Text Craze
There is big money in SMS for a host of industries
By Joel D. Pinaroc

By now, much has been written about short messaging service (SMS) or “texting,” particularly in the Philippines where SMS has become a cash cow, not only for telecommunications companies, but for many companies in various industries.

Initially a unique feature of the global standard for mobile communications (GSM) mobile telephone networks, SMS is by far the most widely used communications technology in the Philippines, going beyond a mere fad to a full-blown industry by itself.

World’s Text Capital
In the Philippines, subscriptions from Smart and Globe, two of the dominant cellular companies in the country which account for 99% of the total market, indicate that current mobile users now number around 20 million. Telcos and research firms still project a growth of at least ten percent in the coming years. The growth of mobile subscribers by far exceeds the growth of landline subscribers, which according to the government agency National Telecommunications Communications (NTC) will again register a flat growth in 2004.

Majority, if not all, of the 20 million cell phone subscribers send SMS on a regular basis. Although estimates differ, a ballpark figure of about 150 million SMS a day is generally accepted as a good estimate on the volume of SMS in the country.

Smart, in its year-end report, says its cellular phone subscribers now total around eleven million, majority of which are pre-paid subscribers.
Financial reports from the industry’s top two will show that revenues from SMS have increased exponentially, not only because more GSM subscribers send SMS messages, but because of the number of companies, as well as government agencies, that have forged partnerships with the telcos in using SMS for their operations. The two companies, in their respective 2003 third quarter reports, indicated gross revenues of almost P40 billion in the first nine months, mainly “wireless” revenues including SMS.

For Smart, revenues for SMS reached more than P12 billion as of the last quarter of 2003, from P8.4 billion in the same period last year. For Globe, wireless revenues reached P35 billion, for the period ending September 2003. Out of this figure, Globe said more than P8 billion came from SMS for both prepaid and postpaid subscribers.

Research firms say the success of Globe and Smart in SMS seem to be an aberration because their counterparts in the US, European, and other Asian markets, continue to rely on getting the dough from voice calls.

Highly Successful Texting Promos
Various industry verticals are also cashing in on SMS. Case in point is the huge success of television game shows, where television viewers are enticed to participate via SMS. Eventually, even soap operas jumped on the SMS bandwagon and passionate Filipino viewers now have the chance to interact with their favorite soap opera characters via SMS.

While this may seem trivial to casual observers, Smart and Globe are reportedly earning millions of pesos every day from these partnerships.
The arrangement is simple. A telco provides a certain three- or four-digit number to a particular TV station. The TV station then invites televiewers to use the number to send SMS. Usually, every SMS sent costs a bit more than the usual subscriber-to-subscriber sending. The TV station then gets a portion of this price while the telco, which provided the number, gets the rest.

Simple mathematics will show that through this arrangement, the millions of televiewers who are into interactive SMS, generate substantial revenues for both the TV station and the telco.

SMS-related services also sparked the need for content providers, or companies which design and conceptualize SMS content such as ring tones, logos, and graphics among others, that can be downloaded directly through a user’s mobile phone. However, there has been a clamor from local content firms to increase the revenue-sharing scheme between them and the telcos. Currently, telcos get 80% of the cost of every SMS content that is downloaded by millions on a daily basis, while the content providers get the remaining 20%.

Trends
SMS has been around for some time now, and after being the recognized dominant application in wireless communications, at least as far as the Philippines is concerned, IT experts have been quick to point out that texting’s successor, multimedia messaging services or MMS, will follow suit. However, MMS is still in its infancy, despite lofty projections from various research firms. These research firms have been hailing MMS and camera-capable mobile phones as the next big wave in wireless. So far, revenues from MMS remain modest, compared to SMS.

In the coming years thus, SMS is expected to continue to be a cash cow for telcos and for companies who are wise enough to join the bandwagon at the right time.

Trends favoring the growth of SMS abound. Manufacturers of mobile phones may have varying outlook on the growth of subscribers but one thing is certain; the trend is pointing upward.

Sony Ericsson, perhaps one of the leading contenders for the top spot in the global mobile phone sector, estimates that 430 million cellular phones would have been in use worldwide at the end of 2003, with the 10% year-on-year growth expected.

Nokia, on the other hand, projects 300 million cellular phones by 2007 that are capable of accommodating newer, faster communications technology such as GPRS and 3G.

These figures represent not only Nokia and Sony Ericsson brands, but other brands as well.

Interestingly, the US market, which is traditionally a non-GSM country, is also grudgingly jumping in on the SMS bandwagon, according to one research firm, which projects 200 million mobile subscribers in the US by 2006 which will use GSM as a platform.

Another trend that is seen favoring SMS is the growth of games via mobile phones. One report says mobile games will be worth $3 billion in the worldwide market in 2004. A side note is the recent report that Filipino content providers based in the US have been making waves for coming up with intuitive mobile games for the US and European markets.

Furthermore, the Philippines’ leading telcos will be joined by other global telcos in getting a substantial percentage of revenues from SMS. Strand Consults, a European research firm, says 32% of mobile operators revenue by 2005 will come from person to person messaging. The Philippine market will still be unique because, according to the research outfit, the business for ring tones and logos will be virtually non-existent in Europe and the US until 2005.