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Creating Value - Major VAS players in the market

July 15, 2009

Value-added services (VAS) have matured globally and account for a considerable portion of the total revenue from telecom services. Within the VAS segment, the focus is now on mobile entertainment and commerce, locationbased services, and new and enhanced services in the next-generation network (NGN) environment.

The VAS segment is growing at an exciting pace the world over, with India being one of the top three countries for the mobile and internet VAS industry.However, the challenge is to retain customers, develop alternative revenue streams and differentiate services in a high churn market.

VAS in India have evolved from basic P2P SMSs to offerings such as innovative caller ringback tones (CRBTs). This trend is expected to continue with new technologies such as 3G leading to significant market growth.

Driven by the opportunities, many mobile VAS players have entered the market in the past few years. These companies operate in various segments of the VAS chain, leading to a highly fragmented industry. The market comprises well-connected players with considerable exposure in the industry as well as a host of smaller players which lack the financial muscle and ability to scale operations and meet the growing demands of operators.

As India's mobile subscriber base continues to increase at a rapid pace, telecom operators are opting to work with the major mobile VAS players who can offer the full gamut of services. As a result, the bigger VAS companies like OnMobile, IMImobile and Mauj Telecom are witnessing about 100 per cent year-on-year growth. These companies, which have a rapidgrowth strategy, are also looking to expand through mergers and acquisitions, and are on the lookout for smaller VAS companies. These factors are making it increasingly difficult for smaller companies to retain a foothold in the market.

tele.net takes a look at the key players in the VAS space and their future plans...

Spice Digital

The mobile VAS subsidiary of the Spice Telecom group, known till recently as Cellebrum, specialises in three segments: mobile VAS and technology platform solutions, social networking and gaming solutions, and mobile marketing.

The company is one of the few fully integrated players in the VAS industry, and has entered into partnerships with key operators like Bharti Airtel, Idea Cellular and Reliance Communications (RCOM).As a part of its growth strategy, the company is looking to develop tailor-made solutions for rural India, such as weatherand education-related services.

While music-on-demand is a key revenue generator, Spice Digital also offers wholesale commodity rate alerts, career counselling and hospital databases. Its portal on mandi rates is used by service providers like Idea Cellular in various rural parts of the country.

It is also focusing on enterprise solutions, which is a key area for VAS players and has set up a research and development facility in Bangalore to develop enterprise solutions. In 2008, the company signed two major enterprise deals –­ one with Indian Railways for rolling out a mobile enquiry system across the voice, SMS and GPRS platforms, and the other with the State Bank of India for developing technology to enable the bank's customers to access their accounts and make transactions using mobile phones.

Spice Digital's turnover has been growing at over 100 per cent and currently stands at over Rs 2 billion. However, this year, the turnover is expected to grow by 40-50 per cent due to a reduction in VAS spending by customers. The company, which currently derives 5 per cent of its revenue from the international markets, is targeting a higher share of about 20 per cent by 2012 through global expansion. It is exploring the SAARC countries as a potential market for its services.


OnMobile, the first VAS provider to go public, witnessed a 55.2 per cent rise in revenue in 2009 to Rs 4.06 billion. Its net profits increased by 41.3 per cent to Rs 852 million. However, the share of revenue from its top five clients came down from 77 per cent to 70 per cent due to the economic recession.

OnMobile's key clients include major telecom operators such as Vodafone Essar, Bharat Sanchar Nigam Limited, Bharti Airtel, RCOM and Idea Cellular.

The main revenue earners for OnMobile are CRBTs and interactive voice response (IVR)-based solutions, products in which the company has an edge. Its IVR solutions, which use voice prompts in local languages, cater to a fast-growing user base in rural areas. The company has enhanced its product portfolio by adding a number of new products which include CRBTs, mRadioV3, Msearch and a subscription services gateway that supports daily, monthly and event-based charging options.

OnMobile has also acquired companies like Telisma and Voxmobili over the past 18 months to strengthen its market position, especially in Europe. The international market accounted for 23 per cent of the company's revenues in 2008-09 vis-à-vis 15 per cent in 2007-08.

Recently, OnMobile entered into an agreement with the Vodafone Group for providing CRBTs, voice portal services and speech-enabled services to the mobile operator in emerging markets in East Europe, Africa and Latin America.


Hyderabad-based IMImobile is another fast growing company in the VAS segment. It has operations in 40 countries and caters to major companies such as Bharti Airtel and Vodafone Essar. IMImobile's product portfolio includes service delivery, mobile advertising and messaging platforms/gateways, applications for data services, music downloads, video streaming.

Capitalising on the opportunities in the rural areas, the company has launched services for rural customers under the brand Cell Shakti. Some of the services offered include access to mandi prices and an education service by which the customer is taught English through the local language.

IMImobile is on a rapid growth trajectory and has adopted a multi-pronged strategy which includes increasing the uptake of live VAS, launching new services and maintaining a focus on revenue assurance. For instance, it has recently launched full-track music services for Vodafone and is in talks with other operators as well.

IMImobile also intends to acquire companies. The company has recently acquired UK-based Mobykyo's social media aggregation service platform, Mobytec, for an undisclosed amount. This is the company's second buyout in the UK, since in 2008 the company acquired dx3, a digital content delivery services provider.Recently, it formed a joint venture with Telecom Express, UK's largest interactive service provider, to launch the IMEXmobile service to provide end-to-end solutions to media groups.

IMImobile generates nearly half of its revenue from the international markets.Like most VAS players, the company is trying to tap the emerging markets which have a large growth potential.

One97 Communications

Growing at over 100 per cent on a yearon-year basis and with revenues of over $25 million, One97 Communications is another key player in the VAS space. The company has chalked out an ambitious growth plan for the future and has set a revenue target of $100 million. Gearing up for 3G services, it has already invested significantly in video-based applications and is considering both the inorganic and organic routes for expansion. The company plans to invest $30 million in 2009.

Earlier this year, One97 raised funds from chipmaker Intel's venture capital arm, Intel Capital. A large portion of the funds will be used for making acquisitions. In addition to India, the company is exploring investment opportunities abroad, in markets such as Bangladesh, Indonesia, Africa and even the US and Europe. The international markets currently account for only 12 per cent of One97's revenues.

The company undertook its first round of funding in 2007, raising $8-10 million from SAIF Partners and Silicon Valley Bank. The funds were used for various growth initiatives, following which the company witnessed a growth rate of 400500 per cent.

Currently, many paid transactions take place on One97's platforms, and this is expected to increase. Voice-based applications, accounting for 37-38 per cent of the revenues, are the largest contributor to the company's top line. The company also has around 20 million SMS subscriptions and delivers half a billion SMSs in a month.Hence, its dependence on any single application is quite low.

The company is considering products like social networking and m-commerce that will help it create a niche in the future.

Content is another key application for the company. Royalty-free content accounts for 15-20 per cent of One97's revenues.

The company also provides technology platforms for content transactions. It offers various services like news alerts, and local mandi and bullion rates for rural and semiurban populations.

One97 is also planning to launch voicebased alert services in the vernacular for rural users. It has developed and deployed a VAS platform for the Airtel IFFCO Kisan Sanchar Project that provides information, content and updates in local languages to farmers through the Dakia service.


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