Accenture Communications & High Tech

Point of View
Mobile Value Added Services in India: filling
the VAS Vacuum to drive high performance
By Vasanth Balakrishnan
Mobile Value added services (VAS) are
fast becoming a major part of the
revenue mix for telecom and media
companies around the world. Mobile
data is now typically between 25 and 40
percent of revenues in mature markets
and by far the fastest growing service.
To date, this has been driven by SMS and
ringtones but other services like mobile
email and mobile broadband have grown
significantly over the last few years. The
success of Apple’s iPhone App Store –
with more than 1.5 billion applications
downloaded within the first 12 months
of operation1 – that allows users to
download a vast array of different
applications to their iPhone – only serves
to emphasize that when the experience is
right, mobile users are looking for ways
to add to their device – and are in many
cases prepared to pay to get what they
want.
And while a new single ‘killer application’
has yet to emerge that rivals the impact
of SMS, the continued advancement of
devices and networks are driving the
growth of new service offerings that
address a broad range of customer needs
and demands, producing an almost
infinite array of applications, from
games to productivity tools.
As well as driving revenues directly, value
added services can enhance performance
in other ways. Critically, in a competitive
market, they help to build stronger
relationships with customers, as
customer data can be mined to create
customized services that increase loyalty
and enhance stickiness.
India: A VAS Vacuum?
India is one of the most exciting
telecoms markets in the world. It is
already the second largest with almost
450 million subscribers2 and still one of
the fastest growing. Indians seem to be
in love with their mobiles, with one of
the highest mobile Minutes of Use in the
world. There are vibrant software and
media industries and a strong tradition
of entrepreneurship that have already
created a rich community of VAS
1 Apple company press release, July 14, 2009: www.apple.com/pr/library/2009/07/21results.htm
2 PC World, India Added 14.4 Million Mobile Subscribers in July, by John Ribeiro, IDG News Service - Fri Aug 21, 2009 4:50AM EDT
http://tech.yahoo.com/news/pcworld/20090821/tc_pcworld/indiaadded144millionmobilesubscribersinjuly
developers building applications in use
around the world.
Yet despite this, Mobile VAS in India
appears to lag most other countries, even
when compared with other develop-
ing markets, leading to a “VAS Vacuum”.
We observe three main reasons for
this. First, the mobile operators have to
date focused on acquiring customers
in the urban areas where VAS has not
been needed or used as a differentiator.
Secondly, SMS usage in India is much
lower than in other developing markets,
perhaps a function of low literacy rates,
and certainly inversely correlated with
high voice usage. Finally, the later release
of 3G spectrum and licenses may also
mean that operators have not yet
devoted the resources to develop VAS
applications, which typically happens
when at least one player starts actively
to push its 3G network.
But as the Indian market enters its next
phase of growth, with new players, new
spectrum, intensified urban market
competition and expansion into rural
areas, VAS may become an important
part of the operators’ product mix.
Experience from other markets
demonstrates that VAS can help with:
• Revenue Growth - Value Added
Services open up new ways to
generate new revenue. These can be
in the form of new services ranging
from mobile broadband, applications,
entertainment, location-based services
and productivity tools to name a few.
In addition, VAS can create new
revenue streams for example from
advertising or machine-to-machine
services, helping to expand the
overall market
• Customer Acquisition - VAS also
provides an opportunity to acquire
customers through unique,
differentiated offerings. These can
be aimed at capturing additional
higher-end customer segments or
targeted with innovative new services
tailored to the needs of previously
underserved or overlooked customer
segments. In addition, selected “head-
line grabbing” services can help opera-
tors enhance their brand as an innova-
tive player, to help with overall market
positioning
• Customer Retention – As the Indian
market matures, including the advent
of mobile number portability, churn
will become an increasing problem.
Experience in other countries indicates
that the more services a customer
uses, the lower their propensity to
churn. Hence VAS can be used to
increase customer loyalty, particularly
if services are priced to encourage
usage and if they involve some “time
investment” from the customer such as
backing up personal data or
creating personalized content.
Building a successful VAS strategy
So what steps might be required to
address and fill the VAS Vacuum in India?
There is some evidence from the Indian
market showing that there is an appetite
for certain types of VAS offerings to
consumers, with ringtones proving
particularly popular. Services such as
voice activated song requests that can
be turned into ringtones, or social
networking services in their infancy
all point to the potential in the Indian
market. However, uptake of services
tends to peak following marketing
campaigns and declines rapidly once
marketing activity subsides.
But implementing a successful strategy
for VAS will depend less on finding the
elusive ‘killer application’ than it will
on defining and implementing a killer
approach.
While there is no single prescription for a
VAS strategy, we do see five common key
elements for success.
1. Integrate the Ingredients – The
customer experience is essential for
the success of any new service, and
the mobile VAS experience is dictated
by how well you integrate what we call
the “4 P’s” of the Digital Mix: The Pipe
(network), The Pod (device), The Panel
 (user interface) and The Programs
(content & applications). It is the blend
of all of these ingredients that makes
a successful experience. Often heavy
investment in a “cool UI” is let down
by another part of the mix leading to
a poor end customer experience.
2. Embrace the Ecosystem – With
several large global players and
hundreds of small local innovators,
the odds are heavily stacked against
a single company having all of the
expertise in house to provide and
sustain the innovations needed to
deliver a portfolio of VAS services.
Cooperation between content providers,
device makers, application developers
and operators is vital to create the
most effective business models.
Operators can play a potentially
central role in this ecosystem through
leveraging their own unique capabilities
and providing leadership on key
issues such as pricing and payment
transparency, security of copyright
and content.
3. Think Segment, not Product – Rather
than focus on a search for a single
blockbuster product, we think a better
approach is to look at the needs of
specific segments and assemble a
portfolio of VAS products, internal
and from third parties, which meet
those needs. Deep insight into the sub-
segments is key, blending data-driven
analysis, local market knowledge and
creative thinking from within and
outside the company.
4. Get sticky – VAS can provide the
opportunity and means for
differentiation. Sticky services help to
lock in customers by helping them
manage their lives through services
such as address book storage, SMS
back up, and a range of personalized
content and social networking tools.
Operators can mine customer data to
generate insight about the types of
service bundles that would suit specific
customer segments and use these to
help drive retention.
5. Start simply – The development of
VAS should start with simple, reliably
delivered services. The most successful
experiences give customers a “story”,
progressively building in new functions
and features over time and focusing
on the “Pareto of Life”: 80 per cent of
customers just want 20 per cent of
the functions… so do those few things
very well and don’t over-complicate
the range of options.
Opportunities beyond the urban
consumer
Mobile users are growing very quickly
in rural India. Approximately 70 percent
of the Indian population lives in rural
areas, with a subscriber base for mobile
operators of close to 100 million. With
the rural population expected to reach
more than 830 million in 2010, it is
estimated that 100 million new rural
subscribers will be added by then.3
Addressing that market is likely to require
a new way of developing and delivering
services and content, and in particular
working with the not-for-profit sector
to build the use of data services to help
rural populations manage their lives
more effectively.
In addition, services outside the urban
areas will have to be created in a number
of languages and provide locally relevant
content such as agricultural commodity
prices, weather information and access to
official services and information. Telcos
and others may also take the opportunity
to develop their corporate social
responsibility work in both rural and
urban areas by providing free information
services for issues such as healthcare.
A major potential – and to date largely
untapped – market for VAS is in the
provision of services to enterprises.
From simple applications such as using
SMS for scheduling appointments
to streaming product videos to a
salesperson’s mobile phone, the
applications are wide ranging and could
offer considerable first-mover advantage
for service providers who can address
this market quickly.
3 Telecom Regulatory Authority of India, Report “Measures to Improve Telecom Penetration in Rural
India – The next 100 million subscribers,” December 16, 2008, pages 1 and13.
Innovative services, profitable
growth and high performance
India offers a unique marketplace. It
has the simultaneous characteristics of
mature and developing markets, with
affluent and sophisticated consumers
alongside those living in developing rural
markets. Creating relevant and appealing
VAS that address the needs and desires
of those different markets is an
exciting opportunity for service providers
and media companies looking for ways
to create profitable growth and high
performance. Innovation of services and
the capabilities that underlie them will
be critical to making the most of this
opportunity. New partnerships and
alliances are likely to be a distinct feature
of a successful approach to a market
that is only just beginning to reveal its
potential.
Contact Us
For more information about how
Accenture's distinctive solutions and
services can help you achieve high
performance by creating, developing,
delivering and managing innovative
VAS, please contact:
Ashokan Kandiah
Communications & High Tech Operating
Group, India
+91 22-2281-4000
ashokan.kandiah@accenture.com
About the author
Vasanth Balakrishnan is a Senior
Executive with Accenture’s Systems
Integration and Technology group, and
is responsible for Accenture’s capabilities
related to VAS in India.
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