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New Delhi March 1 Value-added service (VAS) providers for cellular users will not hike tariffs for mobile content like ringtones and downloads despite the Government bringing them under the service tax net.

Mobile content providers have said that they would absorb the impact of the service tax and would continue with the tariffs being offered currently.

Mr Nitish Mittersain, CEO of Nazara Technologies, said: "Service tax on mobile VAS may have some impact but not to a great extent. Don't expect any impact on end-consumer prices for mobile content. In a competitive market I don't think operators will allow any increase in content services."

The mobile VAS industry could be worth nearly Rs 4,500 crore by the end of 2007, compared to its current size of Rs 2,850 crore, according to the Internet And Mobile Association of India (IAMAI).

Mr Vijay Shukla, Country Head, ValueFirst Messaging Private Ltd, said that there would only be a marginal increase in costs of providing mobile content, which has already been accounted for in the mobile subscriber's bill.

Mr Saket Agarwal, COO of Cellebrum, said that the move to impose service tax could be a blessing in disguise as it gives industry status to the VAS segment; it would bring about transparency in the way a lot of small mobile content companies function.

Operators are facing cut-throat competition and with the call rates in India being one of the cheapest in the world, the margins are very low. Therefore, they are looking at VAS to power the next wave of growth.

Though VAS currently account for about 10 per cent of the operator's revenues, the share is likely to increase with data-centric technologies such as 3G and Wi-Max being deployed.

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