In the early days of mobile technology, the short message service, better known as SMS, became a global phenomenon as consumers, against all predictions, took up the service with vigour.

The first SMS services were established in 1993, but the technology only really took off in the late 1990s. Now, trillions of text messages fly across the world’s mobile networks every year.

In Africa, free online messaging services have sprung up like weeds and operators started to include SMS packages for pre- and post-paid offerings. SA operators are still collectively raking in billions of rand in revenue from texting.

However, those billions have started to decline in recent years. Operators and analysts say new data services and instant-messaging (IM) products are the reason. IM applications like BlackBerry Messenger have become a preferred way for many consumers to interact using text.

World Wide Worx MD Arthur Goldstuck says his research shows that between 2009 and 2010 SMS spend by SA consumers dropped from 16% of their total monthly bills to 12%. That, he says, is the “most dramatic drop we have seen to date in the amount customers spend on SMS”, he says.

During the same period, World Wide Worx’s research shows average data spend increased from 5% to 8% of their bills. “This is a strong indicator that data is taking over from SMS,” he says.

Goldstuck says the popularity of smartphones is the reason for the shift. “Services like IM cost a fraction of a cent [per message], and other services like BlackBerry Messenger cost nothing,” says Goldstuck.

He says mobile operators have long inflated the price of SMS, with the cost of texting still as high as 80c/message on some networks and tariff plans.

Premium SMS services used for competitions and polling are even more expensive. “[Telkom’s] 8ta was the only operator to realise that it could play with SMS when it launched with its 50 free SMSes for every five sent. It showed the true cost of SMS to the operators,” he says.

Other providers have yet to match 8ta’s service and Goldstuck says it’s a clear sign that the “chickens have come home to roost for operators over the cost of SMS”.
Although SMS revenues are declining, Goldstuck says the service will have a “long tail” and will be used in certain contexts for years to come.

Pieter Streicher, MD of BulkSMS.com, agrees that SMS revenues are declining. However, he says it’s not because of cheap data-based IM applications.

Rather, he says the decline is due to mobile operators including more free SMSes in bundles and other promotional packages. “Take, for example, the MXit service. It has been around for seven years and that hasn’t resulted in a decrease of the number of SMSes,” he says.

MTN and Vodacom’s most recent financial results presentations both show a marginal increase in the number of SMSes sent, even though there has been a decrease in the revenues generated.

The International Telecommunication Union also doesn’t believe there is a dire future for SMS, predicting that by 2013 the number of text messages that will be sent worldwide will climb to 10 trillion a year.

Streicher says SMS is “inelastic”, unlike voice. “If prices go up or down, you don’t see an increase or a decrease in its use.”

IM will not kill SMS because the technology is too fragmented, he adds. “For SMS, all you need to know is the recipient’s telephone number and not whether the person is online or what services they are using.”

He says customers using IM also have to download applications before they can use the services and at least 27% of smartphone users worldiwde have never downloaded an app. “With SMS, it’s already ready and available when you receive the phone,” he says.

He also points to the increased use of SMS by business. “Companies won’t use instant messaging to send commercial messages. SMS will always be entrenched in this environment,” Streicher says. — Candice Jones, TechCentral