

According to industry estimates, SMS and CRBT will continue to be the largest contributors to Indian VAS revenues in the next five years. A different type of VAS, mobile internet (both through handsets as well as dongles), will rapidly gain traction, driven by more affordable access to faster networks.

Further, these services are expected to change the dynamics of the Indian telecom sector by empowering users and providing major commercial opportunities for all service providers.

The MVAS ecosystem

The MVAS ecosystem is a complex system, involving a variety of stakeholders, often with overlapping roles.

The broad stakeholder groups in this ecosystem are:

•  Content providers: Content owners and aggregators

• Technology enablers: Platform providers and application service providers

• Content delivery companies: Carriers and handset vendors

• Content consumers: Subscribers of such services

MVAS can be delivered either through the on-deck or the off-deck mode. In the on-deck mode, VAS providers supply content, platforms and solutions to carriers through agreements. These agreements are not governed by any policy framework.

Under the off-deck model, VAS providers deliver content directly to subscribers. However, carriers often serve as the billing interface.

With mobile advertising becoming an integral part of VAS, the ecosystem has expanded to include advertising agencies and marketers.

Growth drivers for MVAS

•  Increasing penetration and spending power: The use of mobile phones is increasing rapidly. Also, with an increasing disposable income, urban consumers have started demanding more mobile data services.

•  Advancement in handset/devices: The share of GPRS-enabled handsets in the hand-held market increased from 51 per cent to 65 per cent between 2009 and 2010. For the rural market, handset manufacturers are designing phones that not only offer all basic functionalities, but also have certain additional and customised features such as insect repellent capabilities.

•  Innovative data offerings: So far, SMS and mobile music services have been the most popular applications. Mobile applications are considered to be a major driver for VAS usage.

•  Introduction of 3G: These services had been adopted by more than 9 million subscribers as of May 2011. The launch of 3G services has allowed customers to access data services at a faster rate and a reasonable price. Subsequently, their data usage has increased.

Challenges in the MVAS space

The MVAS market in India has been facing several challenges. These include:

•  Lack of compelling applications and localised content: The demand for mobile applications is largely limited to urban areas. To maintain the current growth levels, the application market will need to cover semi-urban and rural areas as well. At present, the number of utility-based applications is limited. A related constraint is the lack of localised content and content in vernacular languages.

•  Structural inefficiencies in the ecosystem: The complex VAS ecosystem is characterised by several structural inefficiencies. In the on-deck model, some of these include:

•   Disproportionate revenue sharing: In the existing revenue sharing arrangement, the network provider claims the majority of VAS revenues (over 60 per cent).

•  Absence of a policy framework: Since the contractual arrangement between the operator and the content owner/ aggregator in the on-deck model is not governed by a policy framework, there is no formal dispute resolution authority to settle conflicts.

•  Lack of consumer awareness: Indian subscribers’ awareness about VAS offerings is limited.

 The road ahead

The MVAS services that are expected to make an impact on the Indian telecom market include:

m-banking: The Indian banking sector has grown significantly over the years. However, as per the Reserve Bank of India’s estimates, about 40 per cent of the country’s population lacks access to formal financial institutions and, therefore, is largely unbanked. Mobile phones have the potential to deliver financial services to this unbanked population through m-banking. Driven by progressive banking regulations, m-banking services are picking up in India. In February 2011, 707,496 m-banking transactions worth Rs 616.1 million were reported.

m-education: In order to facilitate the rural population’s access to affordable basic education, the central government, along with private education players, plans to leverage wireless technology and offer m-education services such as basic education lessons, exam tips and result alerts.

m-governance: Basic governance services delivered through the mobile phone can help governments deliver public services in an inclusive manner. The extensive reach of mobile phones, coupled with the potential of mobile applications in terms of innovation, is making m-governance a cornerstone of various state government schemes.

m-health: This refers to the use of mobile devices in collecting health data, delivering healthcare information to practitioners, researchers and patients, and real-time monitoring of patients. M-health is expected to contribute significantly in providing basic healthcare services to the remotest parts of the country.

m-agriculture: In order to enable faster growth of the agricultural sector, wireless technology can be leveraged to disseminate important information to farmers. This includes basic information such as weather forecasts and crop advisory, and complex machine-to-machine automation services that increase farm productivity. Apart from facilitating information access, m-agriculture would play an important role in overcoming infrastructural constraints and supply chain inefficiencies in the agricultural sector.

Location-based services: These services use the knowledge of the geographical position of a mobile device to generate useful information for the subscriber and the service provider alike. Navigation assistance, emergency or disaster relief, social networking and map assistance are examples of location-based services that benefit users.

Machine-to-machine applications: Such communications comprise services such as fleet management, smart metering, and agro and irrigation monitoring. These can be used in urban and rural markets and across the customer and enterprise segments. Although at a nascent stage in India, these services are expected to be a part of the information revolution.

Therefore, technology and infrastructure are the basic enablers of MVAS. There is a need to work towards creating an ecosystem comprising all stakeholders – regulators, industry players and end users. This will make the mobile handset the preferred platform for promoting socio-economic development of the country.