 "Telcos' revenue focus turns to messaging apps as SMS fades")
SMS has predominantly been the most convenient and cheap way to communicate for about 20 years globally (though it came to India much later, in 1998). Yet, it is fading away fast, primarily because of the instant messaging applications such as WhatsApp, Blackberry Messenger (BBM), WeChat, Line or Nimbuzz, among others, which have emerged as better and cheaper options in recent years.
While this seems an area of concern for mobile service providers, it actually isn’t. The estimated loss from a drop in SMS is getting compensated by fast-growing data revenue. Operators have been losing revenue from messaging, which used to account for a little more than 10 per cent of an operator’s mobile revenue till about 18 months earlier.
Currently, it is five to six per cent. During the same period, data revenue jumped by about half. Increasing smartphone and feature phone reach, with instant messaging apps, have forced telecom service providers to find ways to compensate revenue loss from messaging services with income from data.
“Operators need to develop alternative strategies to cover possible losses. Once 3G (third-generation services) takes off, data will contribute much more in the years to come,” says an analyst with a global management consultancy. Piyush Choudhary, analyst with CIMB, is upbeat on data revenue growth. The data subscriber base in India is expected to touch 350 million by FY16, a penetration of 34 per cent from the present level of about 19 per cent.
In the July-September 2013 quarter, the country’s largest telecom operator by subscribers, Bharti Airtel, reported a drop of a little more than two percentage points in revenue from messaging and value-added services, at only 6.7 per cent of total mobile revenue. This was 8.2 per cent in the April-June quarter and 10.1 per cent in the July-September quarter of 2012.
According to Idea Cellular’s quarterly report, non-data value added services revenue (as a percentage of total service revenue) dropped 1.4 percentage points in July-September 2013 against the previous quarter.
On the other hand, quarterly results of the three companies suggest growth in revenue from data services. Bharti Airtel’s revenue from data as a percentage of mobile revenues increased to 9.2 per cent in the second quarter of 2013-14, as against 7.4 per cent in the previous one and 5.2 per cent in the year-ago period. Vodafone’s revenue from data (excluding browsing) jumped 45.9 per cent in the first half of this financial year, to Rs 111.9 crore, as compared with Rs 76.7 crore in the year-ago period. Total data revenue jumped 76.5 per cent during the period.
In a recent study, mobile communication research firm Ovum said SMS growth rates had fallen from 14 per cent in 2011 to eight per cent in 2013. By 2015, its revenues will begin to plateau. It estimated that new messaging platforms will cost operators $54 bn in revenues by 2016.
Rajan Mathews, director general, Cellular Operators Association of India (COAI), says only about 30 per cent of the country’s mobile subscribers use SMS, due to language restraints. Regulatory restrictions also curbed SMS flow during the past few quarters, he adds.
“Yes, operators are losing revenues from simple text messages. But, operators are also coming out with options to recover the estimated loss. Introduction of vernaculars for SMS is one. Also, growth in revenue from data is much higher,” he says . While the decline is estimated at 45-50 per cent in revenue from SMS over the next couple of years, Mathew believes the market would stabilise over the next six to eight quarters.
Telcos have also tied up with applications providers, such as WhatsApp, Line, WeChat, BBM, to offer cheap monthly plans targeting college goers and specific audiences.
US-based WhatsApp has around 30 million active users in India out of its total 300 million users globally. While China’s WeChat declined to give details of how many users it has in India, industry insiders say that it, too, has close to 30 million registered users in India, followed by Nimbuzz that has about 25 million. Japan’s Line, which entered India last year, has about 15 million users. Bharti’s Hike has more than 5 million users.
India, with its 900 million mobile users and more than 70 million smart phone users, is certainly a market that demands attention from all these companies. In the last one year, chat usage amongst smart phone users has witnessed a significant increase from 70% in November 2012 to 86% in November 2013, according to a study by Nielsen Informate Mobile Insights.