The mobile phone today, is as ubiquitous as a wristwatch was for most of the 20th century. It is, in fact, on its way to pretty much replacing the wristwatch as the one item you never leave home without. It has already become our center of communication (whether for calling or writing) and is one the way to becoming the center for information and eventually entertainment. This shift in consumption of services on the mobile platform is very significant as the mobile population of the world is in the billions! I explore the effect of this shift on the various participants of the mobile business ecosystem.
Value Addition
Voice and text (SMS or Short Messaging Service) are the bread and butter of a mobile phone. These are known as basic services. Every single phone sold today MUST be able to provide at least this level of functionality. Voice and text, however, are the ultimate in commoditized services (i.e. - no one has a competitive advantage. Talking on one phone vs. the other is essentially the same) and therefore are very low margin products. Most operators, therefore, have to rely on what is known as Value Added Services or VAS to increase revenues and margins. VAS includes data access, email, various information services (sports scores, news alerts etc.), content (ringtones, caller back tones, wallpapers etc.), games (all of you know Snake or Brickbreaker), applications (ticket purchases, banking, money transfer) and so on. All of these services are differentiators for operators. They are used not only to attract customers, but also have much higher margins. The current size of the VAS market in India is estimated to be about $1.8 billion (Rs. 9000 Crore) and expected to grow to $3.5 billion (Rs. 17000 Crore) over the next 12 months. That’s a HUGE 70% growth rate.
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