OTT Apps Cut SMS Revenue, But Data Is Up
The popularity of mobile Internet messaging and calling applications has come as a boon to Indonesian carriers, but at the same time poses a threat to their traditional revenue stream, analysts and industry executives say.
Sudev Bangah, the associate director of the Indonesian office of the International Data Corporation, says that “over the top” apps that rely on data connections to provide calling and messaging functionality have long been viewed warily by the carrier community.
“Obviously OTT applications are a concern for many telcos, simply because they eat into their traditional revenue,” he tells the Jakarta Globe. “They’re already losing on voice revenue, and when you have people using apps like LINE which offer free calls and free messaging, then SMS revenue is expected to go down as well.”
Adrian Prasanto, the head of public relations at Indosat, Indonesia’s third-biggest carrier by subscriber numbers, acknowledges the “increasing trend in terms of social media demand, especially the ones related to mobile chatting.”
“If people used to text all the time, now they’re starting to chat all the time,” he tells the Globe.
He says Indosat’s SMS revenue stream has seen a slight decline, but adds that the company is seizing on the uptick in mobile data subscriptions.
“Data package subscriptions for mobile Internet have experienced some growth,” Adrian says.
“Even though the revenue development from these packages isn’t very satisfying at this point, we definitely see positive patterns in terms of traffic.”
Adita Irawati, the head of corporate communications at Telkomsel, the country’s biggest carrier, agrees that the industry’s focus “has shifted from voice and texting services to data services,” and says Telkomsel is responding by beefing up its data offerings.
Bangah says it’s important for the carriers to recognize the trend early on, while smartphone adoption is still low and growing. IDC projects 60 million mobile devices shipped to Indonesia this year, with smartphones accounting for some 15 percent. The figures are up from 55 million devices shipped last year, 12 percent of them smartphones.
“It’s the data packages that at the end of the day are expected to make up for the loss of revenue,” he says.
“But don’t forget that the majority of the market is still feature phones. We’re talking about 45 million feature phones being shipped in a year. And on basic feature phones you can’t get apps like LINE, so SMS will still be fairly big.”
Hasnul Suhaimi, the president director of XL, Indonesia’s second-biggest carrier, says this is the case for the vast majority of subscribers.
“Currently around 80 percent of our customers still use non-smartphones, many of them still on 2G. So the demand for SMS is still very high, and in fact, still very much growing,” he tells the Globe.
“In the future, the demand for SMS might decrease. We hope we can find new sources of revenue from other content or applications to compensate for the decrease in SMS usage.”