Rise In Tariffs To Hamper MVAS Uptake: Analysts

An inevitable tariff hike proposed by the operators as a result of the recent Telecom Regulatory Authority of India (TRAI) recommendations might derail the mobile Value Added Services (MVAS) growth in the country, according to the experts. (See Trai Recommends Higher Base Price For 2G, IndiaWatch: TRAI's Proposal Hits Bharti, Vodafone, IndiaWatch: MTS Predicts 100% Tariff Hike and BSNL May Go For A Tariff Hike.)

"Any hike, be it of [just] 10 percent will impact the industry. MVAS is a luxury in the country and with mounting inflation, both the basic MVAS applications such as CRBT (Caller Ring Back Tone) and wallpapers, as well as the high-end ones such as video streaming will plunge," says Katyayan Gupta, Analyst at Forrester Research.

The MVAS industry in India is expected to become INR 500 billion (US $9.3 billion) by 2016 according to Netscribes, a knowledge consulting solutions firm. (See MVAS To Touch INR 500 Bn By 2016.)

However, with the operators claiming tariff hikes as the only option to sustain, achieving the above number appears to be a daunting task for the industry. In fact, Idea Cellular Ltd. has already hiked the tariff for its postpaid subscribers. Vodafone India has also increased the tariff of its services in the Mumbai circle (service area).

Industry experts also believe that in case of a price rise in accessing the services, application developers may reduce the cost of content and lay greater stress on innovation to keep the industry growth on track.

"MVAS content players might reduce the cost of applications in case of a tariff hike by the operators. The developers might also start to focus more on innovation to tackle the pricing issue," adds Gupta.

MVAS companies still hold hopes that an escalation in tariffs will not have a significant impact on the industry, and the intense competition amongst operators will keep the prices down.

"The pricing of a mobile VAS service is dependent on the content acquisition cost, operators' go-to-market strategy, and average spend by consumers in the region as well. Thus increasing competition is likely to lead to more aggressive marketing and a greater need for differentiation. This is likely to keep a check on the pricing of the MVAS services," says Milind Pathak, VP, South Asia of Comviva Technologies Ltd.

High inflation coupled with the increasing tariff might lead to a decrease in the usage of MVAS. The MVAS industry in India needs to innovate, both in terms of the business model and content, to not just survive but also thrive in the times to come.

Rimit Singh, Correspondent, Light Reading India