::A Report on VAS & Content Aggregator Overview::

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Topics

 Industry Classification.

 Industry Segment Description.

 Value Chain.

 Key Players and Market Share.

 Industry Growth and Changes Going Forward.

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Report Made by: Vijay Kr. Singh, Start Enterprise.
Industry Classification & Segment Description
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Basic Definition of a M-VAS:

Value Added Service (VAS) in telecommunication industry refers to non-core

services, the core or basic services being standard voice calls and fax transmission
including bearer services.

The value added services are characterized as under:

 Not a form of core or basic service but adds value in total service offering.
 Stands alone in terms of profitability and also stimulates incremental
demand for core or basic services.
 Can sometimes be provided as stand alone.
 Do not cannibalize core or basic service.
 Can be add-on to core or basic service and as such can be sold at premium
price.
 May provide operational synergy with core or basic services.

Note:
 A value added service may demonstrate one or more of these characteristics
and not necessarily all of them.
 In some cases, the value added service becomes so closely integrated with the
basic offering that neither the user nor the provider acknowledge or realize the
difference. A classic example is of P2P SMS.

With over 660 million mobile phone subscribers ( July, 2010) & having the second
largest subscriber base in the whole world – Indian Telecom Industry has started
witnessing an era when users buy mobile phones not just to be in touch, but to express
themselves, their attitude, feelings & interests.

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 The current Mobile VAS industry being expected to touch Rs 16520 crore by the end
of 2010 from the level of Rs 9700 crore in 2008. (According to Gartner Report).

M-VAS industry is currently increasing with 12.5% CAGR in India.

MVAS industry is attracting wireless operators, handset manufacturers, content

developers, game makers and music, gaming, SMS based contests and streaming
audio & video.

Telecom Industry is contributing 2.7% in GDP of India. (According to Financial

report 2009).

M-VAS is contributing 13% to the revenue of telecom. ( for FY 2009).

Currently SMS & CRBT is contributing 55% & 26% respectively to the total M-VAS
revenue.

Currently the revenue sharing between Telco & M-VAS companies is 70:30.

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 Pillars of M-VAS:

Pillars of M-VAS defines the basic structure upon which the M-VAS is depend on. It
has four main structures as:

 Technology.
 Access Device.
 Infrastructure.
 Content.

Access Modes / Platforms:

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 The modes that are available to the end users for the growth of M-VAS. There is
basically five types of Access Modes that are:

 SMS with 49% Market share.

 IVR with 40% Market share.
 GPRS / WAP with 8% Market share.
 USSD with 3% Market share.
 MMS with < 1% Market share.

Access Mode Market Share

3%
8%
49% SMS
IVR
40%
GPRS/WAP
USSD

Note: The above percentages shows the Market share of access modes only.

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 VAS Industry Classification:

Broadly the whole Mobile VAS Market is divided into three main segments:

 Infotainment.
 Entertainment.
 M-Commerce or Mobile payment.

Infotainment: These services are characterized by the useful information it provides

to the end user. The user interest comes in from the personal component and
relevance of the content. Apart from mobile, alternate modes are available to access
Information VAS like Newspaper, TV, and Internet. E.g. of Info VAS is information
on movie tickets, news, banking account etc. They also include user request for
information on other product categories like real-estate, education, stock updates, etc.

Example of Infotainment:

 SMS marketing.
 Short Code.
 Long Code or Virtual Number.

Entertainment: The key differentiating factor of Entertainment VAS is the mass

appeal it generates. These provide entertainment for leisure time usage. These not only
generate heavy volume (owing to its mass appeal) but also heavy usage. An example
of these kinds of services is Jokes, Bollywood Ringtones, CRBT (Caller Ring Back
Tone) and games.

These services continue to be popular and have been key revenue generators for the
Indian mobile VAS market. This is a high value MVAS and will continue to show
growth. Other popular Entertainment VAS driving the market are dating and chatting
services.

The service was first introduced 2 years back and is now being offered by all the
operators. This service is not only growing fast but also witnessing less churn as

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 compared to other MVAS. Owing to its sticky nature, it requires comparatively less
marketing efforts and cost.

Entertainment VAS has the potential to remain a key contributor to Mobile VAS
industry. To sustain the MVAS growth, it is the responsibility of the industry to keep
discovering/innovating killer applications like CRBT (Caller Ring Back Tone) at
regular intervals.

M-Commerce or Mobile payment:

These are the services which involve some transaction using the mobile phone.
Example: Buying movie tickets using mobile phone or transfer of money from one
bank account to the other.

These can broadly be classified into 2 types:

 Mobile banking.
 Mobile payments.

Almost all the operators are conducting pilot exercises for mCommerce services using
different access modes like GPRS, USSD, STK, etc. A big boost to mcommerce has
come from the RBI which recently came out with some guidelines.

m-Commerce penetration continues to be small but awareness is increasing. Operators

are betting on technologies like USSD to make the service handset agnostic.

The current marketing focus is primarily on mobile bill payment and m-banking.
Industry is betting on tripling number of m-Commerce users within this year.

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 The revenue generation and popularity of any MVAS revolves around 2 factors:

ENTERTAINMENT INFOTAINMENT M-COMMERCE

VAS VAS
Definition These services provide These are the services
Entertainment for leisure which provide some useful
time. These services information to the end user.
usually generate mass The user interest comes
appeal. from personal or relevant
component of the content
Current status Entertainment VAS is Information VAS is getting
driving the VAS market popular with different
both in terms of categories depending
volume and revenue on the relevance.
Drivers Industry focus is on Entities using mobile as
Entertainment VAS with another channel to deliver
new players coming from information is driving
media and movie houses information VAS. E.g.
e.g. STAR, Rajshri stock updates, bank
account information, travel
information, etc.
Challenges Currently, music is the Marketing is the biggest
biggest component. challenge since
Challenge is to drive Information need
the usage of other content differs across different
/services like games. segments.
Credibility of the source is
another challenge since
there are alternate channels
available to get
Information VAS.
Future status Entertainment VAS is Information VAS is going
expected to remain the to be key to address the
VAS driver for the next needs of growing rural
few years. market.
These are the services
which involve some
transaction non mobile
mCommerce is currently in
embryonic stage
RBI guidelines is expected
to give a big boost to
mBanking.
Identifying the best access
mode to provide
mCommerce is a big
challenge.
Handset penetration and
usage of the key access
mode (GPRS) of
mCommerce is low in
India
Allaying security concerns
mCommerce has the
potential to emerge as a
key VAS component once
security concerns are
addressed.

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 Market Share of the various M-VAS segments:

Broadly M-VAS market is being divided into three main segments, namely-

 Infotainment.
 Entertainment.
 M-Commerce.

The market share of the total M-VAS market (According to FY 2009), can be shown
as-

ENTERTAINMENT INFOTAINMENT M-COMMERCE

CRBT & Ringtones SMS (A2P & P2P) M-Banking & M-Payment

35% 55% <10%

42bn 66bn <9bn

Note: The total VAS Revenue in FY 2009 is 121bn.

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 According to the survey by KPMG in the end of FY 2009, some predictions are
made as:

 86% of Indian People will like Mobile TV in FY 2010.

 63% of Indian People will like Mobile Gaming in FY 2010.
 M-Commerce will remain a problem child up to 2013.

 As it requires large subsidiary.

 Security is a prime concern.
 Inconvenience is also a major problem.
 Lack of awareness is the main hurdle for its growth.

Perceived & Practical value of various categories of MVAS:

 Perceived & Practical value of Entertainment VAS

Entertainment VAS has been responsible for fueling the growth of Mobile VAS in
India and continues to do so. It has been able to capture the imagination of the end
consumer and is being used not only for self entertainment but also for self expression
as in the case of forwarded P2P messages, CRBT, etc.

The key component in Entertainment VAS is music which is responsible for

popularity of FM channels, devices like iPod and even preference of FM enabled
mobile phones by the end consumer.

This is another reason that we are witnessing creation of new stakeholders in the
MVAS industry which are emerging from media houses like STAR mobile
entertainment and movie production houses like Rajshri Productions.

Note: Entertainment VAS has a very high perceived value but scores low on
practical value.

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  Perceived & Practical value of Infotainment VAS:

The key characteristic of Information VAS is that most of it caters to specific

segments within VAS users and is seldom of mass appeal. This makes the task of
marketing these services difficult.

Note: These have a moderate practical value and low perceived value.

But it has the potential of high practical value in cases such as stock updates, etc.

 Perceived & Practical value of M-Commerce:

M-Commerce in India is at an embryonic stage and only a small percentage of the

mobile users are even aware of availability of such services.

Note: Though it has a low perceived value, the practical value of m-Commerce has
the highest potential among all MVAS.

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 Some Facts about SMS:

 SMS contributes 55% in the VAS Revenue.

 SMS is a powerful marketing tool, with 5% interaction rate & 32% success rate.
(Rest 68% SMS’s are either being deleted or ignored).

 An average Indian sends 29 SMS in a month.

Note: The above facts are according to Gartner M-VAS Report.

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 Value Chain
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Overall Value Chain of M-VAS:

Value Chain of M-VAS is shown above that includes six stages as-

 End Client or user send request to the Server.

 From the central server request goes to Platform Enabler. E.g. Jatayu system.

 Platform enabler co ordinate with the Service provider like Airtel.

 Content aggregator like Start enterprise, take contents from the Content
Providers like Hungama Mobile, Mauj Telecom etc.

 Service provider reply back to the end client by using the same channel.

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 Value Chain of SMS ( A2P):

Value Chain of SMS is shown above that includes five stages as-

 End client made request to the service provider via server.

 From the server it will go to the platform enabler through Service

provider.

 Service Provider contacts the Content aggregator & Content provider for
the requested service.

 After aggregating the service properly, it reply back to the end user with
requested service.

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 Value Chain of Short Code:

Value Chain of Short Code is shown above that includes five stages as-

 End client will make request and send it to 56363 through the service
provider.

 Content Aggregator (Start Enterprise) that has taken short code from the
Short Code provider (Nazara Telecom), forwarded the request to the
Client (e.g. Reliance Life).

 Automatic response will go from the Client to the End user or Request
maker through Content aggregator (Start Enterprise).

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 Value Chain of Long Code or Virtual Number:

Value Chain of Long Code is shown above that includes Five stages as-

 Pull Mechanism: Message is pulling from the end user & send it to the
Client.

 Push Mechanism: Client send the reply to the end user through the Bulk
SMS process.

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 Key Players
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Content Aggregators in Infotainment segment & their brief detail:

 SMS Country Networks:

SMS Country's Core Messaging Platform provides an easy, efficient and flexible
option to integrate with your website / application, facilitating auto-generated SMS
Text messages to be delivered to the intended recipient’s mobile phones. This method
does not require SMS Country's Software Platform at Enterprise/Data Center site.

Supported Protocols:
 SMPP.
 HTTP.

 Route SMS:
Route SMS Solutions provides Bulk SMS dedicated Routes to various companies who
looking bulk SMS as marketing tool. The Gateway Service provides full end to end
solution as far as third party integration is concern.

Supported Protocols:
 SMPP
 HTTP

 Planet41:
Planet41 provide a specialized engine for text messaging for bulk users, Mobile
Marketing and for integration with various web links. We provide solutions for all
mobile networks. Our engine support Voice SMS and video SMS too.

Supported Protocols:
 HTTP.
 SOAP/XML.
 SMTP.

 mySMSaddress.com:
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 Each SMS account has access to SMPP service and access is both SMPP 3.3 and 3.4
compliant. MySMSaddress.com supports 2 way communication and return delivery
reports with the error or status codes of your messages/ You can bind your gateway or
application to our SMSC as transceiver or transmitter and receiver. Send Normal Text,
Unicode, Binary, Ringtones, pictures, logos, V-cards, V- calendar, Flash, WAP Push,
and OTA provisioning along with other formats. Mobile Originated (MO) Virtual
number Short code messages and delivery reports for messages sent, are sent to your
application using the receive or transceiver channel.

Supported Protocols:
 SMPP
 HTTP

 SMS GupSup:
SMS GupSup is a global wireless messaging service provider in India. We are a
leading end-to-end mobile data solutions provider that caters to corporate and
individuals throughout the world. To increase support to our clients, we also do
provide value added services such as customization and integration.

Supported Protocols:
 SMPP
 HTTP
 SOAP.
 DLL.

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 Industry Growth & Changes Going Forward
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Future of M-VAS in India:

Mobile VAS industry in India is undergoing a lot of structural changes. Mobile VAS
industry is poised to grow and contribute greater revenues to the telecom industry.

 Consolidation of MVAS content provider’s market: Currently, the MVAS market

is fragmented and consists of a large number of small content providers.
Consolidation of MVAS market will happen, leading to emergence of few strong
content providers. This would enable content providers to command greater share of
revenue in the MVAS ecosystem.

 Rational revenue structure: With the growth of MVAS market in India, more
rationality will emerge in the revenue structure. The revenue structure would be
dependent on the value added by the respective stakeholder in delivering the product
to the end user. This would enable the growth of MVAS market in India.

 Rural MVAS market: MVAS market in India is largely dominated by urban

population, with rural constituting around 15% of the total market. Rural MVAS
market would witness marginal growth and would grow to around 20% in the next
couple of years. The growth drivers would be availability of vernacular content,
entertainment services and voice based services.

 Growth of M-commerce market: M-commerce has tremendous growth opportunity

in India. High penetration of mobile phones would give a boost to this industry. The
stakeholders need to work in tandem to ensure that issues like low awareness, security
constraints, user friendliness and pricing of the services are aligned towards the
consumers. The services that would provide boost to the m-commerce market in India
are mobile marketing, mobile banking and mobile payment. A major step has been
taken by RBI in issuing the m-Banking guidelines.

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  Differential pricing of content: The telecom operators have already taken a step in
this direction. Further, in an attempt to cater to the expanding mobile subscribers in
India, the telecom operators will price the content in a manner suitable to the target
respondent.

 Number portability: Government of India is planning to launch number portability in

the metros by end of 2010 and in all the remaining circles by 1st quarter of 2011. This
would enable users to change service providers while retaining the mobile number.

Growth driver of M-VAS Industry:

 Increase in User Base: On an average about 8.5 Million mobile subscribers are being
added every month and therefore the mobile industry is witnessing an unprecedented
growth. With increasing growth rate of low end subscribers Traditional MVAS (P2P
and P2A SMS) will have a huge growth potential among the low end mobile
subscribers.

 Price Decline of MVAS services: Looking at the high growth rate of low end mobile
subscribers the MVAS services are being offered at attractive prices such subscription
packs of free SMS or news alerts etc.

 New Technology Adoption By operators: From 3G, new services for premium
MVAS consumers will come like video services which use fair amount of bandwidth,
(live TV, cricket match). Today because of lack of data speed it just does not work.

 Impact of 3G: The Ministry’s decision to open up the bidding to all player for 3G
spectrum, gives a chance to the foreign players like Deutsche Telecom, AT&T and
new Indian players such as Unitech and Hindujas to enter the high growth telecoms
market.
 Players who would get 3G spectrum would have an upper hand as relative to
other players.
 Entry of foreign players would encourage the growth of mobile VAS services
for additional revenues.

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 Growth of SMS Marketing:

SMS Marketing:

In the last 3 years, mobile has become the greatest media for communication in India.
Marketers are utilizing this to promote their service using mobile. Mobile advertising
is a form of advertising where marketers target mobile users for marketing of their
products and services.

While using traditional media of marketing such as print, television, etc, the marketers
are not sure whether the consumer would take notice of the promotional campaign or
not, the main advantage of mobile marketing is that since the marketing message is
delivered on the mobile phone, a personal device, and the target respondent ends up
taking notice of the campaign.

Mobile marketing services can be pull-based or push-based.

 Push based mobile marketing: In this mode, the service providers send
mobile based advertisements to the users. Presently, this is the most popular
mode of mobile marketing in India. Many companies are using this as an
effective medium for reaching out to their users.

 Pull based mobile marketing: In this, the users can access content by simply
sending an SMS or calling a number. For example, such mobile marketing is
adopted by Pepsi, Kwality Walls’ etc. the users are allowed to access the
content available with the service providers.

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 Drivers to the Growth of mobile Marketing:

 High penetration of mobile phones: Currently, there are 660 million mobile
phone users in India. With such a huge subscriber base, mobile is a very
effective medium for marketing goods and services to the end user. Mobile
marketing would enable marketers to develop customized campaigns as per
specific target respondents’ profile. This would increase the effectiveness of
marketing.

 Consumer oriented business model: Mobile marketing model is consumer

centric. The telecom operators charge the marketers and thus the consumer is
benefitted. In some models, like mginger, etc. the consumer is even paid to
receive advertisements on his mobile. This model would stimulate the growth
of mobile marketing in India.

 Usage of voice as a media for mobile marketing: Usage of Voice for mobile
marketing would help the marketers to reach out to the rural subscribers also.
This can be achieved with deployment of regional content for mobile
marketing.

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 Issues facing by Mobile marketing in India are:

 Lack of customization of mobile advertisements: Mobile marketing is at a

nascent stage in India. The current mass marketing efforts by the marketers are
not generating the required impact among the consumers. The need of the hour
is to have customized marketing of products and services as per the consumer
requirements. Since this is a new concept, the stakeholders are playing safe by
adopting mass marketing in the beginning.

 High penetration of cheaper handsets: Presently, mobile advertising space in

India is dominated by SMS. Gradually, voice is also taking up. Parachute was
among the first ones to use voice for mobile marketing. Reliance Mobile World
users were able to listen to ‘Gorgeous Hamesha’ jingles through voice portal
services. But development of video based mobile marketing has a long way to
go in the Indian Market. This is due to the fact that the higher penetration of
cheaper handsets restrains the growth of video based mobile marketing.

 Limited usage of GPRS/WAP: Mobile internet can be used as a very effective

medium for marketing of products and services on mobile. This would enable
users to view video as well as audio content. Limited GPRS usage is a
hindrance to the growth of internet based marketing on mobile phones.

 Do-Not-Disturb Registry and spectrum requirements: The Do-Not-Call

registry move by the government would hamper the growth of mobile
marketing in India. It would restrain the service providers from using voice
platform for mobile marketing. Also, using voice for mobile marketing would
increase the load on the spectrum of mobile operators. Mobile marketing in
India is growing and has huge potential in India. The increasing pace of
adoption of mobile marketing by telecom operators and marketers indicates a
bright future.

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 M-VAS growth after 3G:

Comparison of VAS revenue with & without 3G

FISCAL YEARS TELECOM VAS REVENUE VAS REVENUE

WIRELESS
REVENUE
BEFORE 3G AFTER 3G
2009 936bn 121bn 121bn
2010 1050bn 136bn 136bn
2013 1500bn 191bn 450bn

It is expected that once the 3G hold the place in Indian market, the scenario will be
different as:

 The Revenue sharing between the Telco & M-VAS will be 60:40 as compared
to current 70:30.

 VAS will contribute 30% in total Telco revenue.

 VAS will grow with 30% CAGR once the 3G take place.

Note: All the data’s are according to Gartner report FY’09, IMRB Report ’09 & KPMG
FY’08 prediction.

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