| 20 Jul 2024
20-TEN Year-ender: Pancham Endlaw, Country Manager - TZ Mobile

* 2010 – A renaissance year for VAS

What a year we had in 2010! It was a single year that changed the VAS industry. Both, within India and globally, the VAS industry was completely transformed. VAS companies started the year fighting the so-called â€?recession-trends' and the      consequent squeeze by    carriers, and look at what they accomplished by the end of the year -- almost a perfect U-turn where carriers are looking to VAS to retain their customers and save bottom-lines. One thing is for sure: there has been a resurgence -- indeed, a renaissance -- in the VAS space in 2010, which has it poised and bracing for a great performance in 2011.

Globally there were some spectacular trends. This was the year when VAS changed gears and moved from basic pure-download mode to becoming more integrated with users – almost like a lifestyle product. It was the year where applications made their mark. Lots of apps came in and were woven into our lives via social- and personal networks. In many ways, Foursquare and Angry Birds are perfect poster VAS products for the year. 2010 was also the year where all kinds of VAS access devices mushroomed - from plain-Jane handsets to intelligent smart phones to tablets you can make calls from. It was the year that reinforced some trends but disrupted others completely. On the one hand, smart phones became mass-products -- iPhone and iStore set newer and higher benchmarks. On the other, tablets became VAS consumption touch points, Android became a force to reckon with, tablets like iPad became a legitimate VAS consumption channel, Blackberry, Motorola, Dell and Windows came up with exciting mobile products. Hmmmm…

India too had a similar picture. Some trends got reinforced. We started 2010 with 525 million subscribers and closed the year at almost 680 million, and the subscriber-growth train seems to have lost no steam, poised as it is to hurtle into the near future  White-labelled mutated java handsets from China also continue to eat into the market-share of mainstream... handset-makers. Relevant to the current topic, in 2010, the VAS industry continued its march and moved to become a double-digit percentage contributor to overall revenues for most carriers.

While there was reinforcement on some fronts, other trends crumbled. 2010 was the year that the telecom players started to seriously look at VAS as a means to retain their margins. There was a pointed focus on the three VAS verticals other than RBT – sms, data and voice VAS .

The year began with the first serious efforts by a carrier to outsource a complete VAS silos - Airtel started off with App Central and Vodafone with its Games Store. Within the next few months we had app stores plans announced by almost all carriers. Most carriers continued to play it safe here, going with software companies rather than with global VAS specialists – a choice that some are already reviewing and others are almost getting tempted to follow suit J

On other fronts, January was the month that Indian courts started intervening into the areas of spam sms and tele-calling. A few publications launched Kindle editions (don't laugh – these things made headlines then). And oh, RBI allowed cash withdrawal via mobile – something that will impact VAS and financial-inclusion in years to come.

February saw real action towards bringing 3G in India. The ground rules for the 3G auction were spelt out and it became clear that it is mostly an incumbent race. The next few months saw the recession effect wearing off as the realization set in that VAS was the only bottom-line saver for carriers. A number of VAS companies used this global-warming... to VAS to get funding/structure deals.

Personally, I liked two new trends in March: Firstly, the use of QR codes in the Ford Figo print ads – something I hope will happen more often. And secondly,  the extensive use of social networks by carriers as points of differentiation in ATL media campaigns.

April saw the start of the legendary 3G auction. While carriers were raising the ante to the delight of DoT and FinMin, my VAS colleagues and I were shaking our heads in controlled-disbelief..., knowing fully well that all the monies for the bids will be mostly recovered via VAS. This will be something that will trouble us for years to come. April also saw Airtel advertise mobile app that controlled DTH recording at home – something that made a lot of people sit up and realize that apps were not just �trivia-fancy-party' show things but had real-world value. Nokia also launched its Ovi-Music Unlimited service that we all hoped would promote (paid) music consumption amongst users.

The middle-of-the-year months made lots of interesting news. There was an effort to promote IPL on mobile, which many thought was premature, looking at the bandwidth choke that needs no elaboration. We also saw the end of 3G and BWA spectrum auction where almost the entire country's liquid cash and some more got pledged; it was also the month where initiatives like Facebook-zero gained currency. It was also the poster-period where Indian VAS companies looked at global reach – IMI started talking to WIN Plc, Tanla bought out Openbit and Onmobile & Comviva made some noise and overtures to widen their global reach.

In the next few months we heard of several initiatives by a number of VAS companies that merit mention because they are signposts for the way business will be done in the industry -- RCom doing a direct-deal for Universal Music, Share trading over Mobile with the support of leading brokerages, Shoutcast Radio coming onto Mundu, PPL segmenting music rights for IVR and RBT, SBI and Western Union partnering for mobile money transfers are just a few of them. There was also the share of duds – the USD15 Tablet, Indian IPR owners not getting paid for Android apps, IPL mobile rights (part of IPL rights tangle with GCC), Balaji Telefilms' Hoonur shutting within 6 months, Mobile number portability hoopla, Diwali 3G launch.

So what do all these events and trend-pointers lead to in 2011? What can we expect this year? If you ask me, two trends stand out big time for the industry in 2011. First is 3G, and second is the rampant march of nett-adds at the bottom-end of the spectrum. I believe the most important development will be the actual... launch of 3G. I'd like to stick my neck out to say that if priced right, 3G services will do what IRCTC did to e-Commerce in India. I believe that pricing can revolutionize the way VAS is consumed.

Let's take a look at how mobile content is consumed in India. While there is non-P2P mVAS , there is credible reason to believe that most of content is free -- pre-loaded or free content on wapsites or side-loaded, or worse, pirated. There are two reasons for this. One is access – put simply,  it's too painful to do any content download / streaming. Another is the reluctance to shell out monies if there is low perceived value -- if I can download MP3s free from the internet, why should I pay for ringtones? 3G will in many ways remove both the hurdles. It will make internet access easy and fast, so content will become broadband-like easy and almost free. VAS companies need to keep pace with this game-changer. Value will now be built by revolution, not evolution here.

All is not lost for the companies unwilling to completely re-invent themselves. Every month mobile companies add approximately 16 to 20 million subscribers. While half of these are 2nd and 3rd sims, almost 6 to 8 million Indians are getting their first taste of mobile communication – just like most of us did in the mid-1990s. There is traditional... VAS consumption here just like what we did in 2003 or so. The trick will be to package it so that there is value to the end-user just like carriers re-packaged calling value in mid-2000s.

Which brings me to my closing thoughts for this post. Will the carriers, er… please note that voice revenues only exploded when call rates were dropped by the carriers. Similarly, VAS revenues can explode if their rates are dropped. The IP owners and aggregators are surviving on almost love-and-fresh-air kind of margins and genuinely can't reduce rates any more, but operators can. We are standing at a cross-roads.

It's in our joint-hands to make it an evolutionary or revolutionary 2011.

Happy 2011!


(Pancham Endlaw is Country Manager with TZ Mobile. He has  Masters' Degree in Mass Communications and brings over 15 years of experience, of which over two-thirds has been in the mobile and digital domain. Prior to TZ Mobile, he's worked at INX Media, Airtel and Times Internet. Along with M-VAS , gizmo-gazing and golf are his other passions that compete for quality time with his family.)