Value-added services (VAS) in telecom used to be a “nice to have.” But as data becomes an easily traded commodity and reselling that data becomes less and less profitable (everyone is selling it!), once-foundational telecom offerings are growing less viable on their own. So, savvy service providers have started looking at new ways to earn revenue. In today’s story, we’re going to look at the market forces that are putting pressure on traditional telecom business models. We’ll also examine how those pressures have opened the door for a new and exciting VAS era. Most importantly? We’ll look at how telecoms can start implementing VAS, using some of the most innovative ways it’s being done now.
Why Has Reselling Data Become So Unprofitable for Telecoms?
Because data, once a luxury, is now a staple. This means that what used to be a lucrative business is now a competitive landscape in which telecoms are fighting a price war against other sellers on every street corner. (Or every corner of the internet, in the case of eSIM.) With little room for differentiation, operators are being forced to undercut each other to retain customers. That is significantly reducing profit margins. You can see it in the numbers. (Sure, data might now account for 70% of total mobile traffic globally. But the average revenue per user – known as ARPU – for data services continues to decline.)
And that’s just the battle on one front. Another significant pressure on the data market is the rise of over-the-top (OTT) services, which bypass traditional telecom infrastructures. There’s Netflix for streaming of course, but also companies like WhatsApp and Zoom, which provide free or low-cost messaging. These are areas that were traditionally the revenue-generating domain of telecom operators. OTT providers have diverted a significant portion of telecom traffic, further eating into the profitability of data reselling. You can imagine how hard it can be for a telecom to sell a service that is being widely offered for free. In fact, according to SpringerLink, operator voice revenue could drop by as much as 45%.
Don’t Forget the (Mixed) Effect of 5G
But wait, there’s more! The introduction of 5G networks might be a big innovation, but it hasn’t just been a boon. Sure, 5G offers faster speeds and lower latency. But it also comes with high infrastructure costs. Telecom companies are still struggling to balance that massive capital expenditure against the low (and lower, and lower) margins of data reselling.
It’s all been forcing operators to rethink their strategies. So, hello VAS.
What Are Value-Added Services (VAS)?
Before we get too deep into how VAS is being leveraged by today’s telecoms, let’s break down the definition and importance of the term. Value-added services (VAS) refers to additional services beyond the core telecom offerings of voice, messaging, and data. The vast array of VAS forms are designed to help telecoms differentiate themselves in a highly competitive market. At the same time, they are helping to address evolving consumer demands and expectations. By going beyond basic connectivity, VAS allows operators to offer more personalized, innovative services. And they can cater to specific consumer and business niches.
Major Value-Added Services for Telecom
Because it allows services to be highly targeted, VAS plays a crucial role in customer engagement and brand loyalty. (And, therefore, better profits.) So, what are the key VAS solutions for mobile operators that can increase business profitability? Think: cloud storage, gaming and entertainment, automated transcription and summarization services. Or: enhanced interactive voice response (IVR), AI assistants. Or: basically anything you can dream up that you think your customers will want.
We’ll look deeper into some of the VAS types in a bit. But for now, what’s important is that these targeted VAS options help operators deepen their relationships with their customers. Just as key, they reduce churn rates while helping operators increase that all-important average revenue per user (ARPU) that we mentioned earlier. (According to a report by GSMA Intelligence, operators offering value-added services saw up to a 30% increase in ARPU due to higher customer retention and engagement.) And alongside a higher ARPU comes a higher customer lifetime value (CLV). You can call that for the win (FTW).
Moreover, as basic telecom services become commoditized, VAS provides a means for operators to diversify their revenue streams. According to a Deloitte report, global telecom operators are increasingly relying on VAS to capture new growth areas. By 2025, says the report, VAS could contribute to more than 20% of total telecom revenues. A vital shift as operators strive to counterbalance what we’ll dig into a bit deeper in the next section: those shrinking margins from traditional data reselling and voice services.
What Are the Problems of Low Margins for Data Resellers?
These can be summed up in five words: a race to the bottom. The relentless pursuit of market share through aggressive pricing strategies has led too many operators to sacrifice profitability to stay competitive. In fact, in some markets, mobile data is being sold at prices below the actual cost of delivery. Yes, this strategy might attract customers in the short term. But it leaves operators with hair-width profits, if any, along with reduced cash flow. That is limiting their ability to invest in network upgrades, customer service, and innovation. And down the spiral goes.
And we can widen that bleak picture even further. Too heavy a dependence on data reselling leaves operators vulnerable to market fluctuations and regulatory changes. What if your markets brings in strict price controls or competition-driven price caps, for example? You’ll see even tighter profit margins, and worse financial strain.
Expanding to a VAS model is an opportunity for operators to diversify their offerings and break free from this cycle. With the automation and integration of value-added services, you can achieve higher profit margins… while reducing operational complexity, too.
Types of VAS for Mobile Operators
Right. We said we’d look deeper at the VAS types, and now’s the time to do just that. VAS as a product can be broadly classified into two categories: consumer VAS, and corporate VAS. The first, obviously, is for individual consumers, and the second helps businesses create new revenue streams and improve their customer experience.
Consumer VAS
Consumer VAS focuses on enhancing the individual customer. That’s people like you and me who use mobile phones and the accompanying digital services on a day-to-day basis. These services are designed to integrate seamlessly with their regular daily use. Real-world examples of consumer VAS include:
Entertainment Services
Streaming TV shows and movies (Netflix, Prime Video), mobile gaming, and music platforms (such as Spotify) are prime examples of entertainment VAS. It’s more than added partnership revenue! The more your mobile subscribers use these kinds of services, the higher their engagement and the higher their data consumption. Think beyond streaming services, too. Verizon, for example, provides customers with exclusive tickets to live concert and sports events with its Verizon Access add-on option.
Mobile Banking
Partnering with financial institutions to offer mobile banking services helps extend financial inclusion. There is a huge demand for this, particularly in emerging markets. One big trend seeing massive uptake in rural Africa is CSPs partnering with banks to create mobile money options, such as MTN and its MoMo program, or OrangeMEA working with Mastercard on mobile digital wallets.
Data Storage and Management
As we all collect years and years of photos, films, scans, PDF files, tax records, and the list goes on, cloud storage enhanced with tools that help people keep and manage all of those digital assets are increasingly in demand. A recent survey by Deloitte showed that more than a third of consumers have concerns about data security. Local CSPs have an opportunity to provide customers with the comfort of knowing their data is being stored within their country’s borders.
Health
There are all kinds of popular health-tracking services out there, but some providers are going further by enabling mobile health services (“mHealth”) from A2P/P2A reminders to access to health guidance… to actual doctoring. Canadian CSP Telus, for example, partners with regional governments to provide direct digital access to doctors, billed under public health programs, via its Telus Health arm.
Corporate VAS
Corporate VAS is tailored to meet the specific needs of businesses. These enterprise mobility solutions are particularly valuable in industries undergoing digital transformation, where businesses require robust connectivity and efficient tools to streamline their operations. Telecom operators are offering corporate VAS in the form of mobile device management (MDM) systems, secure VPNs, and mobile collaboration tools. In general, anything that empowers businesses to work flexibly and securely. A few real-world examples of corporate VAS include:
IoT Integration
Internet of Things (IoT) solutions help businesses monitor and manage devices, collect real-time data, and streamline operations – look to our customer Datora Group for examples of innovation in this area.
Cybersecurity
As businesses digitize, cybersecurity solutions provided by telecom operators, such as firewalls, threat detection, and data encryption, are critical in protecting sensitive corporate data. Orange Business Services, for example, provides enterprise mobility solutions that allow businesses to manage their mobile devices, ensuring data security and seamless communication for employees working remotely.
Unified Communication Platforms
Tools that integrate voice, video, and messaging into a single platform (for example, Microsoft Teams, Slack) help businesses streamline internal and external communication.
Cloud Services
Cloud storage, cloud collaboration tools, unified communication tools, and SaaS platforms are becoming essential for businesses, and telecom operators are increasingly offering these solutions as part of their corporate VAS portfolio. In the age of AI, this area is becoming increasingly important. Companies like Vodafone, along with regional players like India’s Tata Communications, are investing in their AI infrastructure in order to prepare for the growth.
Messaging Tools
Services like bulk SMS, push notifications, and interactive voice response (IVR) systems are key for customer engagement and marketing campaigns. Now take it further… what if you combine them with conversational AI voice generation? You’d have a pretty powerful tool for game-changing CX.
So those are the innovations. But what’s the foundational need to tap into them all? It’s a unified communication platform that is extremely customizable, allowing your business to tailor the service to your specific needs.
Boosting Profitability with VAS
These are just a few of the VAS tools out there. Now, how can telecom operators best leverage VAS to increase their profits? There are two critical factors that will help you truly capitalize on VAS:
1. Seamless integration with your existing core infrastructure
2. Automation
Let’s start with VAS integration. This allows operators to launch new services quickly and efficiently, reducing the time to market. (Speed is a critical edge in a competitive landscape.) Even better? By integrating VAS into their core systems, operators can leverage data analytics and AI to offer more personalized and relevant services to customers.
Automation, on the other hand, is key to lowering your operational costs. Going by the traditional method, the manual processes involved in launching and managing VAS offerings were time-consuming and prone to error. Automation streamlines that service activation, billing, and customer support, allowing operators to focus on higher-level strategic initiatives. (Plus, it involves fewer fingers on keyboards, and so fewer costly mistakes.)
Investing a bit of effort into integration and automation works. According to a report by McKinsey, telecom operators that fully integrate and automate VAS offerings can achieve cost savings of up to 20-30%! That’s mostly due to reduced operational overhead.
What Technologies Are Supporting Automation and Integration for VAS?
There are a number of innovative solutions out there that can make that automation and integration effort even easier. Here are a few key technologies that are helping telcos and mobile operators integrate VAS (while diversifying their revenue streams):
AI-Based Platforms
AI-powered solutions are essential for personalizing VAS offerings. AI enables operators to analyze customer data in real-time, predict user behavior, and recommend the most relevant services. For example, AI-driven chatbots can automate customer support, while AI-powered recommendation engines can suggest VAS based on customer usage patterns.
IoT Integration (Again)
Telecom operators can use IoT-based VAS to connect devices and offer monitoring and management services across industries. By 2025, there will be more than 75 billion IoT devices globally! So, telecom operators stand to benefit from offering IoT management platforms. With innovations like the IoT Mill platform, telecoms can create a new customer base of IoT entrepreneurs – not only helping them get their product to market faster, but also provide a suite of customized business-focused VAS, from data processing to old-fashioned consultation. In the logistics sector, IoT solutions enable fleet management, route optimization, and cargo monitoring. This not only reduces operational costs but also increases the overall efficiency of the business. Vodafone IoT is a leading example. They have over 100 million IoT connections globally, helping businesses enhance their operational intelligence and decision-making.
5G-Based Services
The rollout of 5G networks enables new VAS that rely on high-speed, low-latency connections. Examples include augmented reality (AR), virtual reality (VR), and smart city solutions. 5G enables the development of new, data-heavy applications that are impossible on 4G networks, driving significant growth in operator revenues from VAS.
Consumer Behavior and VAS Implementation
Another key to successfully implementing VAS in the telecom industry lies in understanding customer behavior. By leveraging data analytics to gain insights into customer preferences, usage patterns, and needs – examining touchpoints such as app usage, browsing habits, and customer service interactions – telecom operators can create tailored VAS that resonate with individual customer groups. (Or even individual customers.)
Personalization to Boost Customer Retention
We all like things better when they fit us better. So it’s no surprise that personalizing your VAS offerings can significantly improve your customer retention and satisfaction. Have users who watch a lot of video? Offer customized streaming video bundles. Have fintech-savvy customers? Here’s a mobile payment solution. A McKinsey study shows that personalizing products in this way can improve customer satisfaction by up to 20%. (As it happens, PortaBilling supports customer data management and usage tracking, enabling operators to personalize VAS offers based on individual customer behavior.)
Predictive Analytics to Anticipate Future Needs
Predictive analytics, driven by AI, allows operators to foresee future customer demands. By analyzing historical data, you can anticipate what services your customer might need next and proactively offer those exact services. Like above, this will (obviously) enhance customer satisfaction. And it can also create new revenue opportunities. For example, if you have a customer who uses IoT devices in their home and relies on you for data, you could deepen that relationship by offering them smart home VAS options. Meanwhile, you might offer your small business client some enhanced security solutions based on their usage patterns.
Enhancing VAS Offerings Through Data Analytics
Data analytics and AI are indispensable tools in the development and optimization of VAS. By utilizing big data and real-time data, telecom operators can go further than tracking customer behavior. They can also predict future trends and tailor their VAS offerings accordingly.
AI-Powered VAS Personalization
VAS offerings, when combined with all those data-driven insights, can be personalized further using AI and machine learning algorithms. AI tools can enable operators to analyze their customer interactions and adjust their VAS offerings dynamically. (And without having to do any thinking themselves!) It can be done in real-time, too, ensuring that customers receive the most relevant services at the right time.
Predictive Maintenance and Resource Allocation
Service providers are also using data to optimize the delivery of their VAS products. For example, telecom operators can use predictive maintenance algorithms to monitor network performance and preemptively address issues before they impact service quality. By predicting demand spikes and reallocating resources accordingly, operators can ensure a seamless user experience, especially during high-traffic periods.
How does all this happen? Platforms like PortaSwitch can be customized to integrate real-time data analytics and AI to do all this work and help providers optimize their VAS offerings. It’s all about making constant, quick, and automated adjustments to ensure that your customers are always receiving the best possible experience. (And the most personalized experience, too.)
Future Trends and Opportunities in VAS
Let’s get specific now and look at a few of the key VAS solutions for mobile operators to increase profitability and customize their offerings to their target audience. As value-added services become increasingly critical in driving profitability, telecom operators ignore these emerging VAS trends at their peril.
5G-Driven VAS
With faster speeds, lower latency, and greater capacity, 5G has opened up a world of opportunities for new VAS. For example, telecom operators can offer augmented reality (AR) and virtual reality (VR) services, which require that low-latency and high-speed connectivity. Immersive experiences have moved from the realm of sci fi (hello, holodeck!) to the everyday. And not just kitschy gaming booths in shopping malls and entertainment complexes. Today, you’ll find AR and VR being widely used in schools, trade shows, real estate offices, destination marketing centres, meeting rooms, retailers, industrial and manufacturing centers… pretty much anywhere you can imagine. And they all need someone to provide that connectivity and processing power.
Another key 5G VAS trend is the enablement of smart cities. Telecom operators can offer IoT-based solutions to municipalities, allowing them to manage traffic, energy consumption, and public services more efficiently. By providing the connectivity and platform for smart city applications, operators can tap into government and enterprise budgets, adding another lucrative revenue stream.
And then there is edge computing as VAS. This growing sector is utterly reliant on 5G. By processing data closer to the source (on the “edge” of the network), operators can offer real-time analytics and low-latency services to businesses. This is especially valuable in industries like manufacturing, healthcare, and logistics.
Mobile Wallet Integration as VAS
Telecom operators offering mobile wallets not only benefit from transaction fees. They can also partner with financial institutions to provide micro-lending, insurance, and investment services. These partnerships open new, profitable avenues while enhancing the value of mobile wallet solutions to customers. And there are opportunities within the opportunities too. Here’s just one of the niches in this area that is hungry for innovation: a 2024 study by Pymts showed that 92% of marketplaces in media and telecom want loyalty and rewards programs, and 45% want installment plans.
Smart Home Applications
Another fast-growing VAS opportunity is smart home services. With IoT integration, service providers can offer home automation solutions that allow their customers to control all the lights, security systems, thermostats, and appliances in their homes from their smartphones. Imagine setting your home to just the right temperature as you wait for the bus after work. And maybe even asking your fridge what you need to pick up on the way home! As more consumers adopt smart home technologies, telecom operators have a chance to bundle these services with their core offerings, differentiating themselves by integrating their services into their customers’ day-to-day life. (And collecting nice subscription-based revenue while they do it.) Verizon is a good example of this. The company has begun offering smart home solutions bundled with its internet services, providing customers with a seamless smart home experience.
VAS as a Driver of Digital Transformation
There are a lot of different ways that VAS is supporting the ongoing digital transformation not just in telecom, but in society as a whole. On the consumer side, VAS does exactly what we’ve been talking about: allowing operators to provide personalized services that cater to individual preferences. For example, AI-driven recommendation engines can offer users tailored content based on their viewing habits. On the IoT side, IoT-based VAS can automate everyday tasks like managing health monitoring devices.
For businesses, VAS is a critical enabler of their own internal digital transformation strategies. Telecom operators offering cloud services, IoT platforms, and cybersecurity solutions are helping businesses modernize their operations and improve their efficiency. (And thus their profitability – turning former simple service providers into critical business supports.)
The Role of Telecom Partnerships in VAS Advancement
Another way larger telecoms are achieving digital transformation is through strategic partnerships and acquisitions. Collaborating with tech startups specializing in AI, IoT, or fintech can enable a telecom operator to accelerate the development of new VAS. Take AT&T’s collaboration with IBM to offer hybrid cloud solutions for enterprises. And it doesn’t need to be startups. Seeing telcos partner with companies like Amazon (for its AWS) and Microsoft has become the norm.
Adapting VAS to Meet Changing Consumer Preferences
The direction that VAS will take from here largely depends on the ability of telecom operators to understand and adapt to changing consumer preferences. The demand for personalized, seamless, and on-demand services isn’t going anywhere, and that should push operators to deliver more and more tailored forms of VAS. By leveraging customer insights and predictive analytics, operators can create more relevant offerings that keep their specific customers engaged.
For example, as consumers increasingly prioritize convenience, telecom operators can focus on expanding self-service portals and automated support systems as part of their VAS portfolio. Such services allow users to manage their accounts, troubleshoot issues, and activate services all by themselves. That doesn’t just reduce the burden on telecom customer support teams, it actually makes customers happier, as they can make changes on their own terms.
More Niche, More Opportunity
Another key trend to look for in the future of VAS is service providers that dive deeper and deeper into very specific niches. In the early days, VAS was largely about “consumers” or “businesses.” Today, telecom operators can identify smaller and more targeted (and hence more underserved) markets. Think areas like providing low-latency networks for e-sports or telehealth, or supporting connected agriculture.
How Can PortaOne Help You Find Your Niche for Telecom Value-Added Services?
You can see how the telecom industry is at a pivotal crossroads. As margins on data reselling continue to dwindle due to commoditization and the rise of OTT services, it’s clear that telecom operators need new strategies to sustain profitability. Whatever your niche, a shift from focusing solely on reselling data to offering value-added services is a necessity if you want to stay competitve. By adopting VAS, you can create new revenue streams while enhancing your customer engagement and reducing churn.
PortaOne offers reliable and flexible platforms that can help you automate, integrate, and manage your VAS offerings. PortaSwitch will help you create and deploy VAS quickly, providing real-time service creation, billing, and customer management, all in one platform. With the PortaBilling real-time billing and charging engine, you can personalize your VAS offerings, track usage, and automate complex billing processes to enhance your operational efficiency. Turn your business into an Internet of Things ecosystem with IoT Mill. Combine PortaPhone with our Cloud PBX/Cloud Contact Center portal to offer your business customers a full OTT CX package that can be integrated into their own CRM systems. And, of course, the PortaOne Add-on Mart is full of low- and no-code VAS offerings that you can take to market right away.
Contact us today to explore how these VAS-ready solutions can help you automate, integrate, and scale your telecom services for the future.
Value-Added Services (VAS) FAQs
Value-added services (VAS) for telecom operators are additional services offered to customers that go beyond basic voice, messaging, and data services. Examples include mobile banking, IoT platforms, cloud storage, entertainment apps, and cybersecurity solutions. These services allow operators to increase customer engagement, diversify their revenue streams, and remain competitive in the market.
Telecom value-added services (VAS) improve customer satisfaction by offering personalized and convenient services that go beyond basic connectivity. Services like entertainment apps, mobile payments, and smart home solutions enhance the user experience. VAS also helps reduce churn by providing additional value that keeps customers engaged with the operator’s offerings.
Consumer behavior value-added services are services designed to enhance the telecom experience by catering to the specific preferences and habits of individual users. These services range from mobile payment solutions and entertainment apps to location-based services and personalized content recommendations. By understanding how consumers use their devices, operators can offer tailored services that meet their needs, improving engagement and loyalty.
Corporate value-added services help businesses streamline operations and increase productivity. Services like IoT platforms, cloud collaboration tools, and cybersecurity solutions enable businesses to operate more efficiently. For example, IoT integration allows businesses to monitor and manage assets remotely, while cloud collaboration tools improve communication across teams. These services make businesses more agile and responsive, contributing to higher operational efficiency and reduced costs.
Customer behavior insights refer to the data-driven analysis of how customers use telecom services. This information allows operators to understand usage patterns, preferences, and pain points. By leveraging these insights, telecom operators can offer personalized VAS that cater to individual needs, improving customer satisfaction and retention. Insights can be gathered from app usage, browsing habits, and customer support interactions.
Enterprise value-added services enhance telecom offerings via solutions that help businesses stay connected, secure, and efficient. These services include IoT platforms for device management, cloud services for remote work and collaboration, and unified communication tools that integrate voice, video, and messaging into one platform. By providing these services, telecom operators support digital transformation in enterprises, making them more competitive and agile.
Major value-added services (VAS) for telecom operators include mobile payment solutions, entertainment services, cloud storage, IoT management platforms, and smart home applications. These services allow operators to diversify their offerings beyond basic voice and data, creating new revenue streams and enhancing customer engagement.
Mobile payment solutions allow telecom operators to enter the lucrative financial services market. By offering mobile wallets, operators can generate revenue through transaction fees and partnerships with financial institutions. Mobile payment solutions also improve customer convenience and engagement, especially in regions where access to traditional banking is limited.
Network VAS are services that improve the performance, security, and efficiency of telecom networks. These include network monitoring, traffic management, and predictive maintenance. By optimizing how data flows through the network and predicting potential issues before they occur, network VAS help telecom operators maintain high service quality and reduce operational costs.
VAS improve mobile networks by optimizing their performance and providing better service quality. Services like network monitoring, traffic management, and predictive maintenance ensure that the network operates efficiently and without interruptions. VAS solutions such as location-based services and call management tools also enhance the user experience by adding value to core telecom services.
The most important VAS for mobile operators include mobile payment solutions, IoT platforms, entertainment services, and cloud-based tools. These services not only cater to consumer demands but also open up new revenue streams for operators. For instance, mobile wallets and entertainment apps can significantly increase customer engagement and ARPU.
VAS solutions for mobile network operators include a wide range of services such as mobile payments, cloud services, IoT platforms, network optimization tools, and smart home solutions. These services allow operators to diversify their offerings, improve network performance, and enhance customer satisfaction by providing tailored services that meet specific customer needs.
