Mobile Messaging Malaise

Despite high profile upgrades of networks to GPRS, EDGE and WCDMA across the Middle East, the growth in the contribution of non-voice revenues to overall service revenues has increased only marginally.

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By  Tawanda Chihota Published  July 2, 2005

|~||~||~|Speaking at a mobile communications conference held in Dubai last month, Wataniya International’s chief executive Ahmad Haleem asked the audience where the substantial data revenues that operators in the region and throughout the rest of the world had been forecast to be generating by now, were. “We were told that by this time 20% or 30% of our overall service revenue today would be coming from data, but is that the case?” Haleem received nods of agreement from around the conference room, with many delegates representing mobile operators. This suggests these operator representatives had also experienced the disappointment of contributions from data revenues amounting to no more than 5-8% of their overall service revenues. In other parts of the world, optimistic forecasts regarding the uptake and revenue generation of mobile multimedia services and other data services persist. UK telecoms consultancy Ovum forecasts that global revenues from basic text messaging, next generation text messaging and multimedia messaging would total around US$58 billion in 2008. Ovum continues to expect the growth in multimedia messaging revenue to shore up the overall mobile messaging market, although the research house forecasts that growth will begin to slow down from 2006. Ovum expects text messaging revenues in Western Europe to peak this year at just over US$14.5 billion and to decline thereafter, reaching US$12.8 billion in 2008. Multimedia is forecast to grow steadily, to reach US$5.5 billion by 2008, though the company believes that this will not be enough to compensate for the erosion in text messaging revenues. Ovum predicts that the total messaging market will peak in 2007 at US$18.7 billion, declining to US$18.3 billion the following year. Rival telecoms research house Forrester predicts that total traffic from all mobile messaging types in Europe will grow by 92% over the next five years. Person-to-person SMS is forecast to drive most of this growth, through to the end of 2010. However, revenues from SMS, mobile multimedia messaging service, video messaging, instant messaging presence services and mobile email are forecast to only grow by 10% to US$27 billion by the end of 2010 as unit prices fall. ||**|||~|Haleem2002.jpg|~|Haleem believes data revenues are nowhere near as high as they were projected to be.|~|“This year, the average European mobile subscriber will send 40 messages (of any type) per month. This number will nearly double in five years, to 72 per month. By then, Europeans will collectively exchange more than 23 billion mobile messages each month,” predicts Michelle de Lussanet, principal analyst, Telecom Markets at Forrester. Subscriber growth in emerging markets has been well documented and Ovum expects similar strong growth in data services in certain key emerging markets. In the China-India region, and especially China itself, Ovum forecasts that this will be the real engine of growth in text messaging over the next five years. SMS took off later in China than in the more developed parts of Asia, but growth rates are now said to be very strong. This, in combination with high levels of growth in the mobile subscriber base, is forecast to fuel a rise in annual messaging traffic in the region to 670 billion messages by 2008, according to Ovum, with growth rates still strong. However, text messaging in emerging markets is generally much cheaper than in the more developed regions, and annual text messaging revenues in 2008 in Asia Pacific are forecast to reach US$8.7 billion. Multimedia messaging is set to grow among the high-end subscribers who connect to next generation messaging services, but this is expected to be a comparatively small proportion of the subscriber base. Revenues from multimedia messaging in China are expected to grow to US$455 million in 2008. “This [the limited contribution of data services to overall service revenues] is actually a worldwide phenomenon and not confined to the Middle East only, says Khaled Rifai, director of business development at Lucent Technologies, MEA. “I argue, however, that the numbers for SMS within the region are quite acceptable. As far as other data services are concerned, the Middle East continues to lag behind other parts of the world, not only for mobile data access, but even for internet usage in general.” Rifai adds. Last month, Saudi Telecom’s mobile arm Al Jawal introduced MMS commercially in response to the wide range of data services new entrant Mobily has advertised it shall offer. The spread of MMS in the Gulf region over the last 18 months has seen the service included as an integral component of operators’ value added service propositions, though its financial contribution has not yet become substantial. Bahraini cellco Batelco registered 10,000 GPRS subscribers, the majority of whom were MMS subscribers, in the first three months after its service was first available in June 2003, while Kuwait’s Wataniya registered 5,000 subscribers to its “Action” suite of services, which included MMS, in a similar period. ||**|||~||~||~|Even smaller numbers of subscribers exist for the most advanced technologies such as EDGE and WCDMA in the Middle East. MTC-Vodafone Bahrain and Etisalat in the UAE were the first operators to offer WCDMA in the region, and there were an estimated total of just 7,000 WCDMA subscribers in the Middle East at the end of February, more than 12 months after the networks were first launched. “We have a couple of thousand 3G subscribers and there is no doubt that 3G is the future,” Ismael Fikree, MTC-Vodafone Bahrain’s chief technology officer says. At the end of May, Wataniya Telecom and Nokia announced signing an agreement for the implementation of advanced technologies that are set to enhance Wataniya’s network and take the operator “beyond 3G.” Nokia is set to supply Wataniya with a wide variety of products from its portfolio, and included in the deal is Nokia’s high speed downlink packet access (HSDPA) solution, a software upgrade to WCDMA with which data speeds will reach up to 1-2 Mbps in the first phase. Nokia’s end-to-end offering will enable Wataniya to provide advanced mobile services such as push-to-talk, video calls and video sharing, to subscribers in Kuwait. Nokia will also modernise Wataniya’s GSM network in order to create an EDGE layer that will support advanced services including outside 3G coverage. “Our agreement with Nokia gives us the opportunity to provide the most advanced, capable and reliable network services in the Middle East region, if not world wide. The advanced technologies provided will enable us to provide a new, compelling category of services to our customers,” says Harri Koponen, general manager and CEO, Wataniya Telecom. “We are providing our customers with better connectivity and flexibility for the future. Moving forward, we will listen to our customers’ needs and act accordingly,” says Niklas Sonkin, chief strategy officer and business-to-business director of Wataniya. Not all operators in the region view the roll out of advanced technologies primarily as the conduit for the offer of advanced data services only. Having been one of the WCDMA pioneers in the region, it is significant that MTC now views its 3G infrastructure In Bahrain not so much as a pipe to deliver a richer data experience, but rather as a network that gives it the opportunity to offer voice at a lower cost. “There are two main benefits to the uptake of 3G services from our perspective,” says Marwan Alahmadi, MTC-Vodafone Bahrain chief operating officer and MTC Group chief strategy officer. “It is a quick way to boost capacity for voice; and it offers the opportunity to deploy truly portable broadband services over a secure network.” Alahmadi forecasts that by 2008, 3G will become the most competitive way of delivering voice, though he does envisage a business opportunity for operating high-bandwidth applications such as video calling. A conversation regarding the deployment of infrastructure that improves the quality of content delivery would not be complete without discussing the circulation and availability of compelling content. “Developing content has never been the competency of the mobile operator,” Alahmadi says, suggesting that partnerships with strong third-party content providers are an integral part of the data delivery proposition. Mike Hardman, managing director of Trans Mobile Media (TMM), a start-up that runs a digital storage facility based in Dubai, is in obvious agreement with the view that content and application developers have a vital role to play in the value chain. His company has been established with the view to reducing operators’ capital expenditures with regards the development of content, offering an outsourced alternative for access to content. “We are legitimising and legalising content that has often been accessed in a less than legal environment,” says Hardman. “We are offering content that is legal at the same price that content is being accessed illegally,” he adds. TMM has partnered with Disney for this venture. “With respect to mobile data usage, it remains a small proportion of the operators’ overall revenue due mainly to the availability of appropriate content/ applications,” suggests Lucent’s Rifai. “This issue of limited data usage in the region is in part due to the lack of appealing regional content in some cases, and to devise and service affordability as well as devise capability in others,” he adds. ||**|||~|Fikree200.jpg|~|Fikree: MTC-Vodafone Bahrain remains committed to 3G despite only having a couple of thousand 3G subscribers.|~|Dubai PR agency Spot On last month reported the results of straw polls it conducted in Jordan and the UAE, which concluded that the understanding and adoption of advanced mobile services is low in these countries, while subscribers felt confused by the complexity of such services. The exercise found that in both markets, over 70% of subscribers did not download content to their mobile phones, preferring to use MMS to send and receive pictures on a peer-to-peer basis. Just as picture messaging raised expectations for further data use some years back, so too is the provision of instant messaging and push-to-talk services (PTT) at this stage. A number of operators in Jordan and Saudi Arabia are looking to be amongst the first to launch cellular PTT services in the Middle East later this year. “We believe that instant messaging (IMS) in general will contribute positively to operators’ revenue growth particularly when combined with IMS and access agnostic services delivery,” Rifai says. “As far as PTT is concerned, the industry has seen mixed results. For some operators PTT has contributed positively to their bottom line while others see it as an unsuccessful venture. We believe that instant messaging has its appeal to certain market segments,” he adds. Given the general failure of non-voice services to make a significant impact on overall service revenues in the past, it would be understandable not to expect this to change in a significant manner in the short-term. Voice remains at the core of the mobile communications business and while there is talk of this product becoming increasingly commoditised, operators look set to continue to look at ways to retain its value. “The mobile communications industry is one of the few major industries I know that discounts its most important product,” says Koponen. “Our business should not be about offering discounts, it should be about providing value,” he adds. ||**||

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