Keep it short but sweet, say the operators - Industry Trend or Event

Text messaging has turned around the way a mobile phone is used, but whether it threatens the onward march of WAP has yet to be seen.

Mobile operators are seeing short message services (SMS) revenues outstrip wireless application protocol (WAP) revenues.

The growth in SMS traffic over the last two years has proved an unexpected bonus to carriers in terms of generating traffic and discovering new revenue channels. But carriers, licking their lips at the prospect of similar success with WAP services, may have to content themselves with continued growth in SMS traffic in the short-to-medium term.

"It's too early to compare revenues from WAP services with SMS," said Mike Short, chairman of the Mobile Data Association, London, "WAP services are not substitutes for SMS services. In fact, WAP phones are helping to grow SMS traffic-WAP Forum figures show there are eight million WAP phones in use but 50 million have been shipped," he said.

Short sees no sign of the growth in SMS traffic slowing: "I see no levelling off in the next two years.

Text offers exponential growth

Simple services such as SMS are set to generate the most revenue for operators, according to analysts. The Yankee Group Europe, London expects wireless data revenues to total $62 billion in 2005 in Europe--57% of which will be derived from messaging services. Yankee also predicts 100 billion SMS messages will be sent in December 2002.

This growth is becoming a key revenue stream for many operators. Strand Consult of Copenhagen, Denmark claims that some Scandinavian operators are deriving between 7%-10% of their revenues from SMS traffic and the Mobile Data Association predicts carrier revenues from SMS in the United Kingdom could hit [pound]1 billion ($1.45 billion) this year.

Short thinks making it easier to input text, the possibility of sending messages to users on different networks and the larger displays of current handsets have all been contributors to turning SMS into a multi-million user phenomenon.

Analysts agree. "If you look at SMS compared to WAP, there's no doubt WAP is behind in terms of value generation for operators," said John Strand, chief executive, Strand Consult. "The penetration of terminals that can do SMS is about 100% whereas penetration of WAP terminals is around 5%. All 430 GSM operators have won the lottery in terms of SMS revenue."

Next stop multimedia

According to estimates from Strand Consult, 15 billion SMS messages were sent worldwide in December 2000. In the U.K. in the same month 750 million messages were sent and Vodafone Airtouch says it carried 11 million SMS messages in the U.K. on New Year's Day 2001 alone. "SMS has grown considerably. There's been a four-fold increase in traffic in the last year," said the Vodafone Airtouch spokesperson.

"We believe SMS is in its childhood and will continue growing," said Strand. "E-mail didn't kill the letter, TV didn't kill the radio, the cell phone didn't kill the fixed line and the wireless Internet won't kill SMS. It has educated users that the mobile phone can be used for more than talking, which is essential for the success of 3G."

Looking forward, Strand claims premium SMS services, such as sales of ring tones and content such as jokes, are the next big revenue stream. He says the market for this in Norway has grown from zero to 248 million Norwegian Krone ($28.02 million) in under a year and predicts it will grow to more than NOK500 million ($56.49 million) in the next year.

"The value of these premium SMS services has passed the value of Internet advertising in Norway in one year." he said. "If the U.K. market had the same success as Norway, the U.K. market for premium SMS services would be worth [epsilon]588m ($545.29 million)."

Short at the Mobile Data Association agrees. "There is significant untapped potential for SMS. In some countries there is no mobile banking and the market for icons and music downloads is developing," he said. "SMS will migrate to multimedia messaging services ,which will offer much more interactive services-it's underrated in terms of potential."

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