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Future of Mobile VAS in India Executive Summary December 2007 Mohit S. Gundecha Research Associate  Stanford University Pr...
Our special thanks to: <ul><li>Eric Allen  –   Wireless Advisor </li></ul><ul><li>Veerchand Bothra  – Author, MobilePundit...
The team followed the below process in a very limited timeline, yet was able to gather extensive primary information from ...
Leading VAS players in India profiled during project
Table of Contents <ul><li>Indian Telecom Overview </li></ul><ul><li>Introduction to VAS in India   </li></ul><ul><ul><li>V...
Source: TRAI, COAI, AUSPI, BDA Analysis <ul><li>Despite the continued record growth over the last 12 months, only 23.07% o...
Market continues to show a trend of over 7 million net subscriber additions in a month Million Micro Prepaid Takes off Lau...
Rules of the game Source: BDA Analysis Unprecedented Growth Declining Tariff Declining Handset Prices Innovative Pre-Paid ...
Over the recent years, most new subscribers being acquired have been low-end users, resulting in falling ARPU Source: Comp...
Operators and handset vendors must adapt their strategies to serve the Bottom of the Pyramid Growth is taking off in semi-...
Table of Contents <ul><li>Indian Telecom Overview </li></ul><ul><li>Introduction to VAS in India   </li></ul><ul><ul><li>V...
India’s VAS market estimates show aggressive growth and decreasing relative importance of text-based offerings Source: COA...
VAS today comprises of primarily SMS and content focuses on Bollywood & Cricket Source: BDA Analysis <ul><li>SMS has been ...
Table of Contents <ul><li>Indian Telecom Overview </li></ul><ul><li>Introduction to VAS in India   </li></ul><ul><ul><li>V...
The VAS value chain consists of six entities primarily involved in the flow SI/NI Handset Vendor Aggregator Software Devel...
Network operators dominate the revenue sharing arrangement in VAS today Source: BDA Interview and Analysis, Industry Feedb...
Table of Contents <ul><li>Indian Telecom Overview </li></ul><ul><li>Introduction to VAS in India   </li></ul><ul><ul><li>V...
VAS challenges … Operator Challenge Device Challenge Content Localization Challenge <ul><li>Operators focusing on subscrib...
VAS challenges … Operator Challenge Device Challenge Content Localization Challenge <ul><li>Operators focusing on subscrib...
VAS challenges … Operator Challenge Device Challenge Content Localization Challenge <ul><li>Operators focusing on subscrib...
VAS challenges … Operator Challenge Device Challenge <ul><li>Operators focusing on subscriber acquisition with no incentiv...
VAS challenges … Device Challenge <ul><li>Providing feature-rich handsets at low cost is a big challenge with GPRS enabled...
VAS challenges … Value  Added Services Source: BDA Analysis User Challenge <ul><li>Operators not driving user awareness to...
Table of Contents <ul><li>Indian Telecom Overview </li></ul><ul><li>Introduction to VAS in India  </li></ul><ul><ul><li>VA...
VAS challenges – moving on … Value  Added Services Source: BDA Analysis Challenge will be overcome Challenge will continue...
VAS challenges – moving on … Operator Challenge User Challenge Device Challenge Content Localization Challenge <ul><li>Reg...
VAS challenges – moving on … Operator Challenge Device Challenge Content Localization Challenge <ul><li>Regulatory uncerta...
VAS challenges – moving on … Operator Challenge Device Challenge <ul><li>Regulatory uncertainty around spectrum is going t...
VAS challenges – moving on … Device Challenge <ul><li>Devices are no more a challenge with more features getting added at ...
VAS challenges – moving on … Value  Added Services Source: BDA Analysis Content Localization Challenge <ul><li>IVR will be...
Table of Contents <ul><li>Indian Telecom Overview </li></ul><ul><li>Introduction to VAS in India  </li></ul><ul><ul><li>VA...
Industry sentiment gives a clear indication where the revenues are likely to come from Source: BDA Interviews and Analysis...
Industry sentiment about internet apps being ported to mobile are mixed, especially given low data enabled handset penetra...
Table of Contents <ul><li>Indian Telecom Overview </li></ul><ul><li>Introduction to VAS in India  </li></ul><ul><ul><li>VA...
In the medium term most of the current challenges will be addresses by both operators and VAS players… Source: BDA Analysi...
In the medium term most of the current challenges will be addresses by both operators and VAS players… Source: BDA Analysi...
In the medium term most of the current challenges will be addresses by both operators and VAS players… Source: BDA Analysi...
How do the numbers stack up 2007 2010 W-VAS Services Performance Forecast 100%= USD 926.3 mn 100%= USD 2,744 mn VAS Revenu...
2010 and beyond… 2010 and Beyond Source: BDA Analysis <ul><li>Share of traditional VAS will decline to less than 50% in 20...
Contact Details BDA Team Kunal Bajaj Director - India kunal.bajaj@bdaconnect.com  Girish Trivedi -  Principal Manager Deep...
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Mobile VAS In India - Exec. Summary

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  • its a good presentation. i would be very thankful to you if a copy is send to me as soon as possible at amitbituagarwal@gmail.com
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  • Going by the comments, would appreciate if a copy is sent to prashantbhardwaj@gmail.com
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  • Excellent presentation, would it be possible to share with me for personal use to spollack@btopenworld.com thank you very much
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  • Hi...nikhil here....ur ppt is really gud...so can u share dis at 'nikhilgirme.sitm@gmail.com'
    thanx in advance>>>>>>>>
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  • dear Mohit,

    please share this presentation for my research project at shwetaparag@gmail.com
    Regards
    Shweta
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  1. 1. Future of Mobile VAS in India Executive Summary December 2007 Mohit S. Gundecha Research Associate Stanford University Prof. Tom Kosnik Fenwick & West Consulting Professor STVP, Stanford University Kunal Bajaj Director – India BDA
  2. 2. Our special thanks to: <ul><li>Eric Allen – Wireless Advisor </li></ul><ul><li>Veerchand Bothra – Author, MobilePundit </li></ul><ul><li>Nitin Brahmankar – Director, IDT </li></ul><ul><li>Girish Trivedi – Principal Manager </li></ul><ul><li>Deepshikha Garg </li></ul><ul><li>Rahul Gupta </li></ul><ul><li>Smita Sharma </li></ul>BDA Team:
  3. 3. The team followed the below process in a very limited timeline, yet was able to gather extensive primary information from industry leaders Research Design Primary Data: Interviewed 23 leading VAS companies, each of the major telecom operators and other industry experts Secondary Data: BDA Database & Reports Why Mobile? Why India? Why Now? Mobile Momentum Sept 15 Sept 30 Oct 15 Oct 30 Nov 15 Nov 30 Stanford & BDA Team Synthesis & Analysis
  4. 4. Leading VAS players in India profiled during project
  5. 5. Table of Contents <ul><li>Indian Telecom Overview </li></ul><ul><li>Introduction to VAS in India </li></ul><ul><ul><li>VAS Value Chain </li></ul></ul><ul><ul><li>Key Challenges & Hurdles Today </li></ul></ul><ul><li>VAS Outlook for India </li></ul><ul><ul><li>Addressing Challenges & Hurdles </li></ul></ul><ul><ul><li>Assessment of Applications & Services </li></ul></ul><ul><li>Projections </li></ul>
  6. 6. Source: TRAI, COAI, AUSPI, BDA Analysis <ul><li>Despite the continued record growth over the last 12 months, only 23.07% of the country’s 1.1 bn population owns a telephone, which points to a situation where growth is expected to continue and even accelerate </li></ul><ul><li>The Big 4 continue to lead in market share, but BSNL is losing ground to the other 3 quickly </li></ul>Interesting Market Facts Indian telecom overview Note: Mobile subs data includes fixed wireless customers Operator Market Share (Oct 2007) 2.67 million (Sept 2007) Broadband Subs 9.22 million (Jun 2007) Internet Subs 217.14 million (Oct 2007) Mobile Subs 39.41 million (Oct 2007 ) Fixed Subs 1.112 billion Population
  7. 7. Market continues to show a trend of over 7 million net subscriber additions in a month Million Micro Prepaid Takes off Launch of 999 scheme Penetration in B & C Circles Verification of subscribers Launch of INR 777 Handsets / Lifetime Prepaid Below INR 500 Record Additions in a month Source: TRAI, Morgan Stanley Research, Telecom Watch, BDA Analysis <ul><li>Net new additions continued to be high but less than the last couple of months. </li></ul><ul><li>With aggressive rollout targets by operators such as Airtel who plan to expand coverage to rural areas, the trend of new subscribers additions will continue </li></ul>
  8. 8. Rules of the game Source: BDA Analysis Unprecedented Growth Declining Tariff Declining Handset Prices Innovative Pre-Paid Tariff Plans Improved Regulatory Structure
  9. 9. Over the recent years, most new subscribers being acquired have been low-end users, resulting in falling ARPU Source: Company Information, TRAI, BDA Interview and Analysis <ul><li>ARPUs are dropping as volumes increase </li></ul><ul><ul><li>With increased competition, tariffs of voice calls have gradually declined over the years </li></ul></ul><ul><ul><li>Most of the subscribers added are from the bottom of the pyramid with low usage resulting in reduced ARPU </li></ul></ul><ul><li>Operators are focused on acquiring customers. The fall in ARPU will continue unless operators look at alternative revenue streams like VAS </li></ul><ul><ul><li>It is unlikely tariffs will increase given aggressive competition between operators to add subs </li></ul></ul><ul><ul><li>Spectrum allocation based on subscriber linked criteria has pushed operators to focus more on acquiring subscribers </li></ul></ul>Mobile ARPUs are Declining Precipitously ARPU (INR) Subscriber (mn)
  10. 10. Operators and handset vendors must adapt their strategies to serve the Bottom of the Pyramid Growth is taking off in semi- urban and rural areas Growth is continuing in metros and urban USO will help continue to drive coverage gains Operators and vendors must adapt their strategies and distribution to meet this new growth Growth is fastest at the Bottom of the Pyramid Source: BDA Analysis
  11. 11. Table of Contents <ul><li>Indian Telecom Overview </li></ul><ul><li>Introduction to VAS in India </li></ul><ul><ul><li>VAS Value Chain </li></ul></ul><ul><ul><li>Key Challenges & Hurdles Today </li></ul></ul><ul><li>VAS Outlook for India </li></ul><ul><ul><li>Addressing Challenges & Hurdles </li></ul></ul><ul><ul><li>Assessment of Applications & Services </li></ul></ul><ul><li>Projections </li></ul>
  12. 12. India’s VAS market estimates show aggressive growth and decreasing relative importance of text-based offerings Source: COAI, IAMAI, BDA Analysis <ul><li>VAS services presently contribute 7% of the total telecom revenue for Indian operators </li></ul><ul><li>Non voice revenues have been increasing since 2000. The revenue growth is driven by SMS (including P2P, A2P, P2A), contributing over 55% of the total revenues in 2006 </li></ul><ul><li>Over the last three years the % share of revenues coming from SMS is on a decline as other services, primarily CRBT / Ringtones gain </li></ul>VAS Performance 2005 2006 Data and Voice Breakup 100% = USD 438 mn USD 678 mn Voice VAS Others E-mail Data Games Voice CRBT / Ringtones SMS (A2P P2A) SMS (P2P)
  13. 13. VAS today comprises of primarily SMS and content focuses on Bollywood & Cricket Source: BDA Analysis <ul><li>SMS has been recently driven by voting based TV shows. Indian Idol alone received more than 5,400 SMSs per minute during the last 9 voting days </li></ul><ul><li>SMS has been reinvented and adopted for mobile data services used by enterprises as well </li></ul>Bollywood/Cricket SMS Rural VAS IVR <ul><li>Bollywood is the killer content and is being used for ring tones, CRBT, games and wallpapers </li></ul><ul><li>It is followed by cricket, around which most of the rest of content is built and marketed </li></ul><ul><li>Niche applications like IVR have just started to emerge and have been successfully used in some of TV shows, as well, for auditioning participants </li></ul><ul><li>Rural application initiatives have started primarily in pilots, but with innovative services like commodity pricing, their utility is potentially very high in less developed geographies </li></ul>
  14. 14. Table of Contents <ul><li>Indian Telecom Overview </li></ul><ul><li>Introduction to VAS in India </li></ul><ul><ul><li>VAS Value Chain </li></ul></ul><ul><ul><li>Key Challenges & Hurdles Today </li></ul></ul><ul><li>VAS Outlook for India </li></ul><ul><ul><li>Addressing Challenges & Hurdles </li></ul></ul><ul><ul><li>Assessment of Applications & Services </li></ul></ul><ul><li>Projections </li></ul>
  15. 15. The VAS value chain consists of six entities primarily involved in the flow SI/NI Handset Vendor Aggregator Software Developer Technology Enabler Telco Consumer Content / Application Owner Source: BDA Interview and Analysis, Industry Feedback Internet Pipeline Content Flow Process Flow
  16. 16. Network operators dominate the revenue sharing arrangement in VAS today Source: BDA Interview and Analysis, Industry Feedback End User End user pays for the content Operator keeps 60 - 70% of revenue Aggregators get approx 20 - 25 % of revenue Content / Application owners get 10 - 15% of total revenue Network Operator Aggregator Content / Application Owner <ul><li>Overall revenue share split of 70:30 between operators and VAS players applies for both GSM and CDMA operators </li></ul>
  17. 17. Table of Contents <ul><li>Indian Telecom Overview </li></ul><ul><li>Introduction to VAS in India </li></ul><ul><ul><li>VAS Value Chain </li></ul></ul><ul><ul><li>Key Challenges & Hurdles Today </li></ul></ul><ul><li>VAS Outlook for India </li></ul><ul><ul><li>Addressing Challenges & Hurdles </li></ul></ul><ul><ul><li>Assessment of Applications & Services </li></ul></ul><ul><li>Projections </li></ul>
  18. 18. VAS challenges … Operator Challenge Device Challenge Content Localization Challenge <ul><li>Operators focusing on subscriber acquisition with no incentives to push VAS in light of current spectrum allocation criteria </li></ul><ul><li>Spectrum constraints and delay in 3G roll-out has substantially limited high-end VAS take-off </li></ul><ul><li>Providing feature-rich handsets at low cost is a big challenge with GPRS enabled handsets still around INR 2,599 (USD 63) </li></ul><ul><li>Pre-loading of applications by handset OEMs has not really caught on yet </li></ul><ul><li>Operators haven’t done much to customize content according to consumer behaviour </li></ul><ul><li>Limited availability of local web content and WAP versions of whatever is available </li></ul>Value Added Services Source: BDA Analysis User Challenge <ul><li>Operators not driving user awareness to promote various VAS offerings </li></ul><ul><li>Ease of use, user interface and familiarity with medium of access such as GPRS, IVR etc are some of the challenges for the end user </li></ul>Revenue Challenge <ul><li>Ongoing tussle between operators and VAS companies for revenue share continues </li></ul><ul><li>Since alternative models haven't evolved yet, this has hampered VAS innovation </li></ul>
  19. 19. VAS challenges … Operator Challenge Device Challenge Content Localization Challenge <ul><li>Operators focusing on subscriber acquisition with no incentives to push VAS in light of current spectrum allocation criteria </li></ul><ul><li>Spectrum constraints and delay in 3G roll-out has substantially limited high-end VAS take-off </li></ul><ul><li>Providing feature-rich handsets at low cost is a big challenge with GPRS enabled handsets still around INR 2,599 (USD 63) </li></ul><ul><li>Pre-loading of applications by handset OEMs has not really caught on yet </li></ul><ul><li>Operators haven’t done much to customize content according to consumer behaviour </li></ul><ul><li>Limited availability of local web content and WAP versions of whatever is available </li></ul>Value Added Services Source: BDA Analysis User Challenge <ul><li>Operators not driving user awareness to promote various VAS offerings </li></ul><ul><li>Ease of use, user interface and familiarity with medium of access such as GPRS, IVR etc are some of the challenges for the end user </li></ul>Revenue Challenge <ul><li>Ongoing tussle between operators and VAS companies for revenue share continues </li></ul><ul><li>Since alternative models haven't evolved yet, this has hampered VAS innovation </li></ul>Revenue Challenge <ul><li>Ongoing tussle between operators and VAS companies for revenue share continues </li></ul><ul><li>Since alternative models haven't evolved yet, this has hampered VAS innovation </li></ul><ul><li>Mobile advertising model is in nascent stage as agencies are yet to adopt this new channel and gain familiarity </li></ul>
  20. 20. VAS challenges … Operator Challenge Device Challenge Content Localization Challenge <ul><li>Operators focusing on subscriber acquisition with no incentives to push VAS in light of current spectrum allocation criteria </li></ul><ul><li>Spectrum constraints and delay in 3G roll-out has substantially limited high-end VAS take-off </li></ul><ul><li>Providing feature-rich handsets at low cost is a big challenge with GPRS enabled handsets still around INR 2,599 (USD 63) </li></ul><ul><li>Pre-loading of applications by handset OEMs has not really caught on yet </li></ul><ul><li>Operators haven’t done much to customize content according to consumer behaviour </li></ul><ul><li>Limited availability of local web content and WAP versions of whatever is available </li></ul>Value Added Services Source: BDA Analysis User Challenge <ul><li>Operators not driving user awareness to promote various VAS offerings </li></ul><ul><li>Ease of use, user interface and familiarity with medium of access such as GPRS, IVR etc are some of the challenges for the end user </li></ul>Revenue Challenge <ul><li>Ongoing tussle between operators and VAS companies for revenue share continues </li></ul><ul><li>Since alternative models haven't evolved yet, this has hampered VAS innovation </li></ul>User Challenge <ul><li>Operators not driving user awareness to promote various VAS offerings </li></ul><ul><li>Ease of use, user interface and familiarity with medium of access such as GPRS, IVR etc are some of the challenges for the end user </li></ul>
  21. 21. VAS challenges … Operator Challenge Device Challenge <ul><li>Operators focusing on subscriber acquisition with no incentives to push VAS in light of current spectrum allocation criteria </li></ul><ul><li>Spectrum constraints and delay in 3G roll-out has substantially limited high-end VAS take-off </li></ul><ul><li>Providing feature-rich handsets at low cost is a big challenge with GPRS enabled handsets still around INR 2,599 (USD 63) </li></ul><ul><li>Pre-loading of applications by handset OEMs has not really caught on yet </li></ul>Value Added Services Source: BDA Analysis User Challenge <ul><li>Operators not driving user awareness to promote various VAS offerings </li></ul><ul><li>Ease of use, user interface and familiarity with medium of access such as GPRS, IVR etc are some of the challenges for the end user </li></ul>Revenue Challenge <ul><li>Ongoing tussle between operators and VAS companies for revenue share continues </li></ul><ul><li>Since alternative models haven't evolved yet, this has hampered VAS innovation </li></ul>Content Localization Challenge <ul><li>Operators haven’t done much to customize content according to consumer behaviour </li></ul><ul><li>Limited availability of local web content and WAP versions of whatever is available </li></ul>Content Localization Challenge <ul><li>Operators haven’t done much to customize content according to consumer behavior </li></ul><ul><li>Limited availability of local web content and WAP versions of whatever is available </li></ul>
  22. 22. VAS challenges … Device Challenge <ul><li>Providing feature-rich handsets at low cost is a big challenge with GPRS enabled handsets still around INR 2,599 (USD 63) </li></ul><ul><li>Pre-loading of applications by handset OEMs has not really caught on yet </li></ul>Value Added Services Source: BDA Analysis User Challenge <ul><li>Operators not driving user awareness to promote various VAS offerings </li></ul><ul><li>Ease of use, user interface and familiarity with medium of access such as GPRS, IVR etc are some of the challenges for the end user </li></ul>Revenue Challenge <ul><li>Ongoing tussle between operators and VAS companies for revenue share continues </li></ul><ul><li>Since alternative models haven't evolved yet, this has hampered VAS innovation </li></ul>Content Localization Challenge <ul><li>Operators haven’t done much to customize content according to consumer behaviour </li></ul><ul><li>Limited availability of local web content and WAP versions of whatever is available </li></ul>Operator Challenge <ul><li>Operators focusing on subscriber acquisition with no incentives to push VAS in light of current spectrum allocation criteria </li></ul><ul><li>Spectrum constraints and delay in 3G roll-out has substantially limited high-end VAS take-off </li></ul>Operator Challenge <ul><li>Operators focusing on subscriber acquisition with no incentives to push VAS in light of current spectrum allocation criteria </li></ul><ul><li>Spectrum constraints and delay in 3G roll-out has substantially limited high-end VAS take-off </li></ul>
  23. 23. VAS challenges … Value Added Services Source: BDA Analysis User Challenge <ul><li>Operators not driving user awareness to promote various VAS offerings </li></ul><ul><li>Ease of use, user interface and familiarity with medium of access such as GPRS, IVR etc are some of the challenges for the end user </li></ul>Revenue Challenge <ul><li>Ongoing tussle between operators and VAS companies for revenue share continues </li></ul><ul><li>Since alternative models haven't evolved yet, this has hampered VAS innovation </li></ul>Content Localization Challenge <ul><li>Operators haven’t done much to customize content according to consumer behaviour </li></ul><ul><li>Limited availability of local web content and WAP versions of whatever is available </li></ul>Operator Challenge <ul><li>Operators focusing on subscriber acquisition with no incentives to push VAS in light of current spectrum allocation criteria </li></ul><ul><li>Spectrum constraints and delay in 3G roll-out has substantially limited high-end VAS take-off </li></ul>Device Challenge <ul><li>Providing feature-rich handsets at low cost is a big challenge with GPRS enabled handsets still costing around INR 2,599 (USD 63) </li></ul><ul><li>Pre-loading of applications by handset OEMs has not really caught on yet </li></ul>Device Challenge <ul><li>Providing feature-rich handsets at low cost is a big challenge with GPRS enabled handsets still costing around INR 2,599 (USD 63) </li></ul><ul><li>Pre-loading of applications by handset OEMs has not really caught on yet </li></ul>
  24. 24. Table of Contents <ul><li>Indian Telecom Overview </li></ul><ul><li>Introduction to VAS in India </li></ul><ul><ul><li>VAS Value Chain </li></ul></ul><ul><ul><li>Key Challenges & Hurdles Today </li></ul></ul><ul><li>VAS Outlook for India </li></ul><ul><ul><li>Addressing Challenges & Hurdles </li></ul></ul><ul><ul><li>Assessment of Applications & Services </li></ul></ul><ul><li>Projections </li></ul>
  25. 25. VAS challenges – moving on … Value Added Services Source: BDA Analysis Challenge will be overcome Challenge will continue to exist Challenge may be overcome or could continue to exist Revenue Challenge <ul><li>Advertisements will be a new revenue avenue for VAS players and could offer them the independence they need to succeed </li></ul><ul><li>Mobile advertising will benefit operators, advertisers, VAS players and consumers </li></ul>User Challenge <ul><li>Traditional VAS – SMS, CRBT and ringtones will continue to grow with increased awareness </li></ul><ul><li>Awareness will remain a problem for advanced VAS services unless marketing is done by VAS companies themselves to educate users </li></ul>Content Localization Challenge <ul><li>IVR will be a solution to local language support </li></ul><ul><li>Creating the locally relevant content will still require substantial investments </li></ul>Operator Challenge <ul><li>Regulatory uncertainty around spectrum is going to continue to hinder promotion of VAS </li></ul><ul><li>With 3G, operators will increase their focus on mobile internet VAS for high end users </li></ul>Device Challenge <ul><li>Devices are no more a challenge with more features getting added at lower price points </li></ul><ul><li>VAS players and handset vendors are forming partnerships to embed applications </li></ul>
  26. 26. VAS challenges – moving on … Operator Challenge User Challenge Device Challenge Content Localization Challenge <ul><li>Regulatory uncertainty around spectrum is going to continue to hinder promotion of VAS </li></ul><ul><li>With 3G, operators will increase their focus on mobile internet VAS for high end users </li></ul><ul><li>Traditional VAS – SMS, CRBT and ringtones will continue to grow with increased awareness </li></ul><ul><li>Awareness will remain a problem for advanced VAS services unless marketing is done by VAS companies themselves to educate users </li></ul><ul><li>Devices are no more a challenge with more features getting added at lower price points </li></ul><ul><li>VAS players and handset vendors are forming partnerships to embed applications </li></ul><ul><li>IVR will be a solution to local language support </li></ul><ul><li>Creating the locally relevant content will still require substantial investments </li></ul>Value Added Services Source: BDA Analysis Challenge will be overcome Challenge will continue to exist Challenge may be overcome or could continue to exist Revenue Challenge <ul><li>Advertisements will be a new revenue avenue for VAS players and could offer them the independence they need to succeed </li></ul><ul><li>Mobile advertising will benefit operators, advertisers, VAS players and consumers </li></ul>Revenue Challenge <ul><li>Advertisements will be a new revenue avenue for VAS players and could offer them the independence they need to succeed </li></ul><ul><li>Mobile advertising will benefit operators, advertisers, VAS players and consumers </li></ul>
  27. 27. VAS challenges – moving on … Operator Challenge Device Challenge Content Localization Challenge <ul><li>Regulatory uncertainty around spectrum is going to continue to hinder promotion of VAS </li></ul><ul><li>With 3G, operators will increase their focus on mobile internet VAS for high end users </li></ul><ul><li>Devices are no more a challenge with more features getting added at lower price points </li></ul><ul><li>VAS players and handset vendors are forming partnerships to embed applications </li></ul><ul><li>IVR will be a solution to local language support </li></ul><ul><li>Creating the locally relevant content will still require substantial investments </li></ul>Value Added Services Source: BDA Analysis Challenge will be overcome Challenge will continue to exist Challenge may be overcome or could continue to exist Revenue Challenge <ul><li>Advertisements will be a new revenue avenue for VAS players and could offer them the independence they need to succeed </li></ul><ul><li>Mobile advertising will benefit operators, advertisers, VAS players and consumers </li></ul>User Challenge <ul><li>Traditional VAS – SMS, CRBT and ringtones will continue to grow with increased awareness </li></ul><ul><li>Awareness will remain a problem for advanced VAS services unless marketing is done by VAS companies themselves to educate users </li></ul>User Challenge <ul><li>Traditional VAS – SMS, CRBT and ringtones will continue to grow with increased awareness </li></ul><ul><li>Awareness will remain a problem for advanced VAS services unless marketing is done by VAS companies themselves to educate users </li></ul>
  28. 28. VAS challenges – moving on … Operator Challenge Device Challenge <ul><li>Regulatory uncertainty around spectrum is going to continue to hinder promotion of VAS </li></ul><ul><li>With 3G, operators will increase their focus on mobile internet VAS for high end users </li></ul><ul><li>Devices are no more a challenge with more features getting added at lower price points </li></ul><ul><li>VAS players and handset vendors are forming partnerships to embed applications </li></ul>Value Added Services Source: BDA Analysis Challenge will be overcome Challenge will continue to exist Challenge may be overcome or could continue to exist Revenue Challenge <ul><li>Advertisements will be a new revenue avenue for VAS players and could offer them the independence they need to succeed </li></ul><ul><li>Mobile advertising will benefit operators, advertisers, VAS players and consumers </li></ul>User Challenge <ul><li>Traditional VAS – SMS, CRBT and ringtones will continue to grow with increased awareness </li></ul><ul><li>Awareness will remain a problem for advanced VAS services unless marketing is done by VAS companies themselves to educate users </li></ul>Content Localization Challenge <ul><li>IVR will be a solution to local language support </li></ul><ul><li>Creating the locally relevant content will still require substantial investments </li></ul>Content Localization Challenge <ul><li>More content will be created for Bollywood and cricket as they are tried & tested </li></ul><ul><li>IVR will be a solution to local language support </li></ul><ul><li>Creating the locally relevant content will still require substantial investments </li></ul>
  29. 29. VAS challenges – moving on … Device Challenge <ul><li>Devices are no more a challenge with more features getting added at lower price points </li></ul><ul><li>VAS players and handset vendors are forming partnerships to embed applications </li></ul>Value Added Services Source: BDA Analysis Content Localization Challenge <ul><li>IVR will be a solution to local language support </li></ul><ul><li>Creating the locally relevant content will still require substantial investments </li></ul>Challenge will be overcome Challenge will continue to exist Challenge may be overcome or could continue to exist Revenue Challenge <ul><li>Advertisements will be a new revenue avenue for VAS players and could offer them the independence they need to succeed </li></ul><ul><li>Mobile advertising will benefit operators, advertisers, VAS players and consumers </li></ul>User Challenge <ul><li>Traditional VAS – SMS, CRBT and ringtones will continue to grow with increased awareness </li></ul><ul><li>Awareness will remain a problem for advanced VAS services unless marketing is done by VAS companies themselves to educate users </li></ul>Operator Challenge <ul><li>Regulatory uncertainty around spectrum is going to continue to hinder promotion of VAS </li></ul><ul><li>With 3G, operators will increase their focus on mobile internet VAS for high end users </li></ul>Operator Challenge <ul><li>Regulatory uncertainty around spectrum is going to continue to hinder promotion of VAS </li></ul><ul><li>In India, with the introduction of 3G, high end 2G users can be immediately migrated for delivering better service experience and freeing capacity </li></ul><ul><li>With 3G operators will increase their focus on mobile internet VAS for high end users </li></ul>
  30. 30. VAS challenges – moving on … Value Added Services Source: BDA Analysis Content Localization Challenge <ul><li>IVR will be a solution to local language support </li></ul><ul><li>Creating the locally relevant content will still require substantial investments </li></ul>Challenge will be overcome Challenge will continue to exist Challenge may be overcome or could continue to exist Revenue Challenge <ul><li>Advertisements will be a new revenue avenue for VAS players and could offer them the independence they need to succeed </li></ul><ul><li>Mobile advertising will benefit operators, advertisers, VAS players and consumers </li></ul>User Challenge <ul><li>Traditional VAS – SMS, CRBT and ringtones will continue to grow with increased awareness </li></ul><ul><li>Awareness will remain a problem for advanced VAS services unless marketing is done by VAS companies themselves to educate users </li></ul>Operator Challenge <ul><li>Regulatory uncertainty around spectrum is going to continue to hinder promotion of VAS </li></ul><ul><li>With 3G, operators will increase their focus on mobile internet VAS for high end users </li></ul>Device Challenge <ul><li>Devices are no more a challenge with more features getting added at lower price points </li></ul><ul><li>VAS players and handset vendors are forming partnerships to embed applications </li></ul>Device Challenge <ul><li>Devices are no more a challenge with more features getting added at lower price points </li></ul><ul><li>VAS players and handset vendors are forming partnerships to embed applications </li></ul><ul><li>GSM players have started adopting aggressive handset bundling thus reducing GSM cost of ownership, as well </li></ul>
  31. 31. Table of Contents <ul><li>Indian Telecom Overview </li></ul><ul><li>Introduction to VAS in India </li></ul><ul><ul><li>VAS Value Chain </li></ul></ul><ul><ul><li>Key Challenges & Hurdles Today </li></ul></ul><ul><li>VAS Outlook for India </li></ul><ul><ul><li>Addressing Challenges & Hurdles </li></ul></ul><ul><ul><li>Assessment of Applications & Services </li></ul></ul><ul><li>Projections </li></ul>
  32. 32. Industry sentiment gives a clear indication where the revenues are likely to come from Source: BDA Interviews and Analysis, Industry Feedback SMS Mobile Commerce Mobile Music UGC/SNC IVR <ul><li>Easy learning curve, regional language content </li></ul><ul><li>Capable of replicating info service from SMS or WAP </li></ul><ul><li>Platform for youth socializing </li></ul><ul><li>Online UGC/SNC gaining popularity in India </li></ul><ul><li>Full music download & streaming over 3G </li></ul><ul><li>Extension of current services </li></ul><ul><li>Micro payment for merchants on the move, mobile vouchers </li></ul><ul><li>Remittance and P2P transfers </li></ul><ul><li>Enhanced messaging experience for users </li></ul><ul><li>Contextual targeting of users </li></ul>For <ul><li>Pricing and network quality / speeds critical for the success </li></ul><ul><li>Bandwidth hampers content sharing </li></ul><ul><li>Handsets deliver poor user experience in viewing size & browser </li></ul><ul><li>Not affordable for the masses, due to premium charging on per min basis </li></ul><ul><li>Lack of refined digitized local language content </li></ul><ul><li>Convince advertisers about SMS ads </li></ul><ul><li>Contextual advertising could be intrusive in nature </li></ul><ul><li>As a cash & cheque country, will take time for mass market to adopt mCommerce </li></ul>Against Industry Feedback Application
  33. 33. Industry sentiment about internet apps being ported to mobile are mixed, especially given low data enabled handset penetration Source: BDA Interviews and Analysis, Industry Feedback IM E-mail Search LBS <ul><li>Useful for warehousing, field force resource tracking and fleet management for businesses </li></ul><ul><li>Access to quick, actionable information on the move </li></ul><ul><li>Across business segments will see increasing adoption of e-mail on the move </li></ul><ul><li>Access IM on the move & replicate internet experience </li></ul>For <ul><li>Lack of digitized locally relevant content (e.g. listings, maps) in India </li></ul><ul><li>Low level of business computerization </li></ul><ul><li>Lack of detailed mapping content </li></ul><ul><li>User demand not significant </li></ul><ul><li>Premium charging for messages </li></ul><ul><li>Text entry, especially for local language </li></ul><ul><li>Handset cost & overall investment in initial implementation is high deterrent </li></ul>Against Industry Feedback Application
  34. 34. Table of Contents <ul><li>Indian Telecom Overview </li></ul><ul><li>Introduction to VAS in India </li></ul><ul><ul><li>VAS Value Chain </li></ul></ul><ul><ul><li>Key Challenges & Hurdles Today </li></ul></ul><ul><li>VAS Outlook for India </li></ul><ul><ul><li>Addressing Challenges & Hurdles </li></ul></ul><ul><ul><li>Assessment of Applications & Services </li></ul></ul><ul><li>Projections </li></ul>
  35. 35. In the medium term most of the current challenges will be addresses by both operators and VAS players… Source: BDA Analysis 2008-09 Trends <ul><li>Continued low ARPU subscriber growth, forming majority of net adds will ensure growth of traditional VAS </li></ul><ul><li>Operators focus shifts from customer acquisition to VAS promotion, but very slowly </li></ul><ul><li>Device challenge will start to decline </li></ul><ul><li>Primary focus on reinvention of traditional VAS & early adoption of high end services </li></ul>Medium Term Growth Driver <ul><li>Overcoming challenges will rely on shifts in industry direction caused by regulatory changes like </li></ul><ul><ul><li>Mobile Number Portability </li></ul></ul><ul><ul><li>Allocation of 2G spectrum </li></ul></ul><ul><ul><li>Introduction of 3G </li></ul></ul><ul><li>Non-regulatory changes like </li></ul><ul><ul><li>Availability of payment systems other than the telco </li></ul></ul><ul><ul><li>Ad-supported VAS gaining ground, and thus consumers and VAS companies gain power </li></ul></ul><ul><ul><li>Promotion of bundling data plans with voice </li></ul></ul><ul><ul><li>Large numbers of users experiencing internet for first time on mobile devices </li></ul></ul><ul><li>And continuation of ongoing trends </li></ul><ul><ul><li>Product innovation and ease of use </li></ul></ul><ul><ul><li>Device improvements allowing more “on the go” </li></ul></ul><ul><ul><li>Shorter VAS adoption cycles </li></ul></ul>2006-07 Trends <ul><li>Subscriber growth at the low end has led to declining per capita VAS usage </li></ul><ul><li>Declining prices induced volume growth </li></ul><ul><li>Cost of smart phones & features rich handsets continue to decline, increasing adoption </li></ul>2006-07 Trends <ul><li>Subscriber growth at the low end has led to declining per capita VAS usage </li></ul><ul><li>Declining prices induced volume growth </li></ul><ul><li>Cost of smart phones & features rich handsets continue to decline, increasing adoption </li></ul>
  36. 36. In the medium term most of the current challenges will be addresses by both operators and VAS players… Source: BDA Analysis Medium Term Growth Driver <ul><li>Overcoming challenges will rely on shifts in industry direction caused by regulatory changes like </li></ul><ul><ul><li>Mobile Number Portability </li></ul></ul><ul><ul><li>Allocation of 2G spectrum </li></ul></ul><ul><ul><li>Introduction of 3G </li></ul></ul><ul><li>Non-regulatory changes like </li></ul><ul><ul><li>Availability of payment systems other than the telco </li></ul></ul><ul><ul><li>Ad-supported VAS gaining ground, and thus consumers and VAS companies gain power </li></ul></ul><ul><ul><li>Promotion of bundling data plans with voice </li></ul></ul><ul><ul><li>Large numbers of users experiencing internet for first time on mobile devices </li></ul></ul><ul><li>And continuation of ongoing trends </li></ul><ul><ul><li>Product innovation and ease of use </li></ul></ul><ul><ul><li>Device improvements allowing more “on the go” </li></ul></ul><ul><ul><li>Shorter VAS adoption cycles </li></ul></ul>2006-07 Trends <ul><li>Subscriber growth at the low end has led to declining per capita VAS usage </li></ul><ul><li>Declining prices induced volume growth </li></ul><ul><li>Cost of smart phones & features rich handsets continue to decline, increasing adoption </li></ul>2008-09 Trends <ul><li>Continued low ARPU subscriber growth, forming majority of net adds will ensure growth of traditional VAS </li></ul><ul><li>Operators focus shifts from customer acquisition to VAS promotion, but very slowly </li></ul><ul><li>Device challenge will start to decline </li></ul><ul><li>Primary focus on reinvention of traditional VAS & early adoption of high end services </li></ul>2008-09 Trends <ul><li>Continued low ARPU subscriber growth, forming majority of net adds will ensure growth of traditional VAS </li></ul><ul><li>Operators focus shifts from customer acquisition to VAS promotion, but very slowly </li></ul><ul><li>Device challenge will start to decline </li></ul><ul><li>Primary focus on reinvention of traditional VAS & early adoption of high end services </li></ul>
  37. 37. In the medium term most of the current challenges will be addresses by both operators and VAS players… Source: BDA Analysis 2008-09 Trends <ul><li>Continued low ARPU subscriber growth, forming majority of net adds will ensure growth of traditional VAS </li></ul><ul><li>Operators focus shifts from customer acquisition to VAS promotion, but very slowly </li></ul><ul><li>Device challenge will start to decline </li></ul><ul><li>Primary focus on reinvention of traditional VAS & early adoption of high end services </li></ul>2006-07 Trends <ul><li>Subscriber growth at the low end has led to declining per capita VAS usage </li></ul><ul><li>Declining prices induced volume growth </li></ul><ul><li>Cost of smart phones & features rich handsets continue to decline, increasing adoption </li></ul>Medium Term Growth Driver <ul><li>Overcoming challenges will rely on shifts in industry direction caused by regulatory changes like </li></ul><ul><ul><li>Mobile Number Portability </li></ul></ul><ul><ul><li>Allocation of 2G spectrum </li></ul></ul><ul><ul><li>Introduction of 3G </li></ul></ul><ul><li>Non-regulatory changes like </li></ul><ul><ul><li>Availability of payment systems other than the telco </li></ul></ul><ul><ul><li>Ad-supported VAS gaining ground, and thus consumers and VAS companies gain power </li></ul></ul><ul><ul><li>Promotion of bundling data plans with voice </li></ul></ul><ul><ul><li>Large numbers of users experiencing internet for first time on mobile devices </li></ul></ul><ul><li>And continuation of ongoing trends </li></ul><ul><ul><li>Product innovation and ease of use </li></ul></ul><ul><ul><li>Device improvements allowing more “on the go” </li></ul></ul><ul><ul><li>Shorter VAS adoption cycles </li></ul></ul>Medium Term Growth Driver <ul><li>Overcoming challenges will rely on shifts in industry direction caused by regulatory changes like </li></ul><ul><ul><li>Mobile Number Portability </li></ul></ul><ul><ul><li>Allocation of 2G spectrum </li></ul></ul><ul><ul><li>Introduction of 3G </li></ul></ul><ul><li>Non-regulatory changes like </li></ul><ul><ul><li>Availability of payment systems other than the telco </li></ul></ul><ul><ul><li>Ad-supported VAS gaining ground, and thus consumers and VAS companies gain power </li></ul></ul><ul><ul><li>Promotion of bundling data plans with voice </li></ul></ul><ul><ul><li>Large numbers of users experiencing internet for first time on mobile devices </li></ul></ul><ul><li>And continuation of ongoing trends </li></ul><ul><ul><li>Product innovation and ease of use </li></ul></ul><ul><ul><li>Device improvements allowing more “on the go” </li></ul></ul><ul><ul><li>Shorter VAS adoption cycles </li></ul></ul>
  38. 38. How do the numbers stack up 2007 2010 W-VAS Services Performance Forecast 100%= USD 926.3 mn 100%= USD 2,744 mn VAS Revenues Forecast 2007-10 2004 2005 2009E 2008E 2007E 2006 2010E Revenues (USD mn) VAS as % of Total Rev Source: BDA Analysis 44% Overall CAGR 82% Others 138% E-mail 141% Data 63% Games 82% Voice 18% CRBT / Ringtones 20% SMS (A2P P2A) 26% SMS (P2P) CAGR%
  39. 39. 2010 and beyond… 2010 and Beyond Source: BDA Analysis <ul><li>Share of traditional VAS will decline to less than 50% in 2010 from nearly 80% today </li></ul><ul><li>Mobile Data / Internet, E-Mail, and IVR based services will achieve the highest growth rates </li></ul><ul><li>VAS companies will start seeing the environment favoring them </li></ul><ul><li>Operators will heighten focus towards VAS as a requirement to sustain revenue growth and monetize slowing user base expansion </li></ul><ul><li>Industry will witness much awaited hockey stick growth beyond 2010 </li></ul>
  40. 40. Contact Details BDA Team Kunal Bajaj Director - India kunal.bajaj@bdaconnect.com Girish Trivedi - Principal Manager Deepshikha Garg, Rahul Gupta Smita Sharma India: +91 11 4700 3100 China: +86 10 8529 6164 [email_address] www.bdaconnect.com Stanford University Team Mohit S. Gundecha Research Associate Stanford Technology Ventures Program [email_address] [email_address] Prof. Tom Kosnik Consulting Professor Stanford Technology Ventures Program kosnik@stanford.edu Full Report Access www.bdaconnect.com/india

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