VAS operators Condemn lack of regulatory direction on operations in Nigeria

Operations of Value Added Service (VAS) providers in the country have slowed down, as  lack of proper direction for the sub-sector is posing a threat to its entire existence.

Already, the VAS sub-sector, whose worth was ₦300 billion as at 2018, dropped to N79 billion by October 2019, according to the Nigerian Communications Commission (NCC).

The VAS operators render services such as caller ring back tunes, health tips, daily motivational quotes, sport/entertainment news and the likes, which are delivered to mobile subscribers, who are charged through deduction of their call credit.

In a chat with The Guardian, National Coordinator at Wireless Application Service Provider’ Association of Nigeria (WASPAN), Chijioke Ezeh, said there is serious confusion in the VAS industry. Ezeh said this has led to the decline the sector is experiencing.

Putting it in his words, “there are no clear cut lines as to what to do and not to do, who is charge of what, etc. This means that there are a lot of grey areas, which leave room for conflicting interpretations. In such a scenario it is very difficult to achieve any sustainable success.”

He stressed that the VAS industry is in a state of decline, adding: “the perceived lull is both good and bad news. The industry has less bad news to report, the telcos lose billions in revenue, Nigerians lose access to digital information and entertainment, VAS providers shut down and Nigerian graduates lose jobs while the regulator mulls what next to do. So yeah, there’s been a lull.”

Checks by The Guardian showed that the introduction of the Do-Not-Disturb (DND) initiative by the NCC contributed significantly in reducing the influence of the operators. As at last December, over 24 million Nigerians had blocked them on their mobiles.

While the DND remains a challenge, Ezeh, pointed out that the whole idea of bringing an aggregator into the mix, made a simple problem complex. “At this stage, with initially sighted value already shaven off and with only hard work left to be done to re-grow from nothing, the inviting aggregator position is looking bare and may be a stakeholder position some may want to just hand over (like brokers) to the telcos for whatever little share they can get. Problem is, though…100 per cent of zero is yet zero.”

He stressed that incessant introduction of service-impacting directives has affected the VAS industry negatively. “Even when withdrawn, they leave a trail of long term damages,” he noted.

The WASPAN boss said the industry has faced a barrage of issues including the removal of auto renewal, mundane & restrictive double opt-in, ban on marketing, unfavourable revenue share, delayed/reduced/no revenue pay-outs and inefficient product control platforms.

On revenue sharing gathered to be between 88 per cent to 12 per cent, with the telcos getting the largest share, Ezeh explained that the financial terms of partnership with telecom operators varies. He however, said that telcos take a large portion of the share.

According to him, in recent years it has gotten progressively worse, with VAS players having to accept the new terms in order to keep their businesses afloat.

Specifically on introduction of Aggregator Model, he disclosed that it was introduced as a solution to challenges faced in the industry, “but, it is relatively unclear how the introduction of a new stakeholder can resolve issues between existing players. If not effective may become the industry’s death blow.”

On the need for VAS operators to innovate, Ezeh said: “The skewed revenue sharing formula and industry’s volatility is not conducive to sustain innovation. A number of VAS companies have diversified into other (non-VAS related) industries to stay afloat.”

Speaking with The Guardian, NCC Director of Public Affairs, Dr. Henry Nkemadu, said the forces of the market, especially the introduction of DND definitely impacted VAS operations and the market value. He stressed that VAS operators’ lack of creativity in innovating has also reduced potential.

Nkemadu said NCC never neglected the VAS sub-sector, “but you will recall that there were several complaints from subscribers about how unsolicited text messages, tele-marketing, among others were eating deep into their airtime, disturbing their mobile phones, among others. Today, about 24 million people have activated DND initiated by NCC, definitely, that alone will impact their market. Remember, subscribers are king. So, we tried to balance the interest of consumers against operators. VAS operators must be innovative. They are not neglected.”