- POSTED: 17 Jan 2014 18:33
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Once a cash cow for telcos, short message service (SMS) is quickly being replaced by data-based services, known as "over-the-top" (OTT) messaging. Chat apps like WeChat, WhatsApp and Line have overtaken SMS.
SINGAPORE: Once a cash cow for telcos, short message service (SMS) is quickly being replaced by data-based services, known as "over-the-top" (OTT) messaging.
Chat apps like WeChat, WhatsApp and Line have overtaken SMS.
Ajay Sunder, senior director of telecoms at Frost & Sullivan, said: “Japan, Australia were already seeing (a decline in SMS) four to five years back. Emerging economies like Malaysia, for example, had its first year of SMS decline in 2013. Even in countries like Indonesia, Thailand, operators are facing the challenge where SMS revenues are going down.”
Telcos raked in US$120 billion in SMS revenue globally in 2013, according to consultancy firm Informa Telecoms & Media.
This is expected to drop to US$96.7 billion by 2018.
Asia Pacific is forecast to see the highest fall in revenue, from US$45.8 billion in 2013 to US$38 billion in 2018.
A number of OTT messaging apps originate from Asia Pacific, including Tencent's WeChat in China, Kakao's KakaoTalk in South Korea and Naver's Line in Japan.
Informa said much of the revenue loss in Asia Pacific will come from China, where annual SMS revenue is forecast to fall from US$25.4 billion in 2013 to US$19.6 billion in 2018.
Mr Ajay said: “For developing economies, you can easily say around 15 per cent of a service provider’s revenue traditionally used to be from SMS, which now is increasingly on the decline.”
In developed markets like Singapore and Australia, SMS accounts for much less of a telco's revenue.
Analysts say it is somewhere between 5 to 10 per cent, but it is becoming more difficult to estimate because operators in developed markets are now offering bundled packages, which include SMS, data and phone services.
SingTel, StarHub and M1 declined to say how much SMS contributes to overall revenue.
But in a statement, SingTel said with the mainstream adoption of smart devices, social media and free messaging apps, consumers now have more options for communication.
According to SingTel, SMS continues to be popular because it is reliable and faster than other messaging platforms and does not require an internet connection.
“We believe there will always be demand from consumers and businesses for SMS, which has a proven track record of more than 20 years,” said SingTel.
Tian Ung Ping, StarHub's assistant vice president for mobile post-paid services, said: "The decrease in SMS traffic seen in mature mobile markets is offset by the increase in mobile data use and enterprise SMS volume."
A spokesperson for M1 said in a statement: "The increased use of internet messaging apps such as WhatsApp has contributed to higher mobile data usage. Most mobile subscribers use SMS within their bundle.
“While internet messaging apps have impacted the use of SMS messages above bundle, SMS remains today's most reliable and ubiquitous messaging platform. We are currently monitoring the usage trends of such services, and engaging messaging operators to discuss collaborations."
Analysts said telcos can also offset lost revenue by partnering with the OTT players, offering connectivity to their chat app for a set monthly price.
This is a strategy which Mr Tian said StarHub is trying.
"We believe it is important to offer our customers choice so as to meet their needs. This is why we are collaborating with over-the-top players such as WeChat and at the same time, working towards the launch of Rich Communication Services (RCS)," he said in a statement.
Adolfo Hernandez, CEO at Acision, said: “We're seeing operators around the world who are being very innovative about building SMS-specific services that did not exist before. So whether it's sponsor messaging, whether it's gift messaging using SMS, whether it's the ability to have call-me services, collect services, sponsored services, there is a lot built on top of SMS and that is still the reality for a lot of countries out there.”
Another strategy is bundling SMS with data and phone plans, something a lot of providers, including SingTel, StarHub and M1, are already doing.
But SMS is not facing doom and gloom in all regions. Informa said some markets - such as Argentina, Colombia, Egypt and the United Arab Emirates - will continue to experience growth for the next two to three years.