4G Era VAS Growth Potential in India - Mobile Service Provider's Vs. Smartphone Player's

The Indian VAS ecosystem witnessed turbulent time for the last 5 years post MVAS regulations. Indian regulatory body came out with MVAS regulation to protect Indian mobility user and imposed number of authentication and authorization process in order to kill unwarranted billing to end consumer.

The double consent mechanism implementation knocked down Mobile Operator VAS business and Mobile Operator witnessed de-growth in the segment. The entry of OTT players especially the messaging players killed flourishing SMS business which include P2P, A2P and P2A. The sudden move by regulatory body knocked out many VAS players from the market whereas some other segment like Music, gaming etc witnessed tough time retaining the consumer and generating revenue out of them. The revenue share model between Mobile Service Provider's and Content Provider's also made the business sustainability more difficult.

While the transition was happening during MVAS regulation implementation; India started witnessing adoption of Smartphone in Early 2012. It offered huge window of opportunity for the VAS player to acquire user through indirect channel. Many companies from content, music, gaming turned towards Smartphone players to acquire new user. Smartphone player's captured the opportunities with both hands and started selling their inventories in return of space asked by the VAS providers. Some of the Smartphone players even integrated FOTA solution from leading FOTA service providers in order to ensure that they can mint money through existing consumer base. The unprecedented growth in the startup segment in early 2013 made Smartphone player the darling of all.

The limited space in the device and limited leading Smartphone players made the situation worse when Smartphone player started asking for hefty price point to integrate any VAS services or applications without any commitment of user adoption, retention, usages etc.

Many startup companies poured in many million $ in order to get the userbase without any solid business case to retrieve the invested money and disappeared after some time.

In 4G era VAS it will be very interesting to see how the VAS ecosystem pans out between Mobile Service Providers and Smartphone Players. Smartphone players are coming out with higher RAM and ROM which can sustain heavy load and may offer good consumer experience provided consumer gets better network coverage.

At the same time, Many Mobile service provider started developing their own VAS ecosystem and went to market to acquire users like the other applications. The only differentiation what Mobile Service Provider implemented is the monetization part. Mobile Service provider now acts as VAS aggregators which can be delivered through the applications to consumer based on the consumer wish coupled with monetization mechanism. In my point of view, it will help Mobile Service Providers to offer both value add to end consumer as they can offer multiple option compared to Smartphone players.

The Mobile Service Providers are struggling with high cost of service and it is expected that they will be offering virtualized VAS ecosystem to end consumer and Reliance Jio and Bharti Airtel successfully demonstrated that through their number of applications which they can sell while selling the SIM to end consumer.

On a contrary, Smartphone players also started focusing on developing their own VAS ecosystem instead of relying on others for small amount. Smartphone players also trying to develop recurring revenue model based VAS platform and some of the are even successful doing so.

Unfortunately, the low DAU, MAU, Revenue per user are pushing Applications providers to take another route of user acquisition model as Smartphone players dont know who will be buying the product, what are their liking and in that scenario, selling a device the preloaded applications will definitely yield bad result.

I think that Mobile Service Provider's will again take the centre stage and am confident that they will witness the revival of their VAS business in coming Quarters

Upcoming 4G Era of India -Low End Smartphone with 1GB RAM will dominate Indian Smartphone in Coming Future

Indian Smartphone segment is changing very dynamically both on the specifications and price point side. One Smartphone player is trying to throw the another. All developed  a perception that Indian Smartphone segment will witness double digit growth and that prompted many new player including Chinese as well as heavy weight Reliance Industry LYF device.

In the past two quarter, there is constant change in market share and example of the same is "LYF" Smartphone. Post the launch of Reliance Jio service, LYF brand launched 1GB RAM device as well as 512 MB RAM devices carrying a maximum price tag of around $55 to $65. It created a buzz in the market and most of the new 4G user registering with Reliance Jio buying low end user as the USP set by Reliance Jio attracting low earning group.

In order to match the set threshold, Zen Mobile Launched 512MB RAM device in just over INR 3000 whereas Karbonn Mobile is known for entry level Smartphone. At the same time, Intex is one of the popular brand in$80 to $100 range.

Given the trend, its my prediction that Indian Smartphone market will be dominated by 1GB RAM device which will not be sufficient to give good 4G user experience given multiple tradeoff.

Ultimately, it will also impact the adoption of VAS services and associated revenue around it. In 2014 - 2015, Smartphone player earning at an average of $2 per device from VAS which will not be the game given the quality of video and HD quality as it will consume higher processing power.