Short Message Service-A Shrinking Revenue Model

We all are aware of Short Messaging Service (SMS) which till now has served us in our day to day to usage, be it informing your manager about something or just pinging your loved ones it is a tool which continues to be an integral part of the cellphone.

But since every technology faces the threat of being replaced by an updated and affordable one the messaging services too is meeting the same fate with the advent of various mobile data based messengers with which one can not only chat with multiple users at the same time but also send multimedia files at no extra cost.

The growth potential of the data based messaging applications can be understood with the recent acquisition of a well known messaging application WhatsApp by Facebook at a mind boggling $19 billion. Though the consumer’s proposition here stands on the winning side, its the telcos which are at biggest loss with the advent of such applications.

The eating up of SMS revenues by messaging applications strengthens with Bharti Airtel, country’s leading telecom operator witnessing a decline of 4 percent in its messaging and Value Added Services(VAS) revenue in December 2013 as compared to 2012.

Also if some industry experts are cited then there has been a decline in SMS usage by as much as 50 percent among users who use both Whatsapp and SMS. The drop is expected to not just continue but widen along with the passage of time as more and subscribers switch to applications like WhatsApp, WeChat, Line etc. According to an estimate the SMS revenues in the APAC region will fall from $45.8 billion in 2013 to $38 billion by the year 2018.

However the good news for the telecom operators is that though these applications have almost eradicated the use of messaging( atleast in the cases of smart-phone users) they still run on data and that is why there has been a consistent growth in the data revenues of almost every telecom operator.

There is no doubt that data is going to be the next big thing in the Indian telecom industry and failure to tap the potential of this soaring bandwidth usage may end up in hefty losses.