In this second part of a two-part special insights article on VAS in the Asia-Pacific region, MEF Minute caught up with MEF Asia board directors, Trevor Goldberg, VP Business Development, MNOs at Bango and Paul Palmer, VP APAC, Customer and Market Operations, F-Secure, to ask them about this growth and where the new opportunities exist.

Is the future of VAS in developing regions just confined to the continued evolution of mobile financial services or m-health applications?

TG: VAS spans every aspect of life in these regions, from health and financial services to entertainment, communication, shopping and beyond. The entire internet experience for many people in these regions is built around their mobile devices.

PP: There is significant future opportunities in mobile social networking, games and entertainment. On top of that newer services relating to financial services, m-health and m-commerce will emerge

Will VAS need better low-cost handsets or will their availability make more expensive handsets more attractive to consumers?

  We are seeing the appearance of specialised broadband carriers in some Asian markets, targeting customers whose primary interest is media and content.

Trevor Goldberg, Bango

TG: The best opportunities will come with smartphones but that does not necessarily require expensive handsets. Firefox OS and an increasing range of Android handsets are rapidly gaining popularity across the poorer countries opening up massive new opportunities for the local population and their operators.

Operators can play a big role in partnership with the mobile platform providers to spread awareness of services available on these devices. Today many customers do not – or cannot – activate services they are interested in and that are commercially valuable to operators and their VAS partners.

PP: VAS need to developed for the market and available infrastructure and handsets available at the time. Currently, the penetration of smartphones is still low but growing fast. For VAS services to be successful they need to be able to address the majority of the subscriber based on any type of small screen be it low cost Android device or even older Symbian devices.

VAS will not drive users to spend more on the handsets themselves, but the cost of higher capability devices will reduce over time as we are already seeing with android.

Can you point to a VAS in South Asia you think has been particularly successful?

TG: App stores like Google Play offer massive new opportunities for local operators in S. Asia. Revenues generated are already very high and continue to grow fast and quickly outperforming many more established markets.

PP: A few services such as U2opia Fonetwish have done well as they have adapted global services such as FB and Twitter for emerging markets by developing a USSD UI for these services so that they are accessible to users on any device.

U2opia takes dumb phones and uses the so-called Unstructured Supplementary Service Data (USSD) protocol to allow such phones to connect to specific internet services such as Twitter and Facebook tailored for the small screen and text-only functionality. This is done through the company’s proprietary platform Fonetwish, which has signed agreements with Facebook and Twitter.

An estimated 62% of the phones used in the world are dumb phones, officially called “feature phones” by manufacturers and networks. Their market share is much higher in emerging markers.

Since its launch in 2011, the platform has steadily acquired users on 53 operator networks in 36 countries. They’re in places as far apart as Senegal, Somalia, South Sudan, Chad, Niger, Haiti, Honduras, Columbia, El Salvador, Cambodia, Palestine, Iraq, Yemen, Afghanistan, Sri Lanka, Bangladesh, India and Mauritania, among others. To get online, they dial a short three-digit code and then they use the alphanumeric keypad.

Another successful service is Bubbly developed by Bubble Motion which used IVR and smartphone application to connect celebrities to their fans using a voice based twitter like service which is live across many countries in S.E. Asia.

For VAS to become successful across South Asia, is more cooperation between developers and network operators needed?

TG: Local cooperation with developers helps, but it is more important to gain full support from all the major stores to quickly drive volume. It is also crucial to ensure monetization is the most efficient it can be, it’s very easy to get it wrong and end up losing money.

A home grown solution fails to deliver the scale and efficiencies required to actually make money from the new VAS services as revenue shares need to get closer to credit card levels.

PP: Developers still need co-operation with operators in emerging markets to support the billing for services and also support the marketing of such services. Mobile ads are still in their infancy with digital advertising spend accounting for less than 5% of overall advertising spend in India.

Last year, less than $30M USD was spent on mobile advertising. Moreover, fill rates on mobile ads are often less than 20%. All of this makes it impossible to build a viable business off of this nascent revenue stream.

The final word…

TG:Smartphones and LTE provide an opportunity for operators in South Asia and Africa to leapfrog other markets and take a strong leadership position in the new global mobile economy.

Operators worldwide now need to grasp the opportunity quickly and adapt their business models to maximize their position and revenue opportunity. It is vital to invest in core infrastructure, and then to partner for VAS related services like payments and content distribution.