Basic SMS text messaging will be a key revenue driver for mobile network operators in Africa and the Middle East over the next five years, helping to offset continuing declines in average revenue per subscriber (ARPS) for mobile voice services in the regions, according to the latest report from Pyramid Research.
Leveraging SMS to Attract the Low End of the Income Scale examines how operators in Africa and the Middle East can leverage the SMS platform to boost revenue from the largest, lowest-income subscriber segments. The 14-page report, part of Pyramid's new Africa/Middle East Telecom Insider report series, examines peer-to-peer SMS in the region, a service that accounted for about 60 percent of total mobile data revenue in AME in 2008, and will continue to be the largest single contributor to data revenue over the forecast period. It also analyzes some of the latest and most successful SMS-based services, examining in detail how operators have implemented four of these services in three key markets: South Africa, Egypt, and the UAE.
The fast subscriber growth that operators in Africa and the Middle East are witnessing - a 39 percent annual CAGR over the past four years and about an 8 percent annual CAGR over the next four years – poses some serious challenges related to network efficiency and declining ARPS, notes Badii Kechiche, analyst at Pyramid Research and author of the report. "Mobile voice ARPS has been declining at a rate of more than 10.5 percent annually over the past four years because of increasing competition and an expanding base of lower-income subscribers, pushing operators to focus on data services in order to translate subscriber growth into revenue growth," he says.
In Africa and the Middle East, SMS revenue is expected to almost double to nearly $12 billion in 2013, far exceeding the revenues of higher-end data services such as MMS or mobile broadband, Kechiche says. "The significance of this development goes beyond the revenue opportunity coming directly from peer-to-peer SMS," he notes. "Several operators have found ways to capitalize on subscribers' new familiarity with SMS to increase not only their data ARPS, but their voice ARPS, too. The growing popularity of SMS within the region will allow operators to use SMS-based value-added services, sometimes in conjunction with instant-message USSD services, to boost voice ARPS among the mass base of lower-income subscribers."
Leveraging SMS to Attract the Low End of the Income Scale is part of Pyramid Research's Africa/Middle East Telecom Insider report series. Telecom Insiders are packed with trend analysis, industry best practices, market sizing and forecasting, competitor analysis, and case studies, providing you information you can leverage to make better business decisions.
Telecom Insider report overview
Now that even emerging markets have 3G networks, basic mobile data services like SMS are no longer attracting many headlines. Our research shows, however, that in Africa and the Middle East, SMS revenue will far exceed the revenues of higher-end data services such as MMS or mobile broadband for years to come. The significance of this development goes beyond the revenue opportunity coming directly from peer-to-peer SMS. In the highly competitive and usually low-income markets of Africa and the Middle East (AME), several operators have found ways to capitalize on subscribers’ new familiarity with SMS in order to increase not only their data ARPS, but their voice ARPS too.
Leveraging SMS to Attract the Low End of the Income Scale looks at how operators in Africa and the Middle East can leverage the SMS platform to boost revenue from the largest, lowest-income subscriber segments. We first examine peer-to-peer SMS in the region, a service that accounted for about 60% of total mobile data revenue in AME in 2008, and will continue to be the largest single contributor to data revenue over the forecast period. We also analyze some of the latest and most successful SMS-based services, examining in detail how operators have implemented four of these services in three key markets: South Africa, Egypt and the UAE. The fast subscriber growth that AME operators are witnessing — a 39% annual CAGR over the past four years and a forecast 8% annual CAGR from 2009-2013 — is posing some serious challenges related to network efficiency and declining ARPS. However, over the next four years, SMS-based services will be a powerful tool that operators can use to target the large base of low-income subscribers and generate higher revenues from both data and voice, adding up to a minimum of US$6bn in new annual revenue by 2013.
Key findings
Catering to the low end of the income scale is inevitable, and so is the resulting decrease in voice ARPS. Leveraging an already existing SMS platform, coupled with USSD technology, to launch a slew of attractive services makes business sense and can make the transition less drastic. SMS-based initiatives can have a direct, positive and quantifiable effect on operators’ KPIs such as ARPS and churn, with prepaid ARPS rising as much as 6%. These initiatives can also help with other important indicators, such as network congestion, CRM and brand identity. While SMS-based initiatives have competitive implications, the outcome is not necessarily a win-lose situation. Low-cost services that make sense to subscribers and respond to their needs have a potential to expand the total market as opposed to redistributing subscribers and revenue.
Pricing and Formats
