Telcos losing revenues to messaging apps

Posted on May 29, 2013 08:58 pm

There is an aboriginal saying about change that say “We must now change course. Welfare has not worked. It has a place, always, in the most desperate times, but if it replaces a person’s will, if it turns their kind of feather bed into quicksand, then it is failing the indigenous people. “Any indigenous Australian believes in that say and most of us adhere to it. The aboriginal teaching can come in handy for Africa’s telecom companies that are grappling with their sternest test yet from messaging apps that are raging all over the continent, though telecom companies aren’t completely giving up on SMS business. I had a meeting with a chief executive officer of a leading mobile network operator in East Africa who revealed to me that voice and SMS channels remain relevant in today’s communications mix. He added that the bulk of traffic is still traditional voice and SMS. Although this may seem like a case of industry players in Africa merely refusing to let go of old ways, the truth of the matter is that there are mobile operators who are feeling the pinch.Luckily for mobile operators, not majority of mobile subscribers in Africa have smartphones where most of those apps are widespread on android, iOS and Windows OS based phones. However, there is growing availability and affordability of such devices and the apparent reduction in retail prices over the past few years in countries like Nigeria, Kenya, Uganda, Tanzania and South Africa. Without a smartphone, mobile subscribers are not able to make use of messaging apps but the trend is changing fast.

Many mobile phone users in the continent have begun ditching their feature phones for a smartphone. Huge interest in messaging apps is considered one of the main factors why mobile network operators have lost significant revenues from SMS business. Despite the popularity of free messaging apps, SMS business continues to be valued by Africa’s mobile subscribers with majority being on prepaid services. On average, close to about 85% of each African country, mobile subscribers are on prepaid.Even the availability of numerous prepaid Internet data plans available in most markets across the continent, users tend to subscribe for data packages for short periods of time when compared to postpaid users. There is no short cut for telcos in Africa and they have to innovate to cater to the needs of techno savvy population. Consumers should also be offered the chance to own a new smartphone at a discounted price. I know very well that since 2011 when free messaging apps became widely available in Australia, the number of mobile Internet users and consequently, messaging app users continues to grow, as my communication with my relatives spread across the country, the SMS usage inevitable dwindle is well documented each passing year. Current statistics about Africa’s telco business already suggest that things are on a downward trend and the industry is witnessing a decline not only in SMS traffic and revenue. As conversation with the CEO ended, I was convinced the trend will continue further as the adoption and usage of mobile messaging apps increases. As telcos across the continent are counting on SMS revenue to sustain their operations, messaging apps will continue eroding the revenue margins for the foreseeable future.

Contador Harrison