SMS revenue to drop by $23bn this year

SINGAPORE: Global telecommunications operators are expected to lose $23bn in SMS revenue by the end of 2012 as smartphone users shift to free messaging applications, an industry report said Thursday, 11 October 2012.

Technology research company Ovum forecast the cumulative losses would reach $54bn by the end of 2016 as the traditional Short Messaging Service (SMS) gives way to Internet-based platforms such as WhatsApp.

"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, by-passing SMS gateways that charge users per message or for a bulk monthly quota.

"Ovum believes this level of growth will continue as smartphone and mobile broadband penetration increases and expects smaller players such as texPlus, 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 firms 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 capacity but became a key source of cash for networks as it was a cheaper than phone calls to keep in touch with friends and family.

Ovum said SMS messages contributed about 57% of non-voice revenues for telecommunications companies globally in 2009 but this is projected to fall to 47% this year.