The year 2012 was an exciting time for the Malaysian telecom industry. Mobile penetration in the market crossed the 140% mark. Broadband household subscriptions grew by a solid 9% and the penetration reached a healthy 66%. On the revenue side, the mobile revenue for the industry grew by a strong 5% mainly driven by data. Contrary to popular expectations, even voice revenue grew slightly. It was a good overall performance by the industry. But does everything look bright and sunny? Are we missing out on something?
OTT lightning strikes the Malaysian SMS
Yes we are. Dense OTT (Over-the-top) clouds are hovering over this bright sunny day for telcos. Mobile data traffic has skyrocketed in the networks. The majority of that mobile data traffic is caused by mobile internet and not SMS. Not entirely a favorable sign for the telcos for whom SMS has traditionally been a core high margin service.
In the year 2012 SMS revenue from the Malaysian telecom industry declined by a steep 3%. This is the first time that the Malaysian SMS revenue has declined in the past many years. This should set alarm bells ringing for the Telcos because this SMS decline may just be a harbinger of what’s to come next.
It’s like a lightning strike which precursors a heavy downpour. Yes, a downpour of OTT services which the consumers would access through their mobile internet connections causing the data traffic to surge further and compelling the Telcos to invest more in their network and in turn hitting Telcos’ net margin. The telecom operators would be left with none but one question to answer: Are we extracting the optimum monetization from that data traffic that we are carry?
The onset of the messaging monsoon
SMS revenues have not declined because consumers are now talking more and texting less. In fact consumers are now texting more than ever before. It’s just that now they are texting over the OTT Instant messaging services of the world such as whatsapp, wechat, viber and social messaging instead of the good old SMS. So, the inevitable question is: What’s driving the adoption of these IMs all of a sudden? The answer lies in these 4 key drivers:
1.) Cost - Instant messages are a lot cheaper than SMS
2.) Devices - Increasing smartphone penetration
3.) Data - Availability of affordable of daily/weekly/monthly mobile internet plans
4.) Usability - Richer texting experience offered by IMs (group chats, profile pictures, status messages etc)
At Frost & Sullivan we believe that as the penetration of smartphones increases and the competition amongst Telcos pushes data prices further south, consumers would increasingly prefer IM applications to pure SMS. We also believe that such IM applications would further create greater value by adding capabilities for richer communication experience.