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Telcos stand to lose $23bn in SMS revenue

Bonnie Tubbs
By Bonnie Tubbs, ITWeb telecoms editor.
Johannesburg, 10 Apr 2012

Mobile messaging services like WhatsApp, BlackBerry Messenger, iMessage, Facebook Messenger and MXit may be the bane of cellphone operators this year, as the social messaging surge is estimated to deprive the operators of over $23 billion in SMS revenue.

This is according to global research and analysis firm Ovum, which is set to release a detailed report, provisionally titled “Counteracting the Social Messaging Threat”, in the near future.

Ovum analyst and author of the report, Neha Dharia, says telecommunications operators stand to lose approximately $9 billion more profit than they did in 2011 due to social messaging, “despite their efforts [to innovate and offer creative new services to their consumers using the IP channel]”.

Dharia says, with multi-platform texting application KakaoTalk set to spread beyond South Korea and US-based WhatsApp continuing its rapid proliferation across the world, the pressure is on and telcos will have to expand their messaging portfolios to offer a range of messaging services beyond SMS.

SMS still on top

At this year's Mobile World Conference, in February, global mobile messaging services company Acision noted that SMS still dominates mobile messaging.

In an earlier Ovum report, “The Casualties of Social Messaging”, it was revealed that, although 2011 saw operators globally losing $13.9 billion (about R109 billion) in messaging revenue, SMS remained “a sound revenue stream” that earned them $153 billion in the same year.

Ovum says, however, despite the solid allotment of SMSes, there is undoubtedly an increasing shift towards IP-based messaging. “Even though this shift is bound to smartphone users, it has still managed to cost operators [a loss accounting for 9% of total messaging revenues], and is large enough to make operators sit up and take notice of this emerging threat.”

In what was a rare interview with co-founder of WhatsApp, Brian Acton, Reuters reported the software start-up head said the service was not a threat to operators, but rather held that it would “benefit [operators] quite substantially”. Acton said WhatsApp, which handled one billion messages a day last October (just two years after its launch), was helping operators move their customers to data packages that would prove more profitable in the long term.

Vodacom spokesperson Richard Boorman says although the rise of social messaging “certainly has an impact” on the operators' dynamics, it is not a case of one-for-one substitution.

“I don't think you can draw a direct correlation between the rise of social messaging and decline of SMS, because there will always be a need for SMS or something like it.” A case in point, says Boorman, is the use of SMS for official notifications from banks and other institutions.

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