Fresh revenue window opens up in $11.5bn VAS market

Ben Uzor Jr

A fresh window of opportunity is opening up for Value Added Service (VAS) providers in Nigeria's highly competitive telecommunications market. This emerging sector, according to analysts will witness significant growth over the next two years, riding on the back of rising smartphone penetration, and the successful implementation of the Mobile Number Portability (MNP) scheme.VAS is a popular telecoms industry term for non-core services, or in short, all services beyond standard voice calls and fax transmissions.

"MNP has strong potential to provide impetus for operators to become more pro-active in service delivery to their customers.  "If the scheme runs full throttle, and the challenges plaguing the VAS industry are resolved, we see huge revenue opportunities for us", Simon Aderinlola, National Coordinating Consultant of Wireless Service Providers Association of Nigeria (WASPAN), a body which oversees VAS in the telecoms sector, told Benuzorreports. Africa’s mobile VAS market is expected to reach $11.5 billion next year.

This is according to data from research firm, Informa. The Nigerian market however contributes between 7 and 8 percent to Africa's VAS industry. The country is also forecast to grow to $2.01 billion by 2014. This represents a 17.4 percent of the total African market, according to Informa. Industry analysts expect increase in growth with the introduction of MNP, which allows holders of the country's over 114 million mobile phone lines to retain their mobile phone numbers when changing from one operator to another.

This is because with MNP, telcos would be keen on providing improved service delivery - all in an attempt to wrestle new subscribers from other networks and retain existing ones. Francis Ebuehi, chief financial officer, Spinlet, a mobile music distribution firm, has a slightly divergent view."Yes, VAS is a critical way of luring and keeping subscribers on the network in relation to MNP. But if the quality of service is poor, subscribers will move irrespective of the quality of VAS available on the network", he told Benuzorreports.

"I also think the proliferation of smartphones and tablets offer huge opportunities for VAS providers in Nigeria", he added. Major VAS providers in Nigeria include: MTech, Cellcast, TaviaTxt, SaveMyContacts, Textnigeria, Entegration Solutions, Cellulant, CellTrust, 3G Reality Centre, and A3&O, among others. Big telcos such as Globacom, Airtel, MTN and Etisalat, all work with many of these mobile VAS companies. Benuzorreports learnt that some telcos are even considering expanding the scope of partnerships with them.

 “As voice-based average revenue per user declines, operators are increasingly using VAS to profitably increase data revenues by delivering targeted content to their subscribers", said, Kofi Dadzie, chief executive officer of Rancard, a VAS firm, said at a recent conference. "With the MNP regime, we can deepen the delivery range and quality of services to subscribers.  "We are resolved to further work with telcos to deliver compelling offerings that will meet the expectation of the subscribers", Aderinlola said.

 “I think that the VAS landscape is growing and the potential is there. My take is that it is worth over $500m every year. It may actually be moving towards $1 billion in the next three years,” Goke Akinboro, managing director, Cellulant Nigeria Limited. Analysts say issues such as revenue sharing formula between telcos and VAS providers, access to requisite technology and content platforms, cost and time to market, as well as monetisation of content, have all contributed in slowing down the growth of the sub-sector in Nigeria.