Free message apps 'to cost telecom firms $23 bn this year'

October 11, 2012
This file photo shows a man transmitting SMS messages on two mobile phones. Global telecom operators are expected to have lost $23 billion in SMS revenues by the end of 2012 as smartphone users shift to free messaging applications, according to an industry report.

Global telecom operators are expected to have lost $23 billion in SMS revenues by the end of 2012 as smartphone users shift to free messaging applications, an industry report said Thursday.

Technology research company Ovum forecast the losses would more than double to $54 billion by 2016 as the traditional Short Messaging Service (SMS) gives way to Internet-based platforms such as WhatsApp.

This compares with estimated losses of $8.7 billion in 2010 and $13.9 billion in 2011.

"Social messaging is becoming more pervasive and operators are coming under increased pressure to drive revenues from the messaging component of their communications business," said Neha Dharia, consumer telecoms analyst at Ovum.

"Operators need to understand the impact of social messaging apps on consumer behaviour, both in terms of changing communication patterns and the impact on SMS revenue, and offer services to suit."

Ovum cited the increasing popularity of WhatsApp, which allows smartphone owners to exchange messages for free using wireless Internet links, bypassing SMS gateways that charge users per message or for a monthly quota.

"Ovum believes this level of growth will continue as smartphone and mobile broadband penetration increases and expects smaller players such as 'textPlus', 'Pinterest' and 'fring' to cause further disruption in the messaging space," the report said.

Urging telecom operators to innovate, Ovum said the increase in the number of players offering social messaging services is not a short-term trend but a sign of a "shift in communication patterns".

Text messaging started as a way to use spare telecoms capacity but became a key cash generator for operators while offering users a cheap way to keep in touch with friends and family without having to spend on phone calls.

Dharia told AFP on Thursday that SMS contributed 49 percent of non-voice revenues for telecom companies globally last year, but is expected to fall to 45 percent this year and to 35 percent by 2016.

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5 / 5 (1) Oct 11, 2012
That's 23 billion at exorbitant rates for simple data transfer, the entire SMS industry is a con, a cash cow build on the premise of unjustifiably expensive 256 byte packets of data.
5 / 5 (1) Oct 11, 2012
Someone skimming the article and noting the Really Big Numbers might assume mobile service providers are becoming unprofitable, which of course isn't true.

I would prefer my phone simply move my bits of information between me and another end point. I don't want to be charged more for some bits than others. If the phone company isn't willing to do that, I'm glad there are competitive alternatives.
5 / 5 (1) Oct 11, 2012
thats why we see a shift towards mobile internet subscription with free voice calling, its based on data-use and its digital packets could contain anything from text voice files etc...
5 / 5 (1) Oct 11, 2012
Consumers tired of being gouged on SMS? I'm shocked!
not rated yet Oct 11, 2012
Bollocks most users are on a plan, which includes SMS and unlimited call's. (this is the case in Australia)
not rated yet Oct 11, 2012
A Libertarian employee of the Competitive Enterprise Institute once told me that it was illegal in America for individuals to act to reduce corporate profits.

That is part of the ideology that underlies the Competitive Enterprise Institute's activities. It is why the propaganda organization is paid so well by it's corporate sponsors.

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