All forms of VAS will be cash cows in the long run

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: If indeed anyone were to be cynical with India Shining or 10% growth slogans, then one area there would be no such quibble is acknowledgment of the impact of telecom on everyday life.

Whether they be migrant labourers from Bangladesh, Nepal, interiors of rural India, shoeshine boy in Haryana, fisherman in Kerala, you, me and upscale corporate chieftain, the end use benefits of the ongoing telecom revolution has clearly and quite visibly demonstrated increased economic growth and promoted market efficiency—all within the last decade.

The classic documented case being a recent Harvard University study showing how introduction of mobile phones amongst fishermen in Kerala reduced fish catch wastage from 8% to zero, increased profits by 8% and dropped prices by 4%! All because the phone allows the fisherman to sell his catch efficiently across the coastline. Higher profits mean that phones pay for themselves within two months! The conclusion, a chief economists dream—“Information makes markets work, and markets improve welfare.”

If one were a keen observer of telecom growth in this country, then one will find that predominantly telecom conferences, etc, have focused on infrastructure, scarce resource allocation, equipment and devices. In essence, they have been vendor and engineering-driven. And rightly so. The better part of the last decade has seen penetration of wireless and other related infrastructure literally dot the skyline and surrounding landscape by way of open conduits, ditches, dug up roads, sidewalks and unending haphazard crisscross of wires!

The next phase of telecom revolution will consist of three key drivers:

• VAS will become the most predominant revenue and margin driver for operator survival. There is now clear recognition within senior owners/managers that with commoditisation of voice and declining ARPU, all forms of VAS will be the buffer in the short term and the cash cow in the long run (upto 60% of operator revenues in next decade of growth).

Obviously, the business rules for this will change and operators realise that they need to create an ecosystem of VAS partners like the NTT DoCoMo model (100,000+partners) by not only sharing more revenue with them but also accruals in a more accurate and timely manner. This will help incentives businesses to create desirable apps and content. The next killer application (after email and chat) in the digital space will emerge from within the suite of such VAS.