10th Take On Indian Telecom Industry: ‘VAS’

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The long awaited event in the Indian Telecom Industry ”The Grand 3G auction” has been 26th day over with PAN India Spectrum price set at Rs. 13,474 crore, though the auction eventually happened after more than a year from the initial proposed date. Delhi and Mumbai circles grabbed top positions taking an extensive lead from others with prices closing at Rs 2,372.97 & Rs 2,433.88 respectively.

By the time our Indian Telecom industry prepares itself for 3rd Generation let’s talk about existing Value Added Services governing Indian telecom.

Brief definition of VAS : Any service except peer to peer calling comes under of Value Added Service in Telecom. Thus SMS & DATA services are also covered under the Umbrella of VAS.

The prime question here arises, “WHY VAS?”. Present day operators are facing the biggest hick of declining ARPU(Average Revenue Per user) and increasing churn so how can Value added services HELP ???

A sharp decline in average revenue per user is being witnessed due to tumbling tariff rates. Entry of new operators has aggravated this and tariff rates have hit rock bottom levels. Thus, telecom operators are seeking ways to increase their per-user revenue and VAS has become one of the key focal point. To make this more attractive vendors and operators have started focusing on innovative solutions and local content to increase consumer stickiness along with improving the adoption rate of these services.

If we look at the figures from Airtel revenue last quarter ending 31 march 2010

Average Revenue Per User (ARPU) for the company was at Rs. 220, down Rs. 10 from Rs. 230 last quarter. But the percentage of “Non Voice Revenue” for the company grew 9.3 percent quarter on quarter to 11.8 percent of mobile revenues. SMS revenues as a percentage of mobile revenues declined to 5.7 percent of total mobile revenues. The exponential increase in Non-Voice revenue during the time of falling ARPU shows the sturdiness of Value added services

Now the question is that if VAS is a key consent in Indian Telecom why its potential still seems undermined, the answer to this is quite simple “Lack of VAS education” amongst the mob though recently we have seen operators like Vodafone & Aircel making ad campaigns for awareness of Value Added service still VAS is a matter partially aloof to a common Indian subscriber and also an area of his ‘lack of interest’.

Ok now let’s have a look at conditions that stain’s it, VAS has tremendous potential in class B and C circles. If sold with the right pricing and segmentation techniques it can win huge revenue returns. There are few researches done among customers from leading operators showed clearly that customers in the low and average pre-paid balance segment were fully aware of features, products and tariffs.

Many leading operators have the highest usage and penetration in class B and C cities as compared to the metros. One major factor for this is customer demand for rich regional content which gives scope for operators to promote niche products to different segments.

First vas services were push based to the customer through auto dialers and SMS, things have changed to a larger extend now, consumer has become MORE AWARE of what he wants and what he doesn’t want .TRAI regulations have also become quite strict to follow the interest of the consumer to a larger extend

Now content partners and Platform partner are aware of the need to support operators to enable multi-level charging or micro charging, pull modes and retention offers. Although revenue share percentages would remain the same even in a multi-level charging scenario, partners have overcome the fear of lower rental ARPU in the pursuit of increasing VAS penetration and enjoying a long term benefit along with the operators.

How this can be managed : few set of examples can be :-

Giving add-on-Service-based offers: Operators are getting into constant data mining to make offers at the most probable exit point to retain customers. The usage components of Subscription VAS-song changes, voice browsing minutes and text alert content are offered free or provided at discount.

Segmented initiatives to increase Usage-A major reason for Customer initiated de-activation in VAS is low usage. Tracking past usage trends of each customer in terms of usage duration, content and language preference is absolutely critical for planning promotions to induce usage. Studying this helps in knowing the consumer behavior and hence giving them the benefits to stay on service.

Win-Back Offers for churned customers: At least 35% customers churning out due to low balance are prone to coming back if re-targeted with a correct combination of pricing, content and campaign style. Like Try & Buy offer or call back & get exciting prices .The typical campaign which works as a win-back is a one month rental waiver pitched in a customized out-call with an offer feel.

Our next take will cover the insight and most user procured Services amongst the array of VAS

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