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It's boom time for mobile services in India

May 01, 2008 16:17 IST

Two years ago, Mumbai call centre employee Vijay Parihar used his Nokia mobile phone for calls and sending occasional text messages to friends, spending about $7 monthly. Today the 24-year-old, who earns $450 a month and lives in a one-bedroom apartment in suburban Mumbai, forks over about $20 a month - for calls, of course, but also for ring tones of Bollywood hits, movie tickets, e-mail, and mushy text messages to his girlfriend. If he had enough money to invest, Parihar says, stock market quotes, too, would beep on his phone. "My handset is an extension of myself, a cool, one-stop shop for my personal needs," he says.

Parihar is part of a growing group of Indian consumers who want more from their phone than just talk time. That's a blessing for Indian carriers that are looking seriously at new services to enhance revenues. The numbers are huge: Indians spent some $250 million on extra services for their mobile phones last year - including text messaging, music, wallpaper for phone screens, cricket scores, games, and Web surfing - and that number is expected to reach $1.7 billion by 2010.

Cell phones trump PCs

Why is demand for such services particularly great in India? For starters, there are just 30 million PCs in the country, so e-commerce on the Internet still has a long way to go. Cell phones, on the other hand, are becoming pervasive. Nearly 300 million Indians now have phones - making it the No. 2 mobile market on earth - and some 8 million new subscribers sign up every month.

These young, mobile-savvy folks have high aspirations but are underserved in everything from banking to entertainment. Getting to them via their cell phones is the best way to provide much-needed and valued services. "We have to look at ingenious ways to reach out to these customers," says Pankaj Sethi, who oversees such offerings at Tata Teleservices, the telecom arm of $50 billion Tata Group.

Mobile content providers

The demand for these services has given birth to a slew of companies that develop mobile content in English and regional Indian languages. The market in India is so hot that even multinationals such as Google, Yahoo!, and Microsoft's MSN have become major participants.

These players have tied up with more than a dozen top telecom providers including Bharti Airtel, Vodafone, Reliance Communications, and Tata Teleservices, to offer local information such as movie schedules, taxi services, stock quotes, news, and hospital and business listings.

The range of offerings is vast. Some companies offer downloads of prayers from Indian guru Sri Sri Ravi Shankar for the New Age set, and for the more traditional, recitations from Hindu religious text the Bhagavad Gita are available for 75c a month. Airtel, India's leading cellular operator, offers weather updates and crop prices to farmers, and sells mobile banking services, which allow customers to make purchases in stores and book train and flight tickets using their mobile phone instead of a credit card.

Revenue direction

There are some complications, however. About 25 per cent of India's 1.1 billion citizens own a phone. These new users, who use cheaper handsets but want the same services available on premium handsets, are largely from fast-growing smaller cities and towns.

India's average revenue per user is $10 - one of the lowest in the world - compared with $12 in China and $30 in the US. A cellular phone call can cost as little as 1.2c a minute, vs. 8.4c in Pakistan and 3.5c in China.

So while there's scope for making profits beyond the basics, most services remain a luxury for many Indians. "Companies, however, are convinced that non-voice data revenue is the direction," says Ray Tsuchiyama, Tokyo-based head of emerging markets at Nuance mobile and consumer services.

It helps that Indians are text-message crazy. Indians sent some 25 billion short text messages last year, and together with ring tones they make up about 80 per cent of the services Indians use. While India's rates may not seem like much in a global context - it costs 25c to book a flight on the mobile phone and 75c for a music download - given the numbers of Indians now using phones, those numbers can add up fast.

Consequently, mobile companies want to increase the share of their income that comes from these services, currently 10 per cent of revenues and 13 per cent of profits on average, to about 20 per cent. That would put Indian carriers near the top among worldwide cellular companies. Says Manoranjan Mohapatra, chief executive officer at carrier Bharti Telesoft: "India is leading the way for mobile solutions globally."

Nandini Lakshman, BusinessWeek