VAS: The Goose that lays the Golden eggs

Mobile tariffs in India are decreasing day by day. Rival service providers are up with new enticing plans. So how do service providers make money if they are rendering such low call rates?? It was about time that they found a way of earning that extra income. Offering low call rates is just a strategy to capture the market and get as many subscribers as they can and as soon as possible. The main source of income for service providers is through Value Added Services (VAS).


Value Added Services are the services provided by the service providers in addition to calling facility with a charge. All services other than peer-to-peer calling come under Value Added Service in Telecom. This includes SMS & DATA services also. However as the industry is dynamic and growing, the definition of VAS changes from time to time. For example, many operators do not consider Peer-to-Peer SMS as part of VAS revenue since SMS as a product is now commoditized. Similarly data revenue is shown as a separate revenue stream by some operators.

Services like music, ring tones and games which are known as entertainment VAS, are very popular and have contributed significantly to the growth of VAS in India. On the other hand, services like news and information on bank account, real estate, education etc. are known as Info VAS. A third category of VAS which is emerging now is the M-Commerce VAS which allows customers to conduct transactions like banking and payment through mobile phone. These services are in a very early phase now in India.


Unawareness is the main problem with Value Added Services which the service providers are facing. The major population does not use Value Added Services. Rural population is uneducated and is unaware about the existence of Value Added Services. The main users of Value Added Services are the youth from the urban areas, who form a very low user base of Value Added Services. Also poor network connectivity has resulted in few subscribers using these Value Added Services. Instead they opt for computer where they can avail these services for free. Also it is a difficult to come up with new interesting services for the customers. Their service has to be different and special then what others have to offer and should not be too expensive.


We are in an era where the mobile phone is not just a communication tool, but it is also used as a clock, music system and a PC. Days are not far off when it is going to replace TV, newspaper and ATM card. Indian Telecom operators have realized that VAS is going to be the game changer, which will push the stagnating telecom revenue to the next level. To sum up, in the backdrop of declining revenue trend, VAS will emerge as one of the key revenue generating areas for telecom operators. They need to work on innovative solutions to capture this growing market, which will differentiate operators in this highly competitive industry. Mobile VAS will become more complex after the roll-out of 3G services like mobile TV, video conferencing and M-Commerce.

Shivanand Nabar
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