Wednesday, September 29, 2010

VAS is not really Value Added.

During the last ten to fifteen years mobile operators have reported how much of their revenue is coming from so called Value Added Services, or VAS. Traditionally, the scope of this measure has been a mix of SMS peer-to-peer, and premium, as well for same two both types of MMS services, plus any other content sold together with the cost of transport, whether this was a packed or circuit switched data connection (if anyone can still remember that). The transport part is exactly the problem. As Mobile Broadband if becoming a prime product, large portion of what today is called Value Added comes from the revenue of connecting users to the network, which is not value added, and the measure is now difficult to make sense of. Let's take an example:

Before Mobile Broadband took off in Brazil, operators would have a VAS revenue of about 8% of the total revenue (some of the lowest numbers in the region), compared to Europa and Asia where several operators were on about 20%-25%. Some even higher, but mostly due to fundamentally different business model like SMART on the Philippines.

Now, Brazilian operators happily report a 12% of revenue as VAS, but large part of this comes from the Broadband services which are nothing but connection fees to hook up on the Internet, with no value added at all. On the contrary, operators are themselves worried about the Apples and Googles of the Internet, that have so-called "Over-The-Top" business models that does not include the operator in the revenue stream.

This is relevant because a number of operators are reporting to have trouble with their earnings on Mobile Broadband, and AT&T, 3-UK, Orange, and other are terminating Flat-fee tariff plans and launching volume based plans.

What operators are interested in, is to add value on top of their connectivity business, being voice or data driven, and the VAS measure does not give any indication on their ability to do so. If we estimate that the Broadband revenue is about on third of the VAS measure, then operators are still on the former 8% level, just like they were before they began to sell Broadband.

This could make sense when we see the content provisioning and distribution conditions that some operators are presenting to the market. They clearly show that the market is still immature, and if the 8% figure is a correct assumption, it means that Brazil is at least 5 years behind the European market when it come to real VAS value to the mobile connectivity.

SWEDISH CUSTOMERS WAITLISTED TO BUY SMARTPHONES

As demand for smartphones skyrockets in Sweden, customers are being waitlisted to purchase the most popular models, sometimes for months, reports DN. Jonny Malmlöf, head of PR for the retail giant Phonehouse, said his company is unable to meet demand. Sony Ericsson’s X10 Mini has been one of the best-selling models recently, while Apple is unable to meet demand for its new iPhone and customers are forced to wait to get their HTC Desire handsets. Apple declines to comment on the reason it is unable to supply enough devices, but HTC admits that demand for the Desire has exceeded the forecast around which HTC had planned its manufacturing schedules. Meanwhile, Nokia is planning to launch three new smartphones this fall, which it will price just under Apple’s iPhones. (Dagens Nyheter)

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