Quick scan on Mobile Messaging

1. Trends in Mobile Messaging – quick scan
May 2012
Capgemini Consulting TME Netherlands
Transform to the power of digital

2. Declines in the growth of the number of SMS sent and SMS revenues are forecasted over
the next four years
Global SMS revenue ($billion) Number of Global SMS sent per year (trillion)
+30% +74%
137 8,7
+41%
106
+646%
75 5,0
0,7
2005 2010 2015 2005 2010 2015
 Over the next few years, mobile operators will  A significant decline in the growth of SMS sent
no longer be experiencing the high sms will be noted over the next few years, which
revenue growth that it had achieved between will significantly impact the revenues of most
2005 and 2010 mobile operators
 This decline will be most pronounced in
developed markets
Source: www.juniperresearch.com; www.irma-international.org; www.opengardensblog.futuretext.com Copyright © 2012 Capgemini Consulting. All rights reserved.

3. By 2015, SMS is forecast to contribute 68% of mobile messaging revenues, as opposed to
the 80% during 2010
Breakdown of global messaging revenues Forecasted breakdown of traffic (2015)
100% MMS
5,0%
Email
68% 21,0%
SMS 80% SMS
41,0%
11%
MMS
Email 8% 13%
IM 8% 33,0%
4% 8%
IM
2010 2015(f)
 Although SMS will still remain high source of revenue  Even though IM will be constituting the bulk of the
for operators, its contribution to total messaging messaging traffic (33% of the total messaging traffic),
revenue will decline as IM, Email and MMS continue it is forecast to only contribute 8% to the total
to grow messaging revenues for mobile operators
Source: Informa Telecom and Media Copyright © 2012 Capgemini Consulting. All rights reserved.

4. According to Ovum, mobile operators lost more than $13billion in annual revenues due
to the rise of mobile messaging applications like Whatsapp and Facebook chats
Loss of SMS revenue as a result of substitution (2011) IM Application bandwidth share
150 Other IM
13 Facebook chat
15,0%
ICQ 22,0%
Google talk
This is potential
sms revenue that
5,0% 1,0%
was lost as a result
137 of IM messages QQ 8,0%
18,0%
Whatsapp
14,0%
Windows live
Global SMS Lost revenu Potential 17,0%
revenu SMS revenu
Yahoo mesenger
 Ovum analyst using advanced prediction models,  Another research company, Allot, further
estimate that mobile operators have lost supplemented Ovum’s predictions, using traffic
approximately $13 billion in potential sms revenue as generated by around 250 million mobile users
a result of the rise in instant messaging  The data showed that messaging is migrating from
 This trend in lost sms revenue is anticipated to cellular to internet based world, with facebook chat
continue as smartphone penetration continues to rise and whatsapp being major players in this migration
Source: Informa Telecom and Media; www.theregister.co.uk Copyright © 2012 Capgemini Consulting. All rights reserved.

5. Facebook and WhatsApp are growing in leaps and bounds and capturing a significant
share of the SMS market
 Facebook has 920 million users, and over 425 million
 WhatsApp Messenger is a cross-platform mobile access the site from their phones
messaging app available for iPhone, BlackBerry,
Windows Phone, Android and Nokia  It is said that Facebook probably transports more
mobile traffic, number of messages and time spent
 The company was launched in 2009, and within a online than the world's largest operator
year had managed to have approximately 1 million
users. Their subscriber base is estimated to have  In August 2011, Facebook messenger was initially
grown to tens of millions released for Android ad Iphones, and the blackberry
version was introduced in October 2011.
 The ability to send messages between any kind of
smartphone gives WhatsApp an advantage over  Facebook Messenger is considered the best
Blackberry messenger and Apple’s iMessage, which alternative to SMS for three reasons:
are restricted to owners of similar devices ― With over 901 million monthly active users
most individuals are easily reachable
 In February 2012, it was estimated that WhatsApp ― it’s cross-platform (not limited to only just
users generate 2 billion messages sent each day, an mobile
increase of 1 billion per day from October 2011, ― and it is regularly getting significant
upgrades, video calling is anticipated to be
released soon
Copyright © 2012 Capgemini Consulting. All rights reserved.
Source: Ovum; www.ft.com; company websites; www.zdnet.com; http://www.cnet.com.au

6. Differing reactions to the cannibalisation of sms revenues by IM applications have been
noted from the key players affected
Telefonica KPN
• In response to the rise in IM application, Telefonica has recently • At their financial report back of the Q1 2011 results, KPN reported a
Mobile operators
launched TU me , an integrated, smart over-the-top (“OTT”) 10% y-o-y drop in sms revenues
messaging service
• The company contributed the fall in SMS and voice traffic and
• The application enables one to send text messages, voice revenues to the increased use of messaging applications on smart-
messages, photos, location information and even make calls phones
through the App
• It was rumoured that the mobile operator intends to introduce
• It is initially available on iphones only and it is not restricted to just separate tariffs for IP-based services such as voice-over-IP, instant
Telefonica customers messaging and streaming video, according to local media reports
• This move was quickly curtailed by the regulator through the
introduction of the net neutrality law
Mobile Messaging Application developers Regulators
• WhatsApp co-founder believes that their application is no threat to • The EC has not gone so far as to define „net neutrality‟ in telecoms
Other key players
mobile operators and does not impact on their revenues legislation to come into force 25 May 2011 , in order to curb
attempts by operators to block certain applications
• “I view it from the perspective that we‟re facilitating a broad
movement to data plans and the entities that provide those plans • European telecoms regulators will be required to “promote the
are the carriers, so they stand to benefit quite substantially. It‟s all ability of Internet users to access and distribute information or run
about the data “ he added applications and services of their choice”.
• The Commission also stated that it needs to gather more
information with regards to the de facto blocking of certain services
by operators as a result of charging their subscribers more to
access these services.
Copyright © 2012 Capgemini Consulting. All rights reserved.
Source: Informa Telecoms and Media; Reuters; www.mobileindustryreview.com/

7. Mobile operators still have the opportunity to maximise revenues from application-to-
person (A2P) SMS services
Breakdown between P2P and A2P (2016) Key notes
 The rise in instant messaging applications will lead to
100% a reduction in person-to-person sms, as consumers
increasingly start using these applications
 However Application-to-person will to continue to
increase
49%
 Application-to-person (A2P) messaging include
financial services, advertising, marketing, business
P2P 85% administration, ticketing, television voting and any
other service where information needs to be sent to,
or received from a large number of users in text
 SMS will remain the preferred method for A2P
― Universal access – not restricted to just smart
51% phones
― Interoperability across devices and mobile
operator networks,
A2P 15% ― Ease of use,
― Reliability, and
2004 2015(f) ― Low cost
Source: www.irma-international.org; www.juniperresearch.com Copyright © 2012 Capgemini Consulting. All rights reserved.

8. For more information contact:
Khanya Vokwana
CC TME Netherlands
khanya.vokwana@capgemini.com
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