With mobile voice revenues declining sharply due to intense competition and a fall in tariffs, mobile operators are increasingly looking at data-driven services like EDGE and GPRS to prop up their revenues. Some of these next-generation services have been launched over the past few months. But there appears to be no clear picture so far about the response to these services or whether they are resulting in any significant revenue generation. We bring you the views of some industry experts...

With EDGE now being deployed by cellular operators, what, according to you, would be the percentage share of voice and data in the operators’ revenues?

N. Balaganesh
When we talk about India, we are talking about a country that is still in the early stages of adopting mobile data solutions. Although SMS has been a huge success, multimedia is yet to reach the same growth plane. Now with EDGE being deployed, we are talking of broadband-like data speeds to mobile devices. This would definitely take some time before it becomes a rage. According to me, voice would continue to dominate the operators’ revenue. The percentage break-up would be something like 80:20 in favour of voice. Data can never form the dominant portion of cellular operators’ revenues.

Umang Das
Technology platforms such as EDGE are at the moment more suited for high-end users who actively browse the internet and require higher data speeds for more bandwidth-intensive applications. The market is still evolving as far as data services are concerned. However, we are fast moving to a situation where it will start becoming more relevant for subscribers at large when EDGE-capable handsets become available with customers. Data services presently contribute close to 15-20 per cent of the total revenue for cellular operators in India, but we still have a long way to go. We expect these figures to change phenomenally in the coming years.

Arshit Pathak
The estimated contribution of voice would be 90 per cent and data 10 per cent. Of data, about 8 per cent would be SMS and download of monotones. The usage of other value-added services is actually less than 2 per cent.

Mohit Saraf
The telecom sector has long been expecting the rollout of 3G networks to give a boost to data services. With the deployment of networks like EDGE, which support advanced data services, the percentage share of data services is likely to increase perceptibly. At the regional level in 2002, mobile data services were estimated to account for 10 per cent of the operators’ total revenues. The introduction of EDGE-enabled networks is estimated to increase this share to 30 per cent or more. It is discernible universal trend that as the market matures, the revenue from voice-based calls tends to decline due to intense price competition. In such a scenario the general strategy adopted by operators has been the introduction of data services to boost falling ARPUs. This usually works since data services once well established tend to be significantly price-inelastic as compared to voice revenues. Also, creation of niche markets through data service product differentiation helps to keep competition at bay. EDGE will hopefully give GSM operators the upper edge that they have been anxiously looking for.

Prashant Singhal
Initially we had WAP technology that supported data solutions. However, this did not do too well in India or in Europe. Subsequently, GPRS, the next-generation mobile technology, was deployed. GPRS today has only a handful of customers. And the ARPUs are not very high. People are still learning how to apply GPRS. Therefore, really expecting that EDGE or 3G or any new-generation technologies will change the way we are going to talk is not too realistic. This is at least going to be the case for the next five years. According to me, voice would account for 80 to 85 per cent of operators’ revenues for the next five years.
What has been the experience so far with respect to deployment of data solutions?

N. Balaganesh
Here we are talking of various technologies. Earlier we had GPRS technology, which was deployed by almost all the operators to leverage mobile data services. Now the cellular operators are moving into EDGE technology. Mobile data is definitely growing in the country, but it would take time to generate volume growth. Moreover, in a country like India, mobile data usage is restricted mainly to the urban centers.

Umang Das
Telecom, specifically mobility and more specifically data over mobility, is all about deployment of state-of-the-art technology and providing customer-focused applications on the same. As per the industry average, the revenue from data has become sizeable now and is touching levels of Rs.40 per subscriber per month on an average. The increase is not only due to more applications available on data and higher penetration of mobility among technology-savvy users but also due to the increasing level of awareness among subscribers of the benefits of mobile applications. With operators putting their bets on new data applications, particularly information and entertainment-based services, data usage is likely to increase significantly among subscribers, at the same time contributing towards increasing the bottomline for cellular operators.

Arshit Pathak
The mobile phone has moved from being a device with a red and a green button to a multi-tasking device. EDGE is a next generation technology, which offers multimedia experience. We have networks and handsets that are compatible with this. The issue is marketing and affordability of these value-added services.

Mohit Saraf
The main challenge has been to reach high data transfer speeds to enable commercially viable services. The GSM network operators have had a particularly sobering experience on this issue since neither WAP nor GPRS could deliver the promised pace of data transfer. Hopefully, the EDGE networks would live up to expectations and prove that third time is lucky for GSM operators. CDMA operators, on the other hand, have had a better experience with CDMA 20001X technology.

Prashant Singhal
The experience till now has not been too fruitful. SMS has been the only fast-growing data solution as far as retail users are concerned. According to me, it is going to take at least five years before EDGE or any other such technology becomes really successful. Even in the West, EDGE or GPRS is still at a nascent application stage.
What has been the experience among Southeast Asian countries with respect to adoption of various data solutions?

N. Balaganesh
Cellular operators in India are offering data services, and this is growing. However, these services are largely restricted to the urban metros. In the metros, it is the younger generation, in the age group of 20-30 years, who are the main customers of data services. They are the ones who are more interested in multimedia messaging, video streaming, downloading of movie trailers, etc. In the Southeast Asian region, there are a host of countries like Singapore, Hong Kong and South Korea that are already offering 3G services. In these countries the maturity level in using data services is much higher than in India. People there are increasingly demanding high speed data services. In the Indian scenario, the operators are not deploying EDGE technology only to increase their revenues from data services but also to prepare themselves for the next-generation technology. EDGE is easier to deploy than 3G since the capital expenditure is lower.

Umang Das
With the global industry showing an upward trend and the fast-paced growth in data services in the past few years in India, we definitely expect a rise in these figures in the years to come. Ringtone downloads currently dominate the content-based services market with over 60 per cent of the total market. Graphic downloads like screensavers, wallpapers, logos, picture messages and MMS are also gaining popularity among Indian users. Value-added services contribute approximately Rs.750 million in revenues with a healthy growth rate of 15 per cent per month for the Indian cellular industry. According to industry estimates, over 800 million SMS messages are exchanged during a month. If we look at the Asia-Pacific market, the numbers are bigger, at approximately Rs.1,500 billion in revenues per month. However, the rate at which data services are growing in India is really commendable.

Arshit Pathak
Asia is a pioneer in mobile telephony. Countries like Japan and Korea have the most advanced mobile services. Also, they are the first nations to implement 3G. In these countries, net usage and e-commerce are very high and the speed of convergence has been the fastest. So, mobile phones are frequently used for entertainment, education, m-commerce, gaming/gambling. In Japan and Korea, the voice-to-data ratio is 40:60. However, in the Southeast Asian countries the story is similar to India.

Mohit Saraf
As mentioned earlier, the data services in the Asian region as a whole accounted for around 10 per cent of the total operator revenues. But different markets have reacted differently to the introduction of data services, for the reasons explained in the answer to the next question. For instance, in Thailand data services have accounted for as high as 40 per cent of the operators’ revenues while in Singapore they have remained at a modest 20 per cent. At present, it is estimated that in India data services account for a measly 5 per cent of the total operator revenues.

Prashant Singhal
I do not think India is too far away from the regional trends as far as data usage is concerned. In most of the Southeast Asian countries, data constitutes about 20 to 25 per cent of the operators’ revenues. As far as India is concerned, it would take one year for it to get to the same maturity level of data usage as shown by countries like Singapore and Hong Kong. Within India, a large part of the data solution users are professionals. Since this constitutes a small proportion of the entire mobile group, we find that the entire penetration of GPRS is less than 1 per cent.

What are the major drivers of these data trends?

N. Balaganesh
The single major driver of these data trends are the middle-aged and teenage users, who are increasingly communicating through messaging.

Umang Das
Subscribers no longer consider cell phones as just a communication device. They not only act as a device to store and access real-time information but also as a unique entertainment device. A huge number of SMS information-based services like web portals are being launched daily. In addition to basic m-commerce applications, corporate services, sports, finance, news, weather-based information services, ringtone downloads and icon messaging are now available. Value-added services have provided immense choice to the customer to explore different avenues, just a few buttons away. Especially with a continuous fall in voice ARPU, cellular service providers are striving to offer maximum value to their customers through VAS not just to retain them but also to garner revenues.

Arshit Pathak
For operators, the declining ARPUs are a major driver. The revenue-generation module is fast shifting from voice to data, and we should not be surprised if in the next two-three years voice becomes free of cost.

For consumers, the major driver is the availability of multiple applications. Mobile phones are becoming a mode for information, entertainment, gaming, etc. Once services like GPRS, MMS and Java become affordable to the masses, data usage will just boom.

Mohit Saraf
The varying share of data services in different markets is easily understood. Given that data speeds are fairly constant, a key differentiating factor would be the innovativeness of the different data services being offered and the success with which operators market them to individual and corporate users. Equally important is that the regulatory environment should sufficiently support the introduction of these services. A few countries like Singapore and China are seriously contemplating providing separate licences for 3G operations. If the recent TRAI recommendations are accepted, a single unified licence would suffice to provide such services as well. This would be a vital step forward for the Indian market. Ensuring interoperability of networks for smooth flow of data traffic and execution of any necessary interconnection agreements are also factors that would enable a smoother take-off for data services.

Data service penetration also seems to be visibly influenced by cultural differences. One theory is that Asians are more visually oriented compared to Europeans and prefer a data service such as SMS to voice mail. This perhaps accounts for the relatively higher penetration of data services in the Asian region. It is plausible to conclude that data service penetration in each market is affected by a combination of economic, regulatory, commercial and cultural factors.

Prashant Singhal
The major driver for data solutions in the future would be the overall change in the way we do business. In India today, 50 to 60 per cent of the businesses are not even computerized. If we can overcome this problem, we would find a much greater surge in demand for data services. The other segment is, of course, infotainment, which is the youth. This, in any case, is being driven by data solutions like the use of 8888 and 646. But the real growth would come when there is a huge change in the way we do business.