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Telecom firms in revenue hunt

Operators are increasingly turning towards quicker and smarter valued added services to offset falling average revenue per user, reports Archana Khatri.
Hindustan Times | By Archana Khatri, New Delhi
UPDATED ON OCT 03, 2007 10:18 PM IST

With voice calls getting cheaper, the money game in the telecom services industry has shifted gear. Operators are increasingly turning towards quicker and smarter valued added services (VAS) to offset falling average revenue per user (ARPU), the holy grail of telecom profit seekers.

Revenue from value-added services is only 10 per cent at the moment for Indian operators, but is expected by industry experts to go up to 30 to 40 per cent by 2012. With the expected roll-out of 3G services, quality and number of specialised services, including music, video, gaming and trading applications is bound to increase.

"The purpose is to reduce the shelf life of VAS, which is 6 to 9 months, to two week or more," said an official from telecom application software provider Apoena, which is working with Airtel to install a one-stop facility to club services.

It is installing an application software "that will overcome the technology barriers in clubbing different value added services together, especially for the large pre-paid market".

Currently 60 per cent of the VAS revenue for GSM operators comes from text messages. GSM operators have not been able to tap the market for data-based services because it is technically complicated and also because GPRS handsets that help these services are costlier.

Also, data-based services such as video downloads involve higher costs. A TV video clip currently cost Rs 10/10 kbps, or Rs 499 flat. While a game on mobile on GSM handsets costs Rs 50/game or Rs 99- Rs 150 are charged for a premium game.

"The users actually cannot count how many kilo bites they have used, so this has hidden costs, and this is what makes it more costly," said Jay Kumar Jain, Director and Co-Founder of Astitute Systems Technology, a telecom content and application provider company.

CDMA operators, on the other hand, are aggressively tapping data-based services. Pankaj Sethi, president VAS at Tata Teleservices said, "Most of the data-based services are targeted at high-end segment whereas actual users are found in the mass market. This needs to change."

"Since the launch of data service in our basic phones that may cost as low as Rs 2,000, we have seen the sales double," Sethi added.

According to data from industry associations, mobile music sales stood at about Rs 1,200 crore in 2006, compared with Rs 756 crore recorded by music shipped over the conventional mode.

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