California-based venture capital firm Canaan Partners seeks to invest $100 million (about Rs 456 crore) in telecom, technology and service sector in India over three to four years. Within the telecom space, the company will bet on VAS.
Harish Gandhi, the executive director at Canaan Partners, said that "There is a resurgence of interest in VAS and it would continue to stay exciting mainly because of 3G and the availability of feature rich handsets. Also, consumer maturity in terms of content consumption has increased."
He added that Canaan will not invest in operators because the required investment is too high.
Gandhi believes that it is a big plus for the industry that most VAS companies are raising money from the public. This is good news for Canaan as well, for as Gandhi pointed out, as these firms grow they might acquire the firms that Canaan has invested in.
Talking about the challenges involved in the VAS business, Gandhi said that "It's easy to start a VAS company as it doesn't take much capital. The question is whether you can get it to be large."
A VAS provider needs to offer differentiated services in order to gain ground. Also, revenue is shared at an approximate 80:20 ratio in favour of operators. Gandhi believes this will gradually change.
He said, "The coming of 3G and BWA is a big positive for the industry. With 3G, content will become more popular and the position of VAS players in the eco system will improve."
Gandhi explained further that the services offered over 3G networks won't be drastically different from what is being offered over 2G and 2.5G. However, the significant difference in quality over 3G networks will lead to an increase in consumption. He added, "VAS currently contributes around 10 per cent to operators' revenue. In the coming few years it will jump to 20 per cent."
He believes that the impact of 3G will be significantly visible only in 2012. Gandhi also expects VAS to provide more than just entertainment. He expects mobiles to be used for watching news clips, checking flight details, carrying out financial transactions and for similar imperative tasks.
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