Mobile messaging
Despite the rapid growth in sophisticated mobile data services, mobile messaging such as SMS remains a crucial revenue generator for mobile network operators. Here we present a collection of free articles on the role of messaging in the mobile service mix.
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Social networks to displace SMS text messaging?
In May 2011, I wrote my article ‘Will Mobile Messaging Revenues Decline?’, in which I discussed declining messaging revenues experienced by Vodafone Spain. As I reported, in the year to March 2011, there was a 13.8% decline in mobile messaging revenue compared with the previous year, from GBP400 million to GBP345 million. The publication by Ofcom of its ‘International Communications Market Report 2011’ on the 14th December 2011, which contains interesting market research on the adoption of social media, has prompted me to revisit this important topic as we near the end of 2011.
Mobile industry concern about the possible negative effects of social media on SMS revenues has increased during the year. Back in April 2011, KPN in the Netherlands attributed a 10% annual decline in SMS revenues to changing consumer behaviour, where mobile applications and data services provide an alternative to traditional voice and SMS. KPN’s recent results for the quarter ending September 2011 show a further decrease of voice and SMS service revenues in the Netherlands. Among KPN’s mobile consumer customers, the number of mobile-originating SMS messages per subscriber fell substantially to 50 in the quarter ending September 2011, compared with 55 in the previous quarter.
Messaging revenues for Vodafone Spain also declined significantly to GBP77 million for the quarter ending September 2011, compared with GBP88 million for the previous quarter.
The uptake of social media has been impressive. In Ofcom research undertaken during October 2011, 79% of UK consumers claimed to have visited a social networking website. Among the 18-24 year age group, the proportion was 92%.
Of those consumers with a social networking profile, the most popular site was Facebook. 71% of people with a social networking profile in the UK stated that they visited a social networking website at least once a day. 32% of 18 to 24 year olds in the UK claimed to visit a social networking website five times a day or more.
The increasing penetration of smartphones is encouraging access to social networking sites via mobile phones. The Ofcom survey during October 2011 revealed that smartphone penetration has already reached 50% in the UK and Germany, with Italy (48%) and France (44%) just behind. According to Ofcom, 43% of UK consumers access their social networking profile page via an app or the web browser in their mobile phone.
The most popular function on social networking sites is communication with friends and family. 85% of those interviewed in the UK with a social networking profile use it to communicate with existing friends and family. 49% of those with a social networking profile in the UK agreed that social networking had significantly changed the way they communicate with people.
The challenge for mobile operators during 2012 is now to minimise any net loss of revenue from the migration of messaging traffic from SMS to social media sites.
To all our regular readers, I hope you have a restful Christmas, ready for the challenges in 2012! Thank you all for your continued support.
About the author:
Mark Heath is co-founder of telecom strategy and telecommunication consultancy company Unwired Insight. He provides regular in-depth analysis on LTE and 4G, and has co-authored over 40 research reports on the biggest issues in the telecom industry.
Will mobile operators turn around declining revenues?
Faced with intense pressure on voice revenues, mobile network operators need to achieve significant growth in the revenue from mobile data services and mobile messaging. However, following years of disappointing revenue growth, some operators in Western Europe will have to do much better with mobile data services if they are to achieve significant increases in overall mobile revenue.
In a previous post, Mark Heath discussed the downward trend in the voice revenues of mobile network operators, caused by a combination of intense competition and price regulation. For mobile network operators to stabilise or, ideally, increase overall mobile revenues, they need to boost mobile data revenues, while maintaining significant mobile messaging revenues. In this endeavour, the success of mobile network operators in Western Europe is patchy, as demonstrated by recent results published by Vodafone.
I’m often asked by investors and analysts if, and when, we see a significant turnaround in the revenues of mobile network operators. Currently, it’s difficult to see any clear indications of such a turnaround. While there are positive signs of mobile data revenue growth in some markets, such as the UK, results in other markets are variable. Meanwhile, the downward pressure on voice revenues counteracts the gains from non-voice services. We need to be able to see a clear upward trend across multiple markets. It’s also essential that mobile operators are able to maintain their mobile message revenues.
Let’s look at the positive signs. Vodafone UK has experienced significant growth in mobile data revenue over the past five years, as shown in the figure below, alongside year-on-year increases in mobile messaging revenue. The relatively strong revenue performance of mobile messaging and mobile data services has finally enabled Vodafone to reverse a relatively strong decline in overall mobile revenue per customer, caused by a significant fall in voice revenue. In the year to March 2011, mobile messaging and mobile data services accounted for annual revenue per customer of about GBP100. This was 18% higher than the previous year. In the five year period to March 2011, revenue per customer for the combination of mobile messaging and mobile data increased by 71% (which is equivalent to a 14% annual increase on average). While mobile data has been the dominant driver to this (with revenue increasing by 151% in the five years to March 2011), mobile messaging revenues increased by 41% during the same period.
Breakdown of mobile revenue per customer in the UK
In comparison to the UK’s solid performance on non-voice services, Vodafone’s operations in Germany, Italy and Spain have performed less well, as shown in the figure below.
- There has been a significant gulf between the UK and the other Western European countries in terms of absolute mobile data and mobile messaging revenue. For example, the annual revenue per customer in Spain from mobile data and mobile messaging services was only GBP51.9, compared with GBP100.1 in the UK.
- While the UK experienced significant growth in revenue in the year to March 2011, with a clear uplift evident in the chart, Italy and Spain experienced no such improvement, and the situation was essentially static.
Annual mobile messaging and mobile data revenue per customer in selected European countries
Spain and Italy achieved significant increases in mobile data revenues, of 9% and 16%, respectively, in the year to March 2011, compared with the previous year. However, these increases were offset by declines in mobile messaging revenues. Without a solid foundation of stable mobile messaging revenues, increasing mobile data revenues will have limited impact on overall mobile revenues.
Breakdown of mobile revenue per customer in Spain
Breakdown of mobile revenue per customer in Italy
So, it seems that mobile operators have more to worry about than declining voice revenues. In the case of Vodafone, there are positive signs from the UK market, but more worrying trends in Spain and Italy. The prospect of a combined decline in both mobile voice revenues and mobile messaging revenues is bleak indeed. However, the Vodafone UK experience suggests that this may not be inevitable. At the very least, these substantial differences provide a great opportunity for benchmarking and learning, so that successful services, techniques and pricing models can be identified and replicated in other markets.
About the author:
Alastair Brydon is co-founder of telecom analysis and telecom consultancy company Unwired Insight. He provides regular in-depth analysis on LTE and 4G. He has written over 40 reports on the biggest issues in the wireless industry.
Will mobile messaging revenues decline?
With analysis from Vodafone’s latest annual results for the year ending March 2011, Mark Heath asks a big question that has major repercussions for mobile network operators. Are we now seeing the decline of mobile messaging revenues?
Mobile messaging in general and SMS in particular have proved highly-lucrative services for mobile network operators. In the year to March 2011, Vodafone generated a total revenue of GBP4.1 billion across Europe from mobile messaging. Despite the launch of 3G services many years ago, which offered the prospect of a much broader set of mobile data services, SMS has continued to be a major revenue generator. In the UK alone, for the year to March 2011, mobile messaging generated a revenue of £1.15 billion for Vodafone, compared with £762 million for all other mobile data services.
The impressive revenue from SMS is despite it being a very simple service relative to other mobile data services, without stringent requirements such as low latency and high data rates. Even though the amount of data that can be sent with an SMS – 160 characters – is so small, mobile network operators have been able to charge significant amounts. The result is that the revenue per megabyte of an SMS is substantially higher than all other mobile services: $1000 per megabyte compared with about USD1 per megabyte for voice telephony and USD0.01 per megabyte (or less) for mobile broadband services.
Mobile network operators are now beginning to see significant data revenues beyond mobile messaging, and I’m sure they have been hoping that this would generate strong increases in overall mobile data revenues. However, coupled with this, there is a risk of diminishing messaging revenues, which could more than offset growth in other mobile data services. This could reverse the progress that mobile network operators have made in the last few years to grow their overall mobile data revenues, as well as sending shockwaves to investors.
Buried within Vodafone’s latest annual report document is a detailed breakdown of service revenue, by service type. Analysis of this data reveals some interesting trends. In at least two countries in Europe, revenue from mobile messaging has declined.
In Spain, the total annual revenue generated from mobile data services was GBP882 million in the year to March 2011, which was actually slightly less than the previous year (GBP888 million). While there was a healthy 10.0% increase in mobile data revenue excluding mobile messaging, there was a 13.8% decline in mobile messaging revenue, from GBP400 million to GBP345 million.
In Italy, a relatively strong 16.7% increase in mobile data revenue excluding mobile messaging was offset by a 5.0% decline in mobile messaging revenue.
At the very least, declines in mobile messaging revenues will make it more difficult to turn the take-up of mobile data services and increases in smartphone penetration into substantial continued increases in overall mobile data revenues.
These numbers do not come as a shock, as I am seeing significant changes of behaviour closer to home. My own children have made a significant contribution to operator SMS revenues and messaging volumes over the last five years. However, I am noticing significant changes in their behaviour. No longer are they glued to their mobile phones sending texts. Instead, social media and Facebook, in particular, have taken more of a hold. They now spend time messaging their friends on Facebook, using their own PCs supplemented by a combination of mobile devices, including notebooks, an iPad and their mobile phones (all principally using a WiFi connection).
Compared with a messaging platform that requires a mobile phone, Facebook and similar services have some important advantages. They can be accessed by a broad range of devices, including PCs, and they can generally better handle group communications. Finally, many people perceive these services as free.
There may be challenging times ahead as mobile network operators are forced to get to grips with the full impact of the Internet, when it starts to threaten one of its key sources of revenue.
About the author:
Mark Heath is co-founder of telecommunication consultancy and research company Unwired Insight. He provides regular in-depth analysis of mobile broadband services. Mark has produced many reports in the area of wireless telecoms.
