Mobile operators struggle against online messaging

(Image Credit: iStockPhoto/jorgesa)

Online messaging apps are eating away into revenues from short messaging services (SMS), causing mobile operators to find new ways to compete and stay profitable.

In fact, online chat applications are even challenging the voice business of mobile operators. Telecom consultancy firm Ovum reported a 20-30% annual decline in SMS usage. Meanwhile, WhatsApp, Facebook Messenger, Skype, Viber and other applications or over-the-top (OTT) services are seeing huge boosts in user bases. WhatsApp alone is delivering around 30 billion messages every day, and WeChat in China has doubled its user base and reached 200 million in six months. KakaoTalk is used every day by 90% of South Korea's mobile phone subscriber base.

As for SMS, India in particular has seen an 18.35 decline in usage in June 2014, according to the Telecom Regulatory Authority of India (TRAI). This is largely due to the increase in OTT messaging traffic. WhatsApp, and other popular services, have put significant pressure on mobile operators' SMS revenue – with over $1.5 billion in revenues lost in 2014.

With voice services on Viber, WhatsApp, and other OTT applications growing in popularity, mobile operators are seeing growing pressure on their main revenue channel – voice revenue. While OTTs have not taken over the voice market, it is growing steadily. Accenture estimates that voice revenue will drop by 2% annually in 2012-2017.

Customers are shifting towards OTT apps as VoIP calls increase in quality. Analysys Mason has reported that 20% smartphone users now actively use VoIP services are beginning to use VoIP apps for primary voice services. The numbers are nascent for now, but reflect the potential of OTTs to take over mobile operators as the primarily voice service provider.

The OTT voice market remains relatively small in less-developed nations where network quality and internet penetration is low. Mobile operators are also competing with extremely low voice tariffs. Mobile industry experts believe the growth of OTT services will not create competition, but will open new opportunities for operators to create new revenue channels. Operators need to change how they charge consumers – with OTT consumers currently paying for internet bandwidth – but not on a per-message or call basis.

Do you think operators need to change how they charge their customers? Let us know in the comments.

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Hisham Fathy
16 Jul 2016, 12:50 p.m.

data charging will not help mobile operators as these applications does not consume a lot of data on the other hand competition is very fierce which decreased prices down and today data price is very low not to mention the quota concept and bundling offers which allows good balance of data to customers.

the only way is to design new products based on OTT in other words packages or products will not be based on how much data is available for free within the package but which application is allowed for free within the product. Hence operators will be able to gain revenue from availing OTT.