Contributed by: Rustam Orudzhev, international business leader, digital ecosystem products expert
Once upon a time, Value-Added Services (VAS) in telecom were limited to premium ringback tones and MMS. Today, these services have evolved dramatically. Imagine your mobile service provider not just as a means of voice and data transmission, but as a resource offering a suite of applications integrated with your daily digital activities. This is modern VAS—a digital toolkit revolutionising the telecom business. It helps telecom companies enhance customer engagement, generate more revenue, and maintain a competitive edge.
This article explores the world of VAS, its various forms, the strong business propositions it offers, global trends, and the barriers telecom operators must overcome to unlock its full potential.
Understanding Value-Added Services
Value-Added Services, though peripheral to the core telecom services, enrich them by offering convenience, entertainment, and additional functionalities to customers. While basic connectivity is essential, VAS extends this concept by adapting to the digital age, enhancing value for both telecom providers and consumers.
VAS typically falls into the following categories:
Content and Entertainment: The entertainment segment is one of the most dynamic in VAS. Mobile data services bundled with video streaming subscriptions like Netflix and Amazon Prime Video capitalise on the shift towards online content consumption. Telecom providers can also bundle these services with platforms like Spotify or Apple Music, offering ad-free music and videos. Where fast fixed broadband isn’t available, telecoms can offer game on demand services like Xbox Game Pass over 4G or 5G connections, packaging them with connectivity services. This consolidation boosts data consumption, customer loyalty, and average revenue per user (ARPU)—a crucial telecom KPI.
Utilities and Productivity: VAS in utilities and productivity enhances subscribers’ lifestyles and work efficiency. With remote work becoming the norm, integrated online storage services (e.g., Google Drive) facilitate document management and sharing. Mobile wallets (NFC payments) streamline and secure transactions both offline and online. As mobile banking adoption soars, telecom operators in developing countries are even venturing into financial services, addressing the scarcity of banks. E-commerce enablement and personalisation further boost telco brand loyalty and customer retention.
Communication and Social Networking: There’s potential for partnerships between telecom companies and social media platforms. Enhanced messaging and social networking features are essential in our hyper-connected world. If well-integrated by mobile operators, these services can improve communication experiences through seamless voice, video, and document exchanges. Partnerships with platforms like Facebook, Instagram, or X, offering free messaging features even when data bundles run out, greatly enhance customer loyalty.
Information and Education: Mobile devices serve as hubs for news, education, and alerts, keeping users informed and engaged. However, simple integrations like weather or traffic updates are not sufficient as customers need help navigating. Offering access to learning platforms like Coursera and Udemy through telco services makes educational content more accessible and valuable to customers.
The Business Case for VAS
In a competitive telecom market, VAS is a key driver of growth and diversification:
Revenue Diversification: VAS allows telecom companies to tap into multiple revenue streams beyond basic connectivity. According to a report by Analysys Mason, VAS accounts for 20%-40% of revenue for some leading telecom companies. This reduces dependence on traditional connectivity services, which face pricing pressure and are often seen as commodities.
Enhanced Customer Lifetime Value (CLV): Providing rich, personalised services significantly boosts customer satisfaction and reduces churn. An Accenture study in 2023 found that telecoms with comprehensive VAS offerings serviced 20% more customers than those with limited VAS. Personalised VAS drives up CLV for both customers and telecoms in the long run.
Competitive Differentiation: In a saturated market, innovative VAS offerings help telecoms carve out a niche. Exclusive content bundles and early access to popular streaming services drive customer acquisition and retention. For example, Vodafone’s partnership with Spotify resulted in a 15% increase in mobile data usage among its customers, enhancing satisfaction and engagement.
Key Trends Shaping the Future of VAS
The future of Value-Added Services (VAS) and the overall development of the telecommunications sector are certain to be influenced by several key trends:
- 5G and Edge Computing: The deployment of 5G networks and the growth of edge computing are set to revolutionise VAS. These technologies will enable real-time and interactive applications, such as augmented reality (AR) gaming and virtual reality (VR) shopping. This opens up new markets for telecom operators and significantly enhances customer experiences.
- Artificial Intelligence (AI): AI technologies, including chatbots and recommender systems, are transforming the telecom sector by improving user experience and service delivery efficiency. AI solutions facilitate hyper-personalised content delivery, customer care, and marketing strategies, ultimately enhancing customer engagement.
- Internet of Things (IoT): IoT solutions for household and health management can be integrated as part of VAS offerings. Telecom companies can help customers remotely control their homes and monitor their health, thereby extending the value they offer to consumers.
- Partnership Ecosystems: Collaborations with content providers, technology companies, and other industry players are expanding the VAS portfolio of telecoms. By building these ecosystems, telecom operators can develop new services and enter new markets, thereby increasing the reach and impact of VAS.
- Blockchain Technologies: Blockchain enables cross-service small payments, making new use-cases for various telecom content services practical and scalable. This technology can support a range of VAS, from in-game purchases to subscriptions for digital goods.
Case Studies: Successful VAS Implementation and Challenges
Case studies highlight the necessity and impact of Value-Added Services (VAS). For instance, Easypaisa by Telenor Pakistan is a groundbreaking example in mobile banking, providing financial services to the 13.2 MAU unbanked population. With over ten million users per month transacting more than ten billion dollars, Easypaisa showcases the significant market potential of VAS in underserved regions. Similarly, NTT Docomo’s i-mode platform in Japan was a trailblazer in mobile internet, generating massive revenue by offering services such as news, shopping, and weather updates on the go.
Ensuring Easy Access
A critical aspect is ensuring that customers are aware of and capable of purchasing VAS. A GSMA Intelligence survey in 2023 revealed that only 36% of respondents from developing rural areas knew about all the VAS their providers offered. Users must be able to easily discover these services for adoption to increase. For example, Vodafone Idea (Vi) in India initially struggled with the uptake of their entertainment VAS in 2021. They resolved this by launching a social media campaign and activating notifications in their app, which boosted subscriptions within three months. Telcos must engage in targeted marketing and provide effective access points, such as app locations and bookmarks, to promote VAS products. Proper engagement analytics are essential to ensure the right message reaches the right audience.
Data Privacy and Security
VAS often involves handling sensitive customer information, such as financial details for mobile banking and location data for navigation purposes. Ensuring data privacy and security is crucial to maintaining customer confidence and complying with legal requirements. A notable example is the 2023 fine against Meta Platforms by the Irish Data Protection Commission (DPC) for breaching the European Union’s General Data Protection Regulation (GDPR). Meta was fined 1.2 billion euros for unauthorised data transfers, underscoring the high stakes of data mismanagement. To address security and payment privacy concerns, WhatsApp India implemented a strategy in 2022 that included local data storage, adherence to Indian laws, multi-factor authentication, biometric security, and end-to-end encryption. These measures, coupled with public awareness campaigns, improved transaction volumes and increased confidence in WhatsApp Pay. Effective security measures are vital for reinforcing customer trust and meeting regulatory requirements, especially for VAS involving financial transactions or personal information.
Technology Integration
Integrating VAS with operational and billing systems is crucial for a seamless user experience. Complex integrations can slow rollouts and reduce service reliability. Many telecom firms still rely on elaborate coding and point-to-point integration, leading to inefficiencies. A 2023 study by Scalefocus indicated that these issues persist, highlighting the need for more efficient integration practices.
Content and Partner Management
Telecom companies must develop strong relationships with third-party content providers to ensure high-quality, exclusive content. Poor content quality or scarcity can lead to customer dissatisfaction and high turnover. To win subscribers in a competitive market, telecom operators have collaborated with well-known streamers such as Netflix and Disney+. However, these partnerships must be managed effectively for long-term success. For instance, Vodafone has strengthened its partnerships with Netflix across Europe, offering mobile and internet plans bundled with Netflix subscriptions, which is a compelling business proposition. According to the 2023 Analysys Mason report, content and partnerships are key assets for telcos to differentiate themselves in the market.
Having exclusive content is also a significant advantage. For example, Telkom Indonesia’s collaboration with Viu provided more Asian content, but to stand out, they focused on offering exclusive Indonesian series and films not available elsewhere. This strategy of emphasising exclusivity has been central to Telkom Indonesia’s efforts to enhance subscriber retention and growth through unique content.
Conclusion
In the Information Age, telcos must provide diverse revenue streams, client interaction, and competitive edge, which can only be achieved through VAS. By creating value-added services, forming strategic business relationships, and utilising business intelligence tools, telecom companies can adapt and thrive amidst newer technologies. The future belongs to telcos that fully understand specific consumer needs and provide relevant, cutting-edge VAS.
