The Rise of OTT Messaging Apps: A Threat to Telco SMS Revenue

2024-12-30

The dominance of SMS messaging is under threat from the rise of over-the-top (OTT) messaging apps like WhatsApp and Telegram. These apps offer free or low-cost messaging services, which are increasingly popular with mobile phone users. As a result, telecom operators (telcos) are facing a potential decline in revenue from SMS messaging.

A new report predicts that OTT messaging traffic will surge in the coming years, reaching 375 billion messages by 2028. This is expected to lead to a significant decline in SMS messaging, with telcos potentially losing over $3 billion in revenue from SMS business messaging in the next five years.

SMS messaging is a major source of income for telcos in Nigeria, with users spending an estimated N3.3 trillion on calls, data, and SMS in 2022. The Nigerian Communications Commission (NCC) reported that about 14.09 billion SMS messages were sent in 2022, with MTN recording the highest number of messages exchanged.

The rise of OTT messaging apps is attributed to several factors, including their lower cost compared to SMS and their wider range of features. OTT messaging apps often offer features such as group chats, file sharing, and video calling, which are not available with SMS.

What Undercode Says:

The dominance of OTT messaging apps poses a significant challenge for telcos. These apps are not only eroding telco revenue from SMS messaging, but they are also putting pressure on telco data networks as OTT messaging traffic increases.

Telcos need to develop new strategies to compete with OTT messaging apps. One option is to invest in developing their own OTT messaging apps that can compete with WhatsApp and Telegram on features and price. Telcos could also offer bundled packages that include SMS messaging, data, and access to their own OTT messaging app.

In addition to competing with OTT messaging apps, telcos can also look for ways to partner with these apps. For example, telcos could offer OTT messaging app vendors access to their billing systems, which would allow OTT messaging app vendors to offer premium features to their users.

The rise of OTT messaging apps is a major trend that is reshaping the telecommunications industry. Telcos need to adapt to this trend in order to remain competitive.

Here are some additional analytics related to the blog article:

The report highlights the importance of pricing for OTT business messaging growth. As SMS network quality declines due to rising fraud, OTT messaging apps can position themselves as a more reliable alternative.
The research suggests that OTT messaging vendors should develop pricing strategies that target high-spending businesses. This could include offering premium features for mission-critical traffic such as multi-factor authentication (MFA).
The report predicts a significant increase in OTT business messaging expenditure for retail, from $790 million globally in 2023 to over $2.6 billion by 2028. This suggests that OTT messaging apps have a significant opportunity to grow in the retail sector.
The fact that Nigeria ranks seventh in the world for mobile phone usage indicates a large potential market for OTT messaging apps in the country. However, high data costs could be a barrier to adoption.

Overall, the rise of OTT messaging apps is a significant trend that is likely to continue. Telcos need to develop new strategies to compete with these apps and adapt to the changing landscape of the telecommunications industry.