App-operator tie-ups: Smart move in a new era of mobile communication

The basic needs of society often trigger innovations in the technology and telecom space across the world. While there are millions of phones out there in the market, one thing that binds all of them is their ability to help users stay connected with one another, anytime, anyplace. Similarly, mobile messaging applications equip users to not only reach out to their friends, family, business and professional connections, but also allow them to do this at a much lesser cost — or even free.

The success of messaging applications or external communication platforms is creating a series of creative disruptions in the telecom space. A relatively new concept just a year ago, there are now over 15 messaging applications today，— and growing. Their ever-increasing popularity is making the more than 20-year old SMS almost obsolete. And it is easy to see why these messaging apps are so popular: They are free to download, messages are not limited to 160 characters the way text messages are, and they allow for creative expressions.

It is no secret that the unstoppable popularity of messaging apps everywhere has become a major concern for telco operators, whose SMS revenues have been adversely affected. According to McKinsey & Company, some markets such as South Korea and the Netherlands have already ‘tipped’ — that mobile messaging apps have reached such as high level that it is causing a material threat to SMS volumes and revenues. Research firm Ovum estimates that by 2016, instant messaging apps will cost telecom carriers about US$54 billion (S$69.2 billion) in revenue. Using Hong Kong as an example, the country reported that 10.9 million and 19.8 million SMS messages were sent and received on Jan 1 this year, plunging 58.9 per cent and down 44.4 per cent respectively from a year earlier.

This disruption has brought high value to consumers who no longer have to shell out huge amounts of money to make international calls or send messages.

While we question the existing state of SMS and the relative revenue it generates, we cannot deny that smart telecom operators are seeing the potential and making the run towards data. It is obvious that this increase in messaging applications correlates to the increasing number of smartphones globally, and with more affordable mobile Internet access, as well as the introduction of a variety of data plans, it is an attractive sector for telcos to tap into, thereby gaining revenue to compensate what they lost from the decline of SMS.

Partnerships with communication platforms allow telecom operators to drive data usage amongst their existing users like never before. Tie-ups with mobile internet companies give operators the added benefit that they missed out during the PC era when social networks confined themselves only within the computer. To further grow their existing customer base, telcos are aggressively looking to capitalise on the consumer shift from PC to mobile. According to recent Nimbuzz data, there are more than 1 billion minutes of calls made per month and more than 102 billion messages sent and received per month, which is much more than that of some (or any) of the biggest global operators.

While telcos might have reduced revenue from SMSs, data revenue opportunities have increased considerably. The partnership between a mobile operator and a messaging app provider allows the mobile operator to compensate it loss of SMS revenue with high data usage amongst subscribers. An example is Aircel, India’s leading telecom player. It recently partnered with Nimbuzz to drive data usage starting with the Jammu and Kashmir regions. Aircel subscribers can download the Nimbuzz application in exchange for access to a specific amount of free data. Partnerships of similar nature are catching the eyes of operators across the world. If telcos act fast and smart, these tie-ups can enable telcos to drive data usage and also give them access to messaging app users’ database. It’s a win-win situation that benefits both parties, making sure both maximise access to an existing customer base, or opportunities to convert voice into data revenue. Considering that majority of these applications are used globally and thus with universal impact, the opportunities for app-operator tie ups are increasingly high.

App-operator partnerships are also a great value proposition for app companies that heavily rely on data offerings by mobile operators. In a mobile-first country like India, where a majority of users access the internet for the first time on a mobile device, the attractiveness of mobile internet is extremely vital for app success. The future of communication is being redefined by communication platforms, but the telcos need to actively partner to ensure end-users are guaranteed maximum return for their money.

It will be interesting to see where this convergence of operator service and mobile communication platforms is headed. The boundaries of telco offerings are largely blurring with messaging apps taking over the role that was native to the telco service provider. The world has been talking about this trend for many years sooner than later, its effects will be felt by the regular mobile phone user who is all set to enjoy the best of both worlds.

ABOUT THE AUTHOR:

Joby Babu is chief operating officer at Nimbuzz