SMS use declining in India?

Posted on October 8, 2007  /  11 Comments

TRAI: SMSs losing their flavour | The Economic Times

NEW DELHI: Are text messages slowly losing their flavor with India’s growing cellular base? Even as operators say it’s too early to take a call and make such a ‘sweeping statement’, the figures, however, suggest so. Data compiled by telecom regulator TRAI reveal that SMS use has steadily fallen from September 2006.

Consider this: GSM operators have witnessed close to 9% drop in the outgoing SMSs during the April – June quarter, as per the latest performance indicator report by TRAI. This implies, an average GSM user now sends about 35 SMSs per month as compared to 39 during the previous quarter.

Little wonder that GSM operators’ total revenue from SMS has now fallen below the 5% mark. Ditto on the CDMA front — the number of outgoing SMSs by customers using this technology platform has declined to 20during the quarter-ended June against 24 SMSs during the January – March, 2007 quarter.

If one were to consider the earlier quarter (January – March, 2007), the fall in SMS usage is more dramatic – GSM operators saw a 19% decline in outgoing text messages during this period. Outgoing SMS per subscriber (for GSM) had declined by 18.75% from 48 in December 2006 to 39 in March 2007.

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  1. There is nothing romantic about SMS over normal call, but SMS have certain basic features.

    (a) Less expensive

    (b) More intrusive

    (c) More asynchronous (than a phone call)

    (d) More private (others hear you talk to a mobile, but not see what you text)

    (e) Broadcasting

    The reason what made SMS popular more was (a) rather than others.

    If there is no distinct financial benefit over selecting SMS over voice many would revert for the latter.

    However, the operators have clear reasons to make SMS charges down making it more popular, because their entire profits lie on encouraging the use of handset for purposes other than pure voice.

  2. The key factor here is that an SMS is relatively cheaper than a call. Although other factors are at play (as chanuka also mentions but additionally factors like language, literacy, etc), cost is probably the most important. However, when considering the ‘cost’ of an SMS, it is important to distinguish between the actual cost of sending one message, versus the relative cost of sending an SMS. For instance, in June 2007 Pakistan was been seen to have the lowest SMS charges among the five countries considered in LIRNEasia’s Teleuse@BOP research, even lower than the Philippines, the ‘SMS capital of the world’ (see What matters really is the relative cost of sending an SMS; for instance, in the Philippines, for a Smart TnT prepaid mobile user, a one minute call is about 5.5 times more expensive. In Pakistan, for a Jazz Budget prepaid mobile user, the ratio is about 2.1. In India, where SMS use at the BOP was seen to be the lowest (among the countries studied), the ratio was 1 – i.e, a one minute call and an SMS are the same price (so why would you bother SMSing if that were the case?). In fact, the correlation between the relative cost and SMS use at the BOP be in Pakistan, India, Sri Lanka and the Philippines, was found to be positive, and very strong. Whereas the correlation between the actual cost of an SMS and SMS usage was found to be very weak.

  3. Those are fascinating findings Ayesha.
    Do you have any idea what the margins are for mobile operators in those countries when it comes to an SMS and one minute of voice? The impression I had was that an SMS costs the operators almost nothing and doesn’t tie up networks, hence you’d think they’d want to increase volumes as much as possible. Would mobile operators in India want to reduce the cost of SMSes soon?

  4. Very interesting. I agree with the points raised by Ayesha and Chanuka and to provide a counterfactual, the use of SMS in the Philippines continues to grow. I think the figure was 500 million SMS per day in 2006 compared to 250 million in 2005– the reasons being SMS cost is way lower relative to the cost of a voice call on- or off-net, plus the reasons cited by Chanuka. The article in fact pinpoint the reason for the decline in India– pricing packages are changing so its probably cheaper to call rather than to text, plus the issues of language, etc. Perhaps the Indian telcos are working on a different business model where SMS is offered but not as a core driver. This is different from the Philippine telcos business models where I think they have actually invested in a separate network to handle texts (SMS centers) and thus, SMS are key to their service packages. Starting 2006, Smart Telecoms (the biggest mobile player in terms of revenue and subscribers) data revenues have overtaken voice so they are making money from simple sms and sms-based services.

  5. It is true that SMSs do not tie up an entire voice channel, like a call does. It goes as packets through the signalling network. But one cannot conclude that it is costless.

    As those who have used SMS in the aftermath of disasters know, it is subject to congestion and delay. That means that at certain levels of use, the capacity of the SMS channels has to be increased. So there are costs; just that the costs are lumpy.

    When operators decide on pricing strategy, there is always the issue of one service “cannibalizing” another. Many operators will degrade the quality or ADSL and/or keep the price high, in order to protect their leased line markets. This interaction effect could be at play between SMS and voice pricing.

    A common mistake made in looking at SMS is to simply compare the cost of one SMS with say a minute of voice calls. We know that a voice call can, in most cases, take 2-3 mts and that in many cases an SMS exchange takes several back and forth messages. So the unit price of a single SMS may not be the relevant factor when a customer chooses to text or talk. Of course in an SMS exchange, both parties pay, unlike with a voice call in a calling party pays environment, which is what exists in India.

  6. Don’t forget the comparative advantage of txting, in the context of international calls. For example in Sri Lanka it takes me only Rs. 2 (>$ 0.02) to txt to Singapore or Malaysia while per minute call charges are minimum Rs. 10 or 11. (=$ 0.1)

    However, the vast majority of users might not benefit using this facility. I cannot prove, but it seems even the ME workers do not to use this option much to keep in touch with their families. Instead they heavily use VoIP.

    Is the situation in Philippines same?

    BTW, cross boarder txting has its own share of issues. Depending upon the type of arrangement between two networks the service quality might vary. Sometimes it is just not possible to txt some destinations. Delivery to Singapore, Malaysia or India from Sri Lanka is fairly okay, (just like local txt) but it is a bit difficult to txt to Indonesian users.

  7. And does not get through at all to China, as Nuwan can testify.

  8. True, Form Kunming, China I can txt my bro in Kandy, Sri Lanka but he cannot reply to that SMS. Nor can he send me SMS. The internal cost of an SMS in China is 0.1 Yuan approx 0.01 USD. However, and international SMS is 1 Yuan = 0.13 USD.

    The Sept 12th Bengkulu scare — I received the GDACS alerts in that were issued on the 12th almost 24 hours later on the 13th evening in Kunming. There must be some kind of SMS filter that uses a priority stacking method for International SMS.

  9. Reasons I’m SMS shy is because I use a less than 100 USD Motorola hand held. The key pad on it is the most frustrating. Being a 6 footer with larger and fatter fingers I tend to accidentally press the ‘off’ key right below the ‘back’ key when trying to delete a character in the process lose the entire message (hand-helds are built in the Orient, perhaps to fit the Filipino like fingers); the cheap key pad on the C261 is awful that I have to press the same key 6-7 times to get the character to appear; when using ‘Singlish’ (Sinhala English) or abbreviated forms of words it’s hard to use the auto dictionary feature (the feature that auto recommends the word); takes me 3 folds the time to prepare a SMS than to voice the same message. Hence, it’s much easier to scroll down the address book then press the ‘dial’ (green) button to make the call. For me it’s not a cost issue because my employer pays the bill.

  10. What could probably bring the decline in the following of SMS in a country where supposedly such service should rate lower compared to calls if not the charge itself. It may just be too expensive for the country’s citizens.