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Back to the future: Rethinking the role of SMS as a revenue driver in the Asian market

Michael Kowalzik Issue: Asia-Pacific I 2012
Article no.: 5
Topic: Back to the future: Rethinking the role of SMS
as a revenue driver in the Asian market
Author: Michael Kowalzik
Title: CEO
Organisation: Tyntec
PDF size: 380KB

About author

Michael Kowalzik joined Tyntec in 2003. His previous experience was in management consulting with a broad background in the financial and telecommunications industry.

Prior to joining Tyntec, Mr Kowalzik was a Director within the Bertelsmann CIO team, leading international strategic projects in the IT and wireless connectivity areas. Here he played a major role as an investment manager and technical advisor for the venture capital company. Prior to this, he was investment manager and interim CEO of internal start-ups at Apollis AG, a venture capitalist firm owned by McKinsey & Company. Before this
Mr Kowalzik had several years of extensive experience in management and implementation consulting at Accenture.

Michael Kowalzik holds a master degree in Electrical Engineering from University of Bremen in Germany and MBA from INSEAD, France in 2000.

 

Article abstract

As the Asian mobile market matures, operators are seeking additional revenues from add-value services. They are rediscovering the versatility of SMS, which is simple, ubiquitous and remarkably resilient service. There is more scope in Asia for application driven SMS and for enterprise messaging. As the user base grows, operators should also think ‘global’-International SMS can be facilitated by partnering with a central SMS hub provider. SMS should be integrated into the IP messaging, maintaining its reputation as a reliable tool, while building on the emerging social network messaging.

 

Full Article

It is no secret that the mobile market across Asia is booming. News such as Google’s decision to launch its latest operating system for mobile devices in the region tallies with the statistics. Industry figures for the end of 2011 have put subscriber numbers at around three billion, with growth predicted to continue at a pace of 20 per cent per year. To put these figures in context: In the Americas, mobile subscription figures totalled 880 million, whilst the number is around 741 million for Europe.

There can be no doubt about the potential and the significance of the Asian telecoms market. Growth in the mobile market in countries such as China and India is strong. This is even more evident now that momentum has returned, following a brief pause in growth as a result of the depressed economy.

Yet strong growth is by no means confined to the large countries in Asia. Countries such as Thailand or Vietnam – where mobile penetration has been comparatively low – are experiencing an explosion in adoption rates. The relatively quick roll-out of mobile coverage in these less developed markets, coupled with marketing and product development lessons adopted from more developed markets, mean strong growth rates are virtually guaranteed.

With such developments in recent years, operators have seen healthy revenue growth and have reinvested the money into network build-outs and customer acquisition strategies. However, as the market continues to solidify and become more developed, competition is increasing. This in turn has given rise to a desire to find new customers amongst the less saturated market of those with less purchasing power, creating a downward pressure on pricing which has resulted in a decrease in ARPU. Consequently, operators across the region are looking for alternative revenue streams outside core services of Voice.

Monetise and make up for ARPU loss

This development has led to a large number of new services being adopted and monetised. Data services have been widely viewed as one way of addressing the shortfall and have seen solid pick-up across the region. However, it is SMS with its reliable and ubiquitous nature that is emerging as key revenue driver. The huge importance of SMS is underlined by figures: By the end of 2011, eight trillion SMS will be sent in Asia, making it the leading mobile messaging format by a significant margin.

In a region with many different standards, patchy data coverage and countless devices, decision-makers are rediscovering the versatility of SMS and are finding new and creative ways to drive additional business through enterprise SMS services. This includes services such as mobile banking, reminders and alerts, mobile check-ins, etc.

Enterprise messaging is also set to skyrocket and analyst reports indicate that application-to-person messaging volumes are set to overtake person-to-person messaging on the Asian continent by 2016. This is not only a sign of the importance of enterprise messaging, but also a signal that its value is increasingly understood by businesses.

The benefit of SMS lies in its ubiquity and simplicity. Everyone knows how to create, read, access and use SMS. In addition, it works across all devices and requires no complex user setup. Sending an SMS is simple with the right technology and is almost guaranteed to reach the destination, and crucially, to be read by the recipient.

Capitalize on international messaging

Mobile operators are intrinsically national champions, but when the domestic market becomes saturated operators need to look for fresh revenue opportunities. This means looking beyond traditional domestic business models and examining the diverse opportunities offered by international markets. Here, there is a revenue opportunity to be found in one of the longest serving network offering: SMS.

By taking advantage of existing network infrastructure, which is easy and cost effective to manage, operators can start to generate revenues from consumer and enterprise messaging traffic for relatively little up-front expenditure. The benefits for operators to provide international services are clear. The current volume of international SMS, coupled with its potential for growth, provides a significant revenue opportunity for operators. In comparison with the more fashionable data-based services, SMS requires very little infrastructure investment, is universal and more importantly has a user base which dwarfs that of apps, email and other data services by a significant margin.

What’s next?

Nevertheless, whilst the benefits of this simple yet versatile technology are clear, there are new developments in the field which mean that decision-makers need to ask some key questions to stay ahead of the curve: What’s next for SMS? How will it develop and be used? How can operators ensure that they are not circumvented and remain part of the revenue cycle? How will businesses use this communication method in the future?

These questions are inextricably linked to the rise of mobile social networking and internet telephony. For some operators this might seem a threat. For organisations used to direct business relationships, the sort of intermediation required in this field can be a concern. Yet with the right partner, these doubts can quickly be put to rest and operators can shift their focus to the opportunities. Put simply, it is possible for operators to take advantage of an established, revenue-generating service such as SMS and make up for stagnating person-to-person SMS revenues with minimal effort. This is achieved by enabling SMS connectivity for businesses via a partner. By doing so, operators can create new messaging and termination revenues from internet companies and enterprises that might otherwise have not come into contact with that operator.

Using a strong partner as a gateway to the world

Taking advantage of international SMS as well as the internet and social media space can be addressed by working closely with a global mobile interaction service provider. Instead of embarking on the complex and lengthy process of signing individual roaming deals with international network operators, local Asian operators can work with one single central hub for SMS delivery which already possesses this capability. This immediately solves the problem of international reach, allowing operators to focus on their core competencies and monetising the revenue streams available to them.

There are two main aspects that any operator needs to consider when signing such a deal:

Firstly, quality is vital. With potentially large volumes from international SMS, the quality of what is delivered on their network is an important factor for the operator. What’s more, volumes of SMS can increase drastically, providing a need for a scalable infrastructure in order to deal with both normal and unexpectedly high throughput in order to deliver messages quickly and reliably. In addition, rigorous SLAs (Service Level Agreements) and anti-spam policies need to be put in place to support this.

Secondly, it’s important to work with a company that understand the interplay between IP-based communication and the importance of its integration into the ‘traditional’ telco world. By working with an expert in the field, operators can fully benefit from Internet telephony and mobile social networking space.

All this adds up to a huge untapped revenue stream for operators, at a time when margins are under increasing threat. Done correctly, using high quality SMS, operators can generate a significant income boost from these new revenue streams and take advantage of the new communications wave offered by internet telephony.

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