Operators to lose $54bn on back of apps: Ovum

OTT players changing consumer behaviour, operators must adopt new strategies

By 2016, operators will have lost $US54 billion in SMS revenues as a result of the increase of and threat from over-the-top (OTT) players’ social messaging services on smartphones, according to a report by research firm, Ovum.

The Countering the Social Messaging Threat (July 2012) report indicates that this figure is more than double the $US23 billion they are expected to have lost by the end of 2012.

The report states that social messaging is not a short-term trend, but a shift in communication patterns, with operators in Europe and Asia-Pacific to be affected most.

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

Vigilance is a key factor here.

“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 revenues, and offer services to suit.”

WhatsApp is one of the more prominent social messaging brands, currently sitting second on the paid charts on Apple’s App Store, and has seen its levels of penetration increase in major smartphone markets, such as Singapore and the Netherlands.

Ovum predicts growth to continue as mobile broadband penetration increases, and expects smaller players, such as textPlus, Pinterest, and fring, to cause further disruption in the messaging space.

“OTT players are changing consumers’ messaging preferences, and the pressure they are exerting on operators’ messaging services is forcing them to offer increased SMS bundles and to experiment with messaging pricing models, further dampening revenue growth,” Dharia said.

As such, Ovum states that industry-wide collaboration must not be underestimated as operators look to a Rich Communication Suite (RCS) platform to provide consumers with features such as file sharing, video calls, and IP-based messaging.

This option will have to take the back seat for now, as RCS is not expected to reach the mass market before 2014.

“In order to take advantage of RCS when the time comes, operators will have to have a strong market presence,” Dharia said. “This means that they need to move to social messaging now in order to make sure OTT players are not in a better position to take advantage of future opportunities.”

Operators must therefore rely on innovative pricing strategies, partnerships, and launching operator-branded IP messaging services to keep up with the changing demand.