Mobile Operators Seek Road To Messaging Riches

If the development of the mobile phone industry was chronicled, text messaging would be regarded as the surprise success story. It remains by far the most successful wireless non-voice service, accounting for 10% of ARPU for many mobile network operators. SMS continues to dominate (see SMS Remains Dominant Mobile Data Application) and it is popular with operators because a single person-to-person message generates around $1000 per Mbyte of traffic, compared with less than $1 per Mbyte for voice telephony.

Analysys believes that the market for SMS is yet to peak and if all goes well, worldwide mobile messaging revenues could more than double over the next two years (see Mobile Messaging Services To Bring In The Lucre). However, new services such as picture messaging, mobile instant messaging and mobile email need to be deployed judiciously and the end result is not guaranteed.

With this in mind, Analysys has drawn up three differing scenarios that could result from possible operator strategies.

“SMS forgotten for the MMS dream” – SMS is neglected in favour of MMS and growth stagnates. Revenues are cannibalised by cheaper mobile instant messaging and email. MMS is too expensive for most consumers and remains a niche product. Operators struggle to maintain existing income levels.

“Price war destroys the golden messaging egg” – Operators cut prices in order to stimulate usage and attract new customers but the plan backfires as cheap mobile instant messaging services are taken up by young people, leading to cannibalisation of existing revenues. MMS grows strongly but overall messaging revenues decline.

“GSM operators achieve a hat-trick of revenue growth” – This is the ideal outcome in which the right emphasis is placed on different messaging services and worldwide revenues rise from $31 billion in 2002 to $70 billion by 2007, as shown below.