Dr TR Madan Mohan, Managing partner addressed Network of ICT Entrepreneurs and Enterprises (NITEE), under the aegis of Foundation for MSME Clusters (www.msmefoundation.org), New Delhi on 27th August 2010 regarding “Value added service (VAS) provider failures: insights from VAS product companies”.

1. Indian Software Product Markets,
VAS Offerings: Some Insights
27th Aug, 2010

2. Disclaimer
This presentation is based on both publicly available data and interviews of key players in the
industry. Browne & Mohan takes no responsibility for any incorrect information supplied to us
by ISV, product vendors or users.
Browne & Mohan reports are limited publications containing valuable insights for CEO, policy
makers and analysts. Academic institutions (including Open Universities in UK and others) are
restricted from distributing this presentation as background material for any course work
without formal approval. Furthermore, no part may be reproduced, stored in a retrieval system,
or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or
otherwise, without the permission of Browne & Mohan.

3. Content
1 Background
2 Indian Software Industry
3 VAS Product companies
4 Conclusions

4. 1 Background
 India has emerged as a major player in software services and
development. Most of the world‟s leading software companies have
established their subsidiaries and R&D centers in the country.
 From self-doubt and bureaucratic apathy, they have grown in revenues,
stature and acquiring companies in India and abroad.
 The number of software product firms is on the rise and is expected to
contribute to the economy through increased employment generation
and intellectual wealth creation. Their multiplier effect on augmenting
industrial growth and increased entrepreneurial activities are a few of
the compelling factors that warrant a focused study of this sector.

5. Content
1 Background
2 Indian Software Industry
3 VAS Product companies
4 Conclusions

6. 2 Product Revenues
 Overall revenues in FY09-10 were about 15% lesser than revenues FY2008-09.

7. 2 Which industry vertical took the hit
 Mobile products and Life Science software product companies were the highest hit
primarily as telecom service providers postponed investments. Bangalore and Pune
were the two regions that had the highest impact in terms of closures.

8. 2 Is Geographical focus changing
 Compared to FY2008-10, revenue contributions from geographies such as North America,
Europe and APAC dropped significantly, while Middle East revenues grew in FY2009-10.
Egypt, Qatar, Oman and Saudi Arabia became hot destination for product companies.
Polaris, Nucleus, Newgen, continued to benefit from multi-country approach.

9. Content
1 Background
2 Indian Software Industry
3 VAS Product companies
4 Conclusions

10. 3 VAS: evolution
High
India in India in
2008 2011
VAS IP oriented
WiMax
mix
convergence
Data rates of 100
mbps
Mobile TV
Multimedia Wireless
Digital voice
High Speed teleconference
CRBT
Digital voice Broadband Full motion videos
M-commerce
Digital voice Download Online gaming
SMS P2P Video TV
Info services SMS P2A Enterprise VAS access with 3G
Ringtones Data service Security services
Wallpapers Contests services
Analog Games
Low voice
1G 2G 2.5G 3G 3.5G 4G

11. 3 VAS: How structure affects
End User
Telecom Operator
Technology Enabler
Content Aggregator
Customer pays for
VAS Content /Application
60-70% of Total Owner
revenue
10-15% of Total
revenue
5-10% of Total
revenue
5-10% of Total
revenue
 Low rent and value appropriation has locked several VAS players with Telco‟s.

12. 3 VAS: who was hit
 While Music and Infotainment are the major revenue generators, companies focused on
single product or single delivery channel were the major hit. VAS providers with me too
offerings in location, Blogging and customer care (botched up IVR solutions) ended up
loosing.

13. 3 Why VAS firms failed
 Major reasons for VAS Companies failures:
 Single product, single vendor
 Few applications with no common platform
 Content aggregation
 Built business around WAP or downloads

14. 3 VAS Successful companies
 Successful VAS strategies:
 Platform play: Onmobile, Apalaya, MobME, One97
 Focused on large customer base
 Sticky Entertainment or Gaming experiences
 Independent of Operators: Indiagames, Games2Win, Cellcast

15. Content
1 Background
2 Indian Software Industry
3 VAS Product companies
4 Conclusions

16. 4 Conclusions: Emergent focus areas
 Services：ON DEMAND DATA / VOICE
 Data connectivity on the move
Broadband Access Quad play i.e Voice, Video, Data and
through 3 G Device
mobility with suitable core network.
 E-mail and Web services on demand
Share the Family for SME
Personal Digital Photo and Video
Centre With members on  VPN service for group of customers
The move
 Gaming, Video Services like Live TV,
 E-governance, E-health, E-education
 Internet Access on the move
Enterprise CUG/ VPN  Video Messaging and rich data
E Governance applications
E Hospital
E Education
VoIP, traditional
Telecom
services

17. Conclusions: Youth (15-24)
Social Economic
• Desire to be • High propensity to
connected with spend
others •Tariff plans with data
• Keep up with latest and pay per service
lifestyle trends schemes
Technology
• Faster download
speed
•Larger memory
•Video clarity
Gaming Apps Music/Movies Apps Social Networking Apps 3G Subscribers
•75% of gaming customers •CRBT/Ringtones and music •Chat rooms •Video streaming for music
constitute youth. downloads are perceived as videos, sports clips,
expressions of one‟s •Sites like Facebook, Orkut Bollywood movies, reality
•Purchased games through personality and are likely to and Twitter on mobile will shows
service increase in demand. generate traffic as young •Mobile advertising: 66% of
providers are 30% more in consumers keep in touch with Indian youth interested in
demand •8 regional movie industries friends and follow the latest receiving mobile ads
than free games offered on and 2000 music albums per trends. •M-coupons, M-tickets for
the web. year within India guarantee retailers and malls.
steady flow of content for •Local language apps: 60% of Singapore VAS companies
users. mobile content in South India could introduce these apps to
is in regional languages Indian consumers as they
possess the technology and
execution capabilities
needed.

18. Conclusions: Professionals on Move
Social Economic
• Desire to effectively Economic
Social • Very high
manage multiple propensity to spend
responsibilities while • Premium pricing
on the move possible because of
• Assurance of affordability
security
Technology
Technology
• Faster download
speed
• Compatibility with
office applications
Core Enterprise Apps Enhancing Productivity Apps 3G Subscribers
• Professionals will need • Company email and web • Video conferencing, video
access to programs like access from phones apart sharing
Microsoft Office for delivering from Blackberry
sales pitches, presentations, • File sharing
carrying proprietary content • Calendar and scheduling
• Download of content
• Mobile security services to • M-Commerce facilities to help
ensure safety and manage business
preservation of content • M-Commerce: Apps to
manage credit cards, monitor
• Video conferencing, CRM, bank balance, carry out online
• Updates of stock market and intra enterprise web transactions
financial news applications applications

19. Conclusions; Women
Social Economic
• Desire to be • Personalized
connected with family content will generate
and friends more revenue per
• Keep up with latest user
lifestyle trends
Technology
• Video content
• Variety of
applications
Social Networking/Enterprise
Lifestyle Apps 3G subscribers
Apps
• Applications for health, • Chat forums, social • Video conferencing to keep in
fashion, fitness, travel networking websites touch with family and friends
• Location based apps to plan • Voice SMS, advanced SMS to • Video streaming for deciding
local events continue as it is used on purchase of products
frequently.
• Calendar and scheduling to • M-coupons, M-tickets for retail
keep professional and • Contest, reality show and mall outlets
personal appointments participation enterprise
applications

20. Conclusions: Rural Consumer
Social Economic
• Desire to keep in • Low margins
touch with family if expected
working in urban area • Revenue to come
• Use technology to from scale of
ease hardships due services
to lack of
information Technology
• Predominantly IVR
due to limited literacy
IVR Services Data/Entertainment Apps M-commerce Apps
• Developed in regional languages • Entertainment, agriculture • Mobile banking, remittance and
to cater to farmers needs related information, such as payment services via a trusted
through a „virtual marketplace‟ weather, prices, distributor financial institution
providing commodity rates networks
conserving time and money • Expenses monitoring apps for
• Mobile music /movies and farmers, small shop owners
• Telemedicine services for remote entertainment services
areas where healthcare options
are limited • Location based services for
information local gatherings,
• Fixed lines can also have IVR for functions
infotainment and utility based
purposes
• Voice SMS

21. Conclusions: Product Focus
 Consumer segments in India that are likely to demand an increase in VAS are:
 Youth (ages 15-34)
 gaming, music/movies, social networking, 3G services
 Professionals on-the-move
 core enterprise VAS, M-commerce, 3G services, productivity apps
 Women
 lifestyle VAS, social networking, 3G services
 Rural subscribers
 IVR, data services, entertainment and M-commerce
 The most applicable VAS capabilities that can be leveraged in the Indian market to fit
the needs of these consumer segments are:
 3G services
 M-commerce applications
 Entertainment/Enterprise VAS
 Mobile Security Services
© Browne & Mohan, 2009
21

22. Thank You
For any query please contact
Ms Harmeet Kaur
Associate Consultant
157/A, 2nd Floor, 10th A Main
Jayanagar 1 Block
Bangalore. 560 01
sharmeet@browneandmohan.com
91-80-26565164

23. 9.1
 Adachi F. Wireless Past and Future- Evolving Mobile Communication Systems. IECE Trans. Fundamentals.
References
2001; E84(A): 55-60.
 Annual Report 2007-08. Telecom Regulatory Authority of India. October 2008.
 Boston Analytics. A Study of the Mobile Value Added Services (MVAS) Market in India. 2007.
 Chitkara N. Market Entry Strategy for Indian Telecom Market As Mobile Virtual Network Operator (MVNO).
December 2007. <
http://insightory.com/view/202//market_entry_strategy_for_indian_telecom_market__:_as_mobile_virtual_network
_operator > Accessed July 24, 2009.
 Economic Times. MTNL calls global telcos for 3G bids. July 16, 2009. <
http://economictimes.indiatimes.com/LATEST-NEWS/MTNL-calls-global-telcos-for-3G-
bids/articleshow/4782648.cms. > Accessed on August 17, 2009.
 FICCI and BDA 3G & BWA: The Next Frontier.. January 2009.
 IAMAI and eTechnology Group at IMRB. Mobile Value Added Services in India. August 2008.
 Infocomm Development Authority of Singapore. Annual Survey on Infocomm Industry 2008. June 2009.
 Kosnik T, Gundecha M, Bajaj K. Future of Mobile VAS in India. Stanford University & BDA. December 2007.
 Livemint.com . BSNL revenue arrears. August 6, 2009. < http://www.livemint.com/2009/08/06150630/BSNL-
revenue-arrears-stand-at.html>. Accessed August 10, 2009.
© Browne & Mohan, 2009
23

24. 9.2
 Mathew L, Mysore J, Nair V. Is the Indian Market Ready to go “Virtual” for Mobile? Diamond Management and
References
Technology Consultants. 2006.
 Members List, Mobile Alliance. < http://mobilealliance.sg/memberlist.html>. Accessed July 25, 2009.
 Medianama. Airtel mobile VAS revenues. July 27, 2008. < http://www.medianama.com/2008/07/223-airtel-mobile-vas-
revenues-at-rs-23555-crores-non-sms-57-of-vas-at-rs-13356-crores/> . Accessed on August 4, 2009.
 Medianama. Rcom VAS Revenues. August 1, 2008. < http://www.medianama.com/2008/08/223-rcom-vas-revenues-at-
rs-109-crmonth-non-sms-vas-at-rs-91-crmonth-60-pc-of-data-card-market/>. Accessed August 10, 2009.
 Mobile Europe. Freemium model to predominate in mobile apps. 13 May, 2009. <
http://www.mobileeurope.co.uk/news_wire/114806/'Freemium'_model_to_predominate_in_mobile_apps_with_VAS_reve
nues_reaching_$14bn_by_2014,_says_report.html>. Accessed July 31, 2009.
 NDTV Profit. Bharti gears up for 3G leap. August 17, 2009. < http://profit.ndtv.com/2009/08/17233801/Bharti-gears-up-
for-a-3G-leap.html >. Accessed on August 17, 2009.
 Press Release No 54. Telecom Regulatory Authority of India. June 2009. <
http://www.trai.gov.in/WriteReadData/trai/upload/PressReleases/687/pr1june09no54.pdf> Accessed July 15, 2009.
 Times of India. Only 4 New Operators in 3G spectrum bid. August 19, 2009. < http://www.varindia.com/Mobility1.asp >.
Accessed August 19, 2009.
 VARIndia. Indian Telcos Aggressive on Value Added Services. < http://www.varindia.com/Mobility1.asp >. Accessed
August 19, 2009.
 VAS. TelecomLIVE. June 2009. < http://www.kirusa.com/press/2009/06-01-09a.pdf> Accessed July 20, 2009.
© Browne & Mohan, 2009
24