Exclusive content, not apps, will rule mobile VAS: Sukesh Jain, head of VAS division, Bharti Airtel

Exclusive content, not apps, will rule mobile VAS: Sukesh Jain, head of VAS division, Bharti Airtel

With affordable smartphones (along with numerous apps) making foray into the Indian market, one wonders whether conventional value-added services (VAS) have taken a dip and need some timely re-invention. Techcircle.in caught up with Sukesh Jain, head of VAS division of India's largest telecom operator Bharti Airtel to know more about the tussle between conventional carrier-driven VAS and free (or paid) apps-based services, as the latter threatens to grab a big chunk of the market share. As a company, Bharti Airtel gains from the development of both, either as a content-based service provider with a higher margin or as a data carrier (after all, even free apps need to be downloaded). Of course, in a market like India where mobile penetration is at its peak and majority of the users are still sticking to feature phones, there are still big opportunities for traditional VAS, but as Jain says, going ahead, it can be a tough market. Jain also talks about the new-age VAS that Airtel is looking to deploy, the issues at the heart of revenue-sharing between VAS developers and telcos, and how Airtel's Hello Tunes service, which has recently completed a decade, is still the most popular music-based VAS. Here are the edited excerpts:

How would you leverage 4G for VAS?
4G networks are crucial for video content. So the maximum enablement of VAS on 4G will happen around video. Movies, games and live darshan (direct telecast of live aartis and prayer meetings from various shrines on your mobile) will do well on 4G and we are going to leverage it.

3G adoption has not been widespread in India. Keeping that in mind, do you think 4G will be received well? Is data connection an issue here?

I don't think connectivity is an issue. What really matters is getting value for your money when you are using 3G instead of 2G. Users need to know what all they can do on 3G for maximum benefits. Currently, people are mostly accessing e-mail, social networks and other such services which work equally fine on 2G. Only when someone wants to watch YouTube or videos, the need to migrate to 3G comes in. On our part, we are trying to ensure that people can access a lot of video content and app, which will increase the push towards 3G.

But won't there be a clash between 3G and 4G services since video-based content is a high point for both?

As of now, 4G is a substitute for wireless broadband; handheld devices here are still some time away from leveraging it. In fact, 4G would be more like a substitute for dongles or broadband connections at home. Of course, when 4G-compatible devices become cheaper, this service would come into the handheld market in a big way. But right now, the market is transitioning from 2G to 3G and there is still a gap of at least 18-24 months before 4G could be available on affordable handheld devices.

What are the services you would like to focus upon in the coming years?

Traditionally, VAS has been more focused on text or voice (IVR), but that was the era when the Internet hadn't taken off. Going forward, we would like to convert that opportunity to WAP services. With more people accessing 2G and 3G, relevant content must be available and we are now focusing on that.
But the WAP services you are looking to push, are only compatible with a certain kind of handsets. Do you have any plan for basic feature phones?

Well, 50 per cent of the phones on our network are smartphones and the number is increasing daily. Having said that, we are not discounting the existence of basic phones in the market. Also, the WAP-isation will happen in a hurry and we are keeping in mind users from every segment. Any new service that we start won't be exclusively available on WAP; it will be available on voice and text as well.

With cheaper smartphones making foray, how do you see life for SMS-based VAS?

Once again, it's a time-bound thing and will start declining gradually. But for now, it is still very relevant.
Can you tell us how the VAS business has been growing for Airtel over the past 2-3 years? What's the recent trend during the past 3-4 quarters?
Overall, our VAS business has been on a growth path – growing much faster than voice. In fact, it's the non-voice business which has been growing while the voice business is almost flat now. Quarter on quarter, there is a reasonable growth of around 8-10 per cent.

Can you share some specific numbers as compared to other operators?

Overall, non-voice services contribute 16-17 per cent of the revenue and VAS in non-voice contributes around 12 per cent. Overall industry figures are in similar range. Although no syndicated data are available, our overall penetration is approximately 10 per cent more than the average industry penetration.
What is the overall strategy of Airtel for VAS business?
Airtel has been leading some initiatives in delivering value-added services but the business has always been partner-driven. For instance, service providers don't get into the content bit simply because they don't have the expertise and we also work with content partners. But due to this partner-driven model, a lot of control is not within our purview and we have tried to change that over the past one year.
We managed to address some customer pain points when we came to know that users had been charged without opting for any specific VAS. To change this scenario, we have moved the entire billing and subscription engine in-house and also stopped the practice that would lead to negative balance. For example, if a customer's balance was Rs 5 and if he/she tried to use a service that would cost more, the balance would go into negative. That practice has been scrapped and now a user can only opt for a service if his balance or account limit permits it.

Obviously, such changes would strain the revenue flow and that's why our revenues have been visibly affected over the past 3-4 quarters. We are also penalising partners who are not following our process. That is the key strategy – to cleanse the delivery of VAS business. Earlier, VAS used to double year on year but due to such measures, the growth has kind of diminished.

What are the segments driving growth in the mobile VAS market in India?

Music and entertainment are the biggest segments still. Next comes devotional VAS, which has been growing at nearly 100 per cent year on year for the last couple of years. Other segments beginning to get traction include lifestyle, fashion and travel.
Music has been one of the key revenue-earners for telcos in the VAS space. But what are the recent trends? Any plan to compete with the music streaming sites?

We have launched an online music streaming WAP store and partnered with Hungama and other players. Otherwise, music as a value-added service has been mainly driven by Hello Tunes. We have even tied up with Saavn – so that listeners who are streaming songs there can use those as their hello tunes. Besides mainstream music, 'name customised' Hello Tunes are really catching up. Music has been equal to Hello Tunes for quite some time but now it has moved to properties like My song, My story. Also, a lot of song downloads are happening and the live radio on mobile is doing really well.

With affordable android phones coming in, most of the services are available for free in the app stores which are network-agnostic. Would it affect a telco's app/VAS business?

I have no doubt that this will eat up the market share. But at the same time, many users are not fully aware of the apps available or the nitty-gritty of the operating systems (Android or others). While the awareness is increasing, it will take some time and currently, we are not worried about the competition. The overall idea is to increase the combined bucket of data and VAS and to achieve that, the strategy is to give away a lot of free VAS to customers. For example, we provide the latest news on Airtel Live for free.

Also, exclusive content will play a big role in Airtel's go-to-market strategy. Services like SMS Gyan, Talk2Me, My song, My story or live telecast of aartis will not be available elsewhere. Android apps or any other app for that matter cannot replace or replicate such services.

VAS developers, such as gaming firms, feel that revenue-sharing is heavily tilted towards telcos who corner around 70 per cent. What's your take and what are the global benchmarks?

It has been a sore point with a lot of people. But there are two things here. First, the kind of infrastructure we must have in place, compared to what they have. Secondly, the kind of volume we bring to them – it's huge. We also give them the benefit of billing and push or promote their apps/games. If you look at the trend worldwide, there is no push happening for games or apps. But we are pushing those daily. That's the difference between the markets here and in the west. However, revenue-sharing is surely a little better when a partner does its own marketing. So these two models exist. It also depends on what kind of risk the VAS partner is taking up.

Going forward, how do you juxtapose the traction for paid and free apps? Do you see better traction for paid apps/VAS in the smartphone segment?

Traditionally, in an app store or a marketplace, 60-70 per cent apps are free and those drive the consumption as well. But paying for good apps is also catching up now. People are now willing to pay and the pricing has also come down to an affordable level. If the app or VAS is useful, people really don't mind paying for it.

(Edited by Sanghamitra Mandal)

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