May 19, 2011

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.

参考:http://www.unwiredinsight.com/wireless-blog