Traditional voice and SMS services are still occupying a very large share of Russian operators’ revenues (despite the fast growth of mobile data transfer and other service). In the developed countries traditional services start to lose their position and operators have been forced to find ways to cover the lack in revenues from traditional services. J’son & Partners Consulting presents main results of the research: Russian and global markets of traditional cellular mobile services (voice and SMS).
Global market and regional peculiarities
The stagnation of voice and SMS revenues and increase in mobile data transfer are current trend on global market. Voice services still show some growth of revenue mostly due to the BRIC countries (Brazil, Russia, India and China), in EU and USA there was a fall for 3-4% in 2012.
Text messages (incl.SMS) revenues still increasing. According to Portio Research forecast operators will earn 230 bln USD from Mobile Messaging (MM) in 2013 that is 5.5% more than in 2012. SMS revenue share in the operators’ revenue structure will still be large for the next 1-2 years. The peak in MM revenues is expecting in 2015 afterwards they will start to fall.
Ericsson forecasts the growth of voice traffic in North America until 2018 and at the end it will reach 3759 bln.min. On the other hand MOU will reach its maximum at 2013 and will start to fall till 801 min in 2018. We have to admit that USA is one of the most successful markets of traditional services. Due to the active implementation of LTE, exploit smartphones, tariff policies, etc and despite the pressure from OTT services American operators still keep the high consumption level of voice services.
In West Europe the situation varies from country to country mostly due to the local peculiarities. In Netherlands the most expensive SMS among EU countries and as a result of WhatsApp implementation in 2009, in 2011 SMS revenues decreased. In 2012-2013 one more negative trend was formed – decrease in voice services revenues.
In Germany the use of SMS is still growing despite the replacement by OTT services in some cases. German regulator explains this as the wide use of SMS in business-transactions. Package offers of traditional services are also one of the main market drivers (58% SMS and 70% calls in 2012).
The stagnation of traditional services on the developed Asian markets is hanging in the air already for several years. In Hong Kong it started with the decrease of SMS traffic on holidays and fell down twice for the last two years.
The most critical situation is in Japan. For example, voice ARPU of the largest operator NTT DoCoMo is continuously falling down already for 10 years that results in decrease of Total ARPU and even growth in data transfer segment is not helping. In 2013 financial year the revenue decreased for 1.1%. The main peculiarity of Japanese market is the use of electronic mail (sending email instead of SMS).
Growth of operators’ revenues from traditional services is continuing mostly because of developing countries. In many countries market is not reaching the peak yet and the expansion of subscribers’ base will be fast (India, China, Pakistan, Vietnam, Indonesia, Philippines etc.). New subscribers are coming from the poorest regions usually; the increase in ARPU is unlikely in these regions. Big subscribers’ base compensate a low costs of subscribers on voice connection, thus operators will have to find ways to implement new non-voice services and as a result increase its revenues.
Alternative services for transfer of instant messeges (mobile messengers, MIM) already influencing the largest market – China. According to Chinese Ministry of Industry and Informational Technology data, subscribers base in 2012 grown faster than SMS-traffic (11% vs 2% accordingly). Average number of SMS per user decreased for 11%. The number of SMS users in China cut for 0.72 mln. from April 2012 till April 2013 (only 67.5% of subscribers used SMS in April 2013, 73.7% in the year before.)
Main factors influencing the traffic and revenues of traditional services:
- Macroeconomic situation (in recession) – under the pressure of regulators operators have to cut the prices for tariffs, subscribers – saving on connection.
- Growth of penetration rate of smartphones and development of OTT services – According to Yankee Group every 10% of growth of penetration rate of smartphones in Europe is a reason for decrease of revenues from voice and SMS services for 1.5 bln. USD yearly. This is mainly due to the use of OTT services.
- Tariff policy of operators: in many countries (USA, Germany etc.) operators still keep the high level of traditional services consumption mainly due the special package offers that include fixed voice, SMS and data-traffic, and special offers for users who have several devices with SIM cards, etc.
- Increase in A2P SMS¹ segment – includes financial services, ads, business-administration, sales of tickets etc. In 2012 Transparency Market Research evaluated A2P market in 137 bln. messages, 67% of which is in Asia-Pacific region. The market will grow till 2017 and CAGR will be 36.8% (2012-2017).
¹ A2P SMS - Application to Person SMS
Situation in Russia
J’son & Partners Consulting data shows that the actual revenues of “Big 3” Russian operators in 2013 increased for 2.6% in comparison with a previous year and reached 19.3 bln. Rub. At the end of 2012 this segment keeps the growth trend.
- The popularity of SMS-banking is one of the “supporting factors” for SMS services in Russia. The number of users who are paying bills and monitor the state of the banking account via SMS increased a lot in 2012 same as number of transactions and total market volume (payments for services and goods via SMS-banking).
- The war against the illegal SMS-distribution (spam) and possible implementation of interconnect for SMS traffic will help large mobile operators to unload their networks. Operators will be able to receive an additional income and cut the costs for the measures against SMS spam if implement SMS-interconnect.
- Informational and reminding SMS services are one of SMS-traffic generators in Russia. Possible ways for monetization of this direction will depend on the tariffs.
There are a lot of factors that will cause stagnation in the midterm of traditional services revenues in Russia (that already happened on many developing markets): fast coverage of 3G (4G in the future), penetration of smartphones, awareness of users about MIM-services and probably the worsening of economic situation. Nevertheless Russia could possibly overcome this negative trend by providing and actively promoting special offers with fixed connection, packages that include some additional services, stimulating the consumption of traditional services and building smart marketing policy.
According to J’son & Partners Consulting in the 1st Q 2013 revenues from voice services decreased for 1% in comparison with the previous year (does not include roaming and interconnect revenues). In 2012 it was a slight increase same as decrease in 2011 of voice revenues. If to add roaming and interconnect revenues total sum in Russia in 2012 increased for 4.4% vs 2.3% in 2011.
J’son & Partners Consulting admits that only the repeat of 2008 – 2009 crises can be the significant reason for decrease of traditional services consumption (voice and SMS). If the scenario that is close to the basic forecast of Ministry of Economic Development² happen revenues in this segment will be “flat” in 2014 – 2016 and show changes for 1-2% only.
² According to forecast, the main economic indices will show a slight growth and stop to fall.
J’son & Partners Consulting admits that only the repeat of 2008 – 2009 crises can be the significant reason for decrease of traditional services consumption (voice and SMS). If the scenario that is close to the basic forecast of Ministry of Economic Development happen revenues in this segment will be “flat” in 2014 – 2016 and show changes for 1-2% only.
Detailed results of the research are presented in the full version of the report: «Current state and development perspectives of the traditional mobile services market (voice and SMS) in Russia and in the world» (85 p)
The global market and regional peculiarities
1. Global market of traditional services (SMS and voice)
1.1. Volume of the global market of services (SMS and voice): tendencies and forecasts
1.1.3. Developed countries of the Asia-Pacific region
1.1.4. Developing countries
1.1.5. Key figures for basic services (voice and SMS-traffic) of the largest mobile
operators in the world and their strategies
1.2. Main factors influencing the market of traditional services
1.2.1. The macroeconomic situation
1.2.2. Changes in market structure and consumption model
1.2.3. Implementation of new technologies (LTE)
1.2.4. Decrease in the average price per minute of voice call (APPM)
1.2.5. Pressure from OTT-services (VoIP, IM)
1.2.6. Services based on SMS
1.2.7. Other factors
2. Russian market of traditional mobile connection services
2.1. Revenues of SMS: historical data and forecasts
2.2. Revenues of voice services: historical data and forecasts
2.3. Main figures of “Big Three” operators and their strategies
2.4. Factors influencing market of traditional services
2.4.1. Economic situation
2.4.2. Consumption of the voice services
2.4.3. Decreasing of APPM
2.4.4. Regulation (cancelling of intranet roaming)
2.4.5. Increased competition (new players, the introduction of MNP, the emergence of MVNO)
2.4.6. Increase in penetration rate of smartphones, expanding of 3G/4G networks and growth
of OTT-services popularity
2.4.7. Mobile banking
2.4.8. War with SMS-spam
2.4.9. Other factors
Conclusions and recommendations
List of Figures
Fig. 1. Revenues from data and voice transfer in the world, 2010 – 2015, bln.USD
Fig. 2. Revenue growth rates from voice services by regions, 2012
Fig. 3. Traffic distribution of mobile subscribers by type and region, 2012
Fig. 4. SMS consumption in the world, bln.pcs., 2008-2012
Fig. 5. Voice services consumption in the world, trl.minutes, 2008-2012
Fig. 6. Revenues from mobile messaging (MM) in the world, 2010 – 2017, bln.USD
Fig. 7. SMS traffic in the world, 1993 – 2017, mln.pcs.
Fig. 8. SMS-traffic in the USA, 2005-2011.
Fig. 9. Dynamic of MOU index in USA, min/month, 2005-2011
Fig. 10. Voice traffic and MOU forecasts in USA, 2010-2018
Fig. 11. Dynamic of ARPM in USA, USD and share of changes, 1993-2011
Fig. 12. Dynamics of voice and data ARPU in USA, USD, 2007-2013
Fig. 13. Voice traffic and MOU forecasts in Europe, 2010-2018
Fig. 14. Dutch operators’ revenues by segments, thousand EUR, 2009-2012
Fig. 15. Dutch subscribers’ traffic by segments, 2011-2013
Fig. 16. Consumption of voice services and SMS in Austria, 2010-2012
Fig. 17. Retail sales of mobile operators in Austria, mln. EUR, 2010-2012
Fig. 18. Consumption of voice services and SMS in Germany, 2010-2012
Fig. 19. Consumption of voice services in UK, bl.min, 2007-2012
Fig. 20. Consumption of SMS-services in UK, 2007-2012
Fig. 21 Consumption of SMS in UK, bln.pcs, 2007-2012
Fig. 22. Consumption of MMS in UK, bln.pcs, 2007-2012
Fig. 23. Dynamic of SMS-traffic in France, 2012-2013
Fig. 24. SMS-traffic in France, 2009-2013
Fig. 25. Voice traffic and MOU forecasts in Asia-Pacific region, 2010-2018
Fig. 26. MOU and ARPU of NTT DoCoMo, 2003-2013
Fig. 27. Monthly consumption of SMS in Hong Kong, 2003-2012
Fig. 28. Monthly consumption of SMS in Hong Kong, 2011-2013
Fig. 29. Consumption of mobile services in Austria, 2006-2011 Fig. 30. Number of SMS in Philippines (subscriber per month)
Fig. 31. Revenues in “data transfer” sector, RMB, 2011-2012
Fig. 32. Share of different segments in Vodafone revenues, 2011-2012
Fig. 33. Geographical operating revenues structure of Vodafone Group, 2010-2012
Fig. 34. Revenue structure of América Móvil Group, 2012
Fig. 35. Changes in MOU indices and total ARPU of América Móvil Group by regions, 2012/2011
Fig. 36. Voice traffic by regions, bln.min., 2011-2012 гг.
Fig. 37. Share of SMS revenues in the mobile connections revenues of América Móvil Group, 2011-2012
Fig. 38. Voice traffic of China Unicom subscribers, bln.min.; subscribers base, mln; 2011-2012
Fig. 39. MOU Vimpelcom’s subscribers by regions, minutes, 2009-2012
Fig. 40. Vimpelcom subscribers’ base by regions, mln. 2009-2012
Fig. 41. Investment of different services in ARPU Orange France, EUR, 2011-2012
Fig. 42. Increase of incomes of SMS and data transfer + penetration of smartphones, Orange France, 2010-2012.
Fig. 43. Orange Europe subscribers’ AUPU (MOU) by countries, minutes, 2011-2013
Fig. 44. Bharti Airtel incomes of mobile connections, bln.; 2010-2012
Fig. 45. Bharti Airtel’s income shares of mobile connections by regions 1Q 2013-2014 fin.year
Fig. 46. Voice traffic in Bharti Airtel network, mln.minutes, 1Q of fin.year 2012, 2013
Fig. 47. Average number of minutes per 1 subscriber (3*MOU) in Bhati Airtel network, mln.minutes, 1Q fin.year 2012, 2013
Fig. 48. Changes in the number of subscribers and revenues from data and voice transfer
Fig. 49. Changes in ARPU AT&T, 2009-2012.
Fig. 50. Changes in the GDP of the largest economies in the world, 2012
Fig. 51. Vodafone revenues of cellular services, 2012
Fig. 52. Mobile traffic, PB per month, 2010-2017
Fig. 53. Forecast in income share changes in the operators’ incomes, 2012-2016
Fig. 54. Average EPPM, USD, 2001-2010
Fig. 55. EPPM of the largest European markets, EUR, 2005-2012
Fig. 56. The daily message traffic of P2P SMS and OTT, bln. 2012-2013
Fig. 57. Total revenues of SMS services of “Big 3” operators in Russia, 2010-2013, bln.RUB
Fig. 58. Total revenues of voice services of “Big 3” operators in Russia, 2010-2013, bln.RUB
Fig. 59. VimpelCom Ltd income structure of mobile connections in Russia, 2011 and 2012
Fig. 60. OJSC “MegaFon’ income structure of mobile connections in Russia, 2009-2012
Fig. 61. Dynamics of MTS MOU indicator in Russia, 2011-2013
Fig. 62.MTS revenue from messaging in Russia, 2012-2013
Fig. 63. Dynamics of MTS APPM indicator in Russia, 2012-2013
Fig. 64. Voice traffic and MTS revenues from voice services in Russia, 2012-2013
Fig. 65. The rate of growth of the main indicators of Russian social and economic development 2007-2016
Fig. 66. Dynamics of ARPU (voice) and MOU in Russia, 2010-2012
Fig. 67. The average price per minute of voice call (APPM) in Russia, 2000-2012
Fig. 68. Volume of smartphone market in Russia, pcs., 1Q 2012 – 2Q 2013
Fig. 69. Volume of smartphone market in Russia, 2008 – 2016
Fig. 70. Number of users paying for different services and goods via SMS-banking, 2008А-2013E-2018F, thousand
Fig. 71. Number of users of informational SMS-banking, 2008А-2013E-2018F, mln.
Fig. 72. Cost of SMS distribution in Russia, 2009-2013
List of Tables
Table 1. Changes in revenues of mobile messages by world regions, 2011-2017
Table 2. Price restrictions in roaming in EU, eurocents
Table 3. Wholesale prices restrictions in roaming in EU, eurocents.
Table 4. Incomes from SMS transfer in Russia, 2010-2016
Table 5. Dynamics of revenues of mobile business JSC «Megafon», bln.RUB
This Information Note is Prepared by J’son & Partners Consulting, We strive to provide factual and prognostic data that fully reflect the situation and are available to us before issuing the material. J’son & Partners Consulting reserves the right to revise the data after publication of new official information by the market players.
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