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The decline of SMS

»There has been a minor dip in the number of text messages sent by Americans. According to data released by the highly regarded telecom consultant Chetan Sharma, Americans sent an average of 678 texts a month in the third quarter of this year. In the preceding quarter the number stood at 696 texts a month. The decline seems insignificant but has caught the attention of the telecom companies worldwide.

In many rich countries in Europe and Asia-Pacific, customers, who graduate to data services, are migrating to texting apps, which provide a free alternative to SMS. Apps such as iMessage, WhatsApp and Groupme communicate through the internet and are outside the reach of the telcos. They come with another advantage; they do not have the 160 character limit placed on SMS. Traditional texting was holding steady in the US though there were signs of an impending decline. If the new trend holds good in the US, a long-term decline of SMS seems to be irreversible.

The decline of SMS, a cash cow, is bad news for carriers. In the US carriers make an 80-cent profit on every dollar generated through text messaging. According to Ovum, mobile service providers lost $8.7 billion in lost text messaging revenue in 2010 and $13.9 billion in 2011.

This may eventually pile more pressure on the Indian telcos, which are already battling a rapid decline in voice-based revenue. SMS constitutes seven per cent of the total revenues of the telcos in India and is an important component of the Mobile value add services (MVAS). Telcos are counting on earning 31% their revenue through MVAS by 2015.

The bigger question: Will this global trend replicate in India, which lives in a different field of reality? A World Bank study released in July this year reported that half of Indian subscribers did not send any SMS perhaps due to their literacy challenge. The smartphone penetration, which may lead to the decline of SMS is still very low in the country. India has just a 2.2 % share of the global smartphone market. But thanks to $100 smartphones and local apps the market will grow to 8.5 percent in 2016, says IDC.

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