The mobile telephony market is showing a lot of promise. Indian mobile voice and data services -- which will include voice, data and value-added services (VAS) -- are estimated at over $8 billion annually.

Besides, India -- the fastest growing mobile telephony market in the world -- with close to 90 million mobile phone subscribers (the actual figures of active subscribers are lower, though), is poised to touch an over 200-million mark by end-2007.

But telecom service providers are still not leaping with joy. Voice still generates 87-90 per cent of revenue and value-added services are yet to add significantly to the balance sheet.

The problem is that despite the average use of mobile phones being the highest at 287 minutes a month, India has an average rate per user (ARPU) of around $8 (approximately Rs 350). Australia has the highest ARPU of $33 followed by Singapore with $32 and China at $12.

The global average ARPU is a little over $ 21. Information technology research firm Gartner predicts that the ARPU in India is set to fall even further to $3-5.

"The way out is VAS which currently contributes about 10-13 per cent of the total telecom revenue," says Arvind Rao, CEO and co-founder, OnMobile.

He points out that there are around 300 SMS players and around 30 WAP (wireless application protocol, used to display and access the Internet on small wireless portable devices like cellphones). The major players, though, can be counted on your fingers.

The VAS market is estimated to grow at an annual rate of 30-40 per cent. For instance, within three months of its introduction, the PVR in Bangalore has been selling nearly 10 per cent of its movie tickets via handhelds (like cellphones and PDAs).

OnMobile has also finished the backend integration for IMAX and Adlabs [Get Quote] to similarly sell movie tickets. And airline and railway ticketing, too, via mobiles, is picking up at a rapid pace.

Yet, SMS still contributes a significant part of non-voice service revenue (around 65 per cent -- the highest in the world), while caller-line identification (CLIP) accounts for eight per cent of VAS revenue. The remaining 27 per cent are from services such as games, ring tones, mobile entertainment and multimedia messaging.

According to Arun Gupta, CEO, Mauj Telecom, the mobile VAS market is roughly Rs 500 crore (Rs 5 billion) currently. This is across SMS info services like cricket scores, jokes and dating (but excludes person to person, or P2P, SMS), GRPS (general packet radio service / EDGE (enhanced data rates for GSM evolution/mobile internet and voice/IVR (interactive voice response) portals. Inclusion of P2P SMS will easily take the figure to over Rs 1,100 crore (Rs 11 billion).

"The mobile media is probably the biggest media opportunity of this century. It is still in its infancy as the number of handsets become data-enabled, wireless broadband is available via 3G, EVDO (enhanced data evolution -- a wireless radio broadband data standard adopted by many CDMA mobile phone service providers), Wibro (wireless broadband by South Korean telcos) and beyond and as awareness increases, we expect mobile content and the applications market to grow to around Rs 5,000 crore (Rs 50 billion) by 2010," he says.

Various studies have indicated that the adoption of Indian film ringtones and ringback tones are the key to early VAS adoption in India. The Mobile Trends Guide, a study by SmartTrust, reveals that across Asia, ringtones and basic graphics top the charts. But, India (alongside China) was unique.

In all other global regions surveyed, the most desired service was music. In India, the most desired services were games. More than 50 per cent of active mobile data users in India wanted more games.

The need for VAS content is acute but there are problems too. The first revolves around revenue-sharing with content providers and the second around the adoption of high-end cellphones, which can leverage VAS.