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Use VAS to generate loyalty, operators urged

Value-added services not just revenue stream but can grow customer loyalty--crucial in competitive pre-paid mobile markets such as Indonesia, says industry insider.

COMMUNICASIA, SINGAPORE--Mobile value-added services (VAS) can go beyond mere additional revenue generation, and become a means to "lock in" customers, particularly in emerging markets such as Indonesia, says an industry insider.

Mobile applications, for instance, are "huge loyalty factors", said Erik Meijer, deputy president director of Indonesian operator Bakrie Telecom, during his presentation at the mobile VAS conference held Thursday during CommunicAsia.

With Indonesia being a predominantly pre-paid user market, it is important to "get loyalty with VAS, beyond just revenue", he noted.

One way the operator hopes to win customer loyalty is by pre-loading apps such as Facebook and Twitter onto phones, Meijer said.

He explained that having a Facebook application already embedded in the phone can mean the customer will be less inclined to use a SIM card from another operator because while voice and SMS (short messaging service) are a given, it takes extra effort to access his social account.

"Customers are locked in by the applications [since] they're tied to their Facebook or Twitter," he said.

The face of mobile in Indonesia is "changing" and it is no longer just voice and SMS, Meijer pointed out. According to him, "mobile is going social"--about 72 percent of Indonesia mobile subscribers use their phone to access social networks, while 51 percent use it for search.

Furthermore, Indonesia is the world's second largest Facebook market, with over 35 million active users, the executive said.

Bakrie Telecom also produces customized, "VAS-themed" feature phones, which essentially makes VAS--instead of price--the competitive differentiator, Meijer added. As a result, there is no need to subsidize the phone since consumers will purchase the handset for specific VAS, he explained.

For instance, its Esia Fun phone comes with Facebook and Google search "hot keys" on the key pad, so users can directly access the applications, without having to discover and download the apps on their own. It also has a Esia QWERTY EC6060 phone which comes with 30 games from Electronic Arts, and the Islam-themed Esia Hidayah that "integrates religion with mobile" through features such as prayer alerts.

Rather than just revenue, customer engagement and creating new customer segments can be done through VAS, he emphasized.

VAS revenue strategy
Meijer also highlighted that the average revenue per user (ARPU) in Indonesia can be as low as 10 percent of that in developed markets.

In such a low ARPU market, there are certain "mantras" when developing a VAS revenue strategy, he noted.

One cannot use "U.S. benchmarks" or flat fees, and instead, bite-sized pricing and device-service bundling are key, he said, pointing out that Bakrie Telecom charges for SMS based on the number of the characters, rather than per SMS sent.

With this pricing model, there was a "huge" jump in SMS contribution to overall usage revenues, from 8 percent to 23 percent, Meijer revealed.

He added that "aggregating and simplifying" the mobile Net experience is also important, which ties back to the embedding of applications into the phone or placing "hot keys" on the key pad.

Consumers, he argued, don't just want to go on the Internet using their mobiles--they want to access Facebook. "If you offer an application to download, maybe two or three percent will go for it. But if you pre-embed the application in your device, 70 percent will try it," he said.

Neeraj Roy, CEO, Hungama Digital Media Entertainment, also stressed that carriers in markets with low ARPUs must invest in developing services beyond just providing mobile access, including mobile radio, news, astrology or sports scores.

The region of South Asia is very price-sensitive, high-growth and fragmented, and "device, connectivity, price competitiveness and innovation" will be the main differentiators for success, he said during his presentation.