Inflection point for Mobile VAS?

ET had an interesting article a couple of days ago on declining SMS usage in India –http://economictimes.indiatimes.com/Indians_dont_just_talk_less_…

While the absolute number of SMS’s sent continue to grow (simply because Indian operators continue to add subs at a mind-boggling rate), the average SMS message per user fell significantly in the Sep. quarter relative to the June quarter – a trend that apparently began in late 2006, according to the article. While a number of possible explanations are put forth for the decline, I think the biggest factor is that with over 200m mobile subscribers we’re now well past the 70-80m subscribers who are English literate (I’ve seen some numbers as high as 100m for the English literate population). With over 50% of the user base unable to send/receive a “standard” text message, is it any wonder that SMS usage is falling? The bigger question in my mind, is when the operators will wake up to the fact that Value Added Services beyond SMS (yes, operators treat SMS as a “VAS”, simply because its non-voice, rather than a source of differentiation) is not something they can continue to soft-peddle if they want to stem the inevitable decline in ARPUs. Operators also need to take a long and hard look at their revenue sharing arrangements (in India 60-70% of VAS revenue goes to the operators vs. 25-30% in most other countries) since that’s leading to a chicken and egg situation – smaller share of the VAS pie stifles innovation in VAS and lack of compelling VAS applications means operators continue to milk whatever they can from SMS based quasi-VAS services. On a related note, the opportunity for non-text based as well as multi-lingual applications is real, and compelling. There are 3-4 companies in this space, but there’s room for many more. Would love to hear thoughts from others.