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OTT apps killed the Telco star

Times are tough for telecommunications companies.

The latest figures from Singapore's Infocomm Development Authority (IDA) show that SMS messaging fell to a six-year low in 2013.

Despite an increase in mobile penetration in the city state the average number of text messages sent per month shrank to 1.49 billion in 2013, down almost 40 percent from 2.41 billion in 2011.

The proliferation of Over the Top (OTT) messaging apps, which use the internet to deliver content, is eating into the SMS revenue telcos used to enjoy.

Instead of paying a set amount to send a message via your mobile provider, smartphone users are now turning to apps like WhatsApp, WeChat, Viber, Line and KakaoTalk, all of which boast large customer bases and offer innovative features like the ability to send pictures and videos. Viagra

Frost and Sullivan analyst Ajay Sunder says the shift is hitting markets all around the world.

"Definitely in the developed economies we're already seeing a trend of declining SMS revenues. But even in emerging economies, like Indonesia, some of the operators are already seeing the impact of OTT apps on their voice and SMS revenue. With Thailand, for example, the minutes of usage of the top three voice providers actually declined close to 4 percent when Line was introduced in 2011."

Earlier this month, Singapore's second-largest mobile carrier, StarHub, inked a deal with Line to offer OTT-based data plans. The tie-up followed a similar arrangement with WeChat in December. Michael Chang, StarHub's Assistant Vice President of Mobility, says the company also plans to launch its own OTT app for customers this year.

"In the second half of 2014, we plan to launch new communication services which will enable customers to enrich their messages or voice calls with videos and images. We are also constantly exploring mutually beneficial and sustainable business models with various other OTT players. We are in talks with more players besides Line and WeChat to enrich our portfolio and give customers more choice.

But do these deals go far enough? The OTT messaging industry is in the midst of a land-grab - this month Rakuten bought Viber for $900 million, while Facebook spent $16 billion for exclusive access to WhatsApp's 450 million plus subscribers. Mr Sunder explains that telcos are missing out on an opportunity to monetize these services themselves.

"What most of the service providers are doing is offering OTT-based data plans. Which I think offers only a very short-term gain. But if you look at a longer-term perspective, the telcos really don't have an answer to addressing how they will come up with new revenue streams or try to fight back against this OTT landscape." he said.

Speaking at the Mobile World Congress in Barcelona, Singtel CEO Chua Sock Koong admitted telcos face an uphill battle in the brave new world of OTT content.

"The main problem we have as an industry is we have been unable to monetize this increased demand... and [average revenue per user] has fallen over time. I think the pace of change in our industry is relentless, so clearly we can't afford to stand still. If we are not careful we could stand the risk of being totally disintermediated," he said.

Chua Sock Koong also called on regulators to allow telcos to charge OTT service providers like WhatsApp for using their networks. Her comments have since sparked outrage on social media.

@nadalala wrote on Twitter:

"Honestly, this #whatsapppass that #singtel is calling for must be the MOST RIDICULOUS and LAZIEST thing I've seen from an organization. To get at a discount how to sell soul to the devil we offer cheap all and everyone.

@MingJieH tweeted:

So #Singtel wants to charge people for using Whatsapp? Not surprised if many people terminate their contract and move to Starhub or M1.

On the flipside, Japan's Softbank is one major telco that is receiving praise for embracing disruptive technologies with investments in e-commerce giant Alibaba and Chinese social network Renren. There was also speculation this week that Softbank is interested in an equity stake in Line, though Line's parent company Naver was quick to deny the reports.

More information at: www.cnbc.com


 

 


 

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