Shifting sands: Telcos evaluate SMS vs messaging apps

TUESDAY, MAY 28, 2013

By SUSANNA KHOO

Link to original article

TechCentral – Shifting sands: Telcos evaluate SMS vs messaging apps (PDF)

Mobile messaging apps may be all the rage nowadays, but Malaysian telcos aren’t completely giving up on SMS just yet.

“Voice and SMS channels remain relevant in today’s communications mix,” says Praveen Rajan, head of product marketing for Internet and services at DiGi Telecommunications Sdn Bhd.

Suresh Sidhu, chief corporate and operations officer at Celcom Axiata Bhd also agrees: “The bulk of traffic is still traditional voice and SMS.”

While this may seem like a case of industry players merely refusing to let go of old ways, the truth of the matter is that there are some concrete reasons to support this view.

Prevalent preference
Firstly, not all Malaysian subscribers have gone the way of smartphones yet. This is despite the widespread availability of such devices and the apparent reduction in retail prices over the past few years.

“There are only around 35% to 40% of subscribers using smartphones,” says Akmal Ab Wahab, telecommunications market analyst at IDC Market Research (M) Sdn Bhd. He explains that without a smartphone, a subscriber would not be able to make use of messaging apps at all.

However, he observes that many mobile phone users, especially those from Generation Y, have begun ditching their feature phones for a smartphone. “The booming interest in apps, including messaging apps, is considered one of the main factors,” he says.

“This trend will only continue to grow,” says T Kugan, head of product, device and innovation at Maxis Bhd. He believes that this is to be expected since smart devices have become increasingly “central to everyday life.”
Besides that, there’s another reason why SMS continues to be valued by the local crowd: Many subscribers are still on prepaid mobile plans.

“About 77% from the total of mobile subscribers are still on prepaid,” claims Akmal. Although there are many prepaid Internet data plans available in the market, he says that such users tend to subscribe for data packages for short periods of time when compared to postpaid users.

Clever bundles
Seeking to leverage on this untapped market potential, most telcos have started innovating their current product offerings to cater to the needs of these subscribers.

For instance, most Internet data packages now include features such as unlimited data usage for messaging apps, regardless of whether they are prepaid and postpaid in nature. In addition, consumers are also offered the chance to own a new smartphone at a discounted price if they agree to sign up for a long term data package.

So far, Maxis has experienced a positive take-up of such bundles, according to Kugan. “This bundling provides consumers with affordable packages and gives them peace of mind in terms of their data usage for such apps,” he says.

Praveen reports a similarly encouraging response over at DiGi.

“The data bundles have succeeded in raising awareness on the need for mobile Internet… and at the same time, allowed us to leverage on the popularity of the apps amongst smartphone users,” he says. “It has since helped us in growing the mobile Internet user base and to further drive data usage.”

Distinct decline
As the number of mobile Internet users and consequently, messaging app users continues to grow, SMS usage will inevitably dwindle with each passing year. In fact, current statistics already suggest that things are on a downward trend.

“The year 2012 was a turning point for SMS in Malaysia,” says Nipun Jaiswal, industry analyst for ICT practice in Asia Pacific at Frost & Sullivan, Inc. “The industry witnessed a decline not only in SMS traffic, but also in revenue.”

According to him, SMS revenue had dropped by 3% in 2012 and this was the first time that it has happened after many years of positive growth. Meanwhile, the number of SMS per subscriber had plummeted by 11% in 2012 (from 2,540 SMS per subscriber in 2011 to 2,261 SMS per subscriber in 2012).

“The trend is expected to continue further as the adoption and usage of mobile messaging apps increases,” says Nipun.

Anchor amidst change
Nevertheless, while the market continues to evolve, telcos say they are still banking on SMS revenue to sustain their operations.

“Voice and SMS will still be a revenue mainstay for the foreseeable future,” claims Suresh.

However, generally speaking, it is quite immaterial which method consumers favour for mobile network communication. As long as a telco is agile in dealing with the ongoing changes, it will definitely remain relevant in the market. Challenges may take different shapes and forms over time, but rich rewards will certainly come to those who persevere.

Leave a Reply

Your email address will not be published. Required fields are marked *