Executives with leading operators said India was mirroring the international trend of subscribers sending fewer text messages and shifting to other platforms and this has already begun to eat into the SMS revenues of local mobile phone companies.
The regulatory curbs on bulk SMSes have accentuated the problem but with individual consumers accounting for 75% of SMS revenues, it's their decline that's worrying companies.
Vodafone India's 'person-to-person messaging' revenue dropped 22% to Rs 481.6 crore in the first half this year from Rs 617.4 crore last year. Overall messaging revenue which includes MMS, bulk SMS, SMS termination and international roaming SMS has dropped 19% to Rs 639.3 crore in the same time, the company said.
"The urban markets will see a surge in shift to new platforms. Social messaging has disrupted traditional services, and operators' revenues in this area will come under increasing pressure. The next two years will see erosion of close to 40-50% of SMS revenues," said Bjas Murthy, associate director - products and services at Vodafone India. Bharti AirtelBSE -0.71 %, India's largest telco by customers and revenues, has seen a marginal drop in messaging revenues.
The contribution of messaging and value-added services as percentage of non-voice mobile revenues in India came down to 10.1% in the three months ended September this fiscal from 12.2% it the same quarter last fiscal. But the company attributes this dip to the ban imposed on SMSes in the last quarter. "We are not necessarily seeing any impact on our SMS revenue.
We did see a small SMS drop last quarter but that has more to do with Trai banning SMS due to unrest in the northeast," said K Srinivas, Bharti Airtel's president for consumer business.
Leading telecom and IT consultancy firm, Ovum, has estimated that India's SMS revenues would rise to $1.9 billion in 2012 from $1.8 billion in 2011. But it says domestic telcos have lost $318 million or nearly Rs 1,600 crore in SMS revenue last year due to the rising popularity of social messaging services that are either more competitively priced or free.
"Mobile operators in India will find it increasingly hard to grow revenue through text messaging with the growing popularity of smartphones and data bundles," says Ovum's analyst (consumer practice) Neha Dharia, adding that user migration to social messaging platforms will only get stronger as 3G penetration grows and data access rates become more affordable.
The world's first SMS was sent 20 years ago, though it came to India much later. Text messaging was introduced in India in around 1998, say sector watchers. Ernst & Young's Prashant Singhal added that pure SMS revenues had taken a hit and that mobile phone companies would develop alternative strategies of charging consumers for using instant messaging exclusively. These changes have already begun.
RCOM tied up with Whatsapp (with bundled Facebook usage) to offer unlimited use at .`16 a month. This has helped improve RCOM's revenue streams and profitability, chief executive officer Gurdeep Singh admitted. Vodafone, Bharti Airtel, Idea CellularBSE -1.27 % and RCOM tied up with RIM to offer BlackBerry Messenger only user plans targeting college students for Rs 129 a month.
Sunil Dutt, who heads the Indian unit of Research In Motion (RIM) that makes BlackBerry smartphones, said that its partners reported an increase in total billing due to increased data usage even as non-voice revenue of a leading operator fell around 14% in the last quarter. While the dream run for SMS in India may be over, both companies and analysts say the technology platform is unlikely to die out.
"The answer is definitely no," Vodafone's Murthy said. India has close to 36% of its telecom base in rural markets and its growing. The last couple of year's subscriber growth emerges from C circles and deep rural areas where price of a handset still matters, he added. Executives at RCOM added that things could change once 3G gained traction in India.
"If 3G takes off, customers with data plans will obviously contribute much more revenue than pure SMS," said one of them. The shift to instant messaging apps will be there but it won't take away SMS completely, E&Y's Singhal said.
As a lot depends on smartphone penetration, these services will take time to pick up country wide. The smartphone market in India which is very nascent will grow exponentially but on a small base.
Also, a large chunk of customers will still use regular feature phones and plain-vanilla SMS on mobile networks. Katyayan Gupta, Forrester's lead telecom analyst for APAC & Japan, conceded that SMS will survive longer in India than in mature global markets even though it faces serious challenges in India as instant messaging is easily compatible with wi-fi.
Source:ET
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