Trends in telecommunications: Voice and Messaging
Global international telephony traffic over traditional and alternative carriers (TDM and VoIP) is in decline from year 2015 on, after years of growth. Actually, year 2015 was the first time after the start of ‘Great Depression’ in 1929, that international telephony traffic through traditional telecom operators decreased in volume, with that negative trend continuing in years after that. Decline in volumes in turn adversely affected revenues earned by telco’s both in TDM and VoIP in a rather dramatic fashion with negative effect being compounded by declining wholesale prices.
Yet, by including international traffic that is running over OTT providers such as Skype, WhatsApp, Viber and others, the overall global international voice traffic is still growing at double digit numbers.
This strongly suggest that traditional wholesale voice models of wholesale traffic transit with declining traffic and margins, are not a viable long term strategy. Activities in the field of international wholesale voice services should be streamlined and focused on protecting current most important sources of high margin revenues, such as non-regulated termination rates, as well as on cost optimization and fraud prevention.
While trends represented above are still valid today, Covid pandemic created a new dynamic in a number of areas of international telecommunications. Lock downs in combination with working from home, created a pressing need for new and upgraded collaboration tools for internal communication as well as for communication with customers. This new paradigm is positively affecting the traditional voice services in a way where businesses need reliable voice solutions. This means that voice services are increasingly integrated in video-conferencing calling tools, thus increasing or at least offsetting the overall transition of traditional voice from TDM and VoIP to OTT platforms.
International roaming services are another area that was historically important source of revenues and margins for telcos. But as with international voice, international roaming is experiencing a significant drop of revenues due to the impact of the regulation of roaming charges in EU countries and Covid pandemic in last 2 years.
The abolition of roaming charges within the EU does not automatically lead to lower calling charges or reduced expenses for mobile operators. With capped retail as well as wholesale charges and growing volumes, the costs will actually increase, usually substantially.
Globally, telecom operators are eyeing mobile data growth for generating additional revenue streams, yet monetizing mobile data is increasingly hard, both on domestic markets due to competition and prevalence of flat offers as well as internationally as EU regulation grants substantial amount of data roaming abroad without surcharges. Operators’ focus needs to shift to innovative bundles and tailored pricing to preserve or grow revenues from travelers and immigrant workers.
Good news is that revenues began to recover, following a significant increase in active roamers and their mobile data usage in EU, and other parts of the world following almost full stop of traveling in the EU as well as globally. For MNOs this is an opportunity that needs to be explored by attracting additional roaming traffic into own network.
There are two additional main trends in mobile telecommunications, that represent opportunities in connection with roaming services and with goal of attracting roaming traffic as well as IoT and eSIM supported devices into own mobile network.
One is the booming IoT sector worldwide as an important factor in supporting market growth. A total number of connected devices globally exceeded 17 Bn, with IoT devices (excluding smartphones, laptops and other mobile devices) surpassing 7 Bn across the globe. By 2022, over 70% of the total IoT devices are expected to be connected using mobile/cellular technology, thereby creating big opportunities in connection with eSIM market as eSIM cards are believed to be more useful for IoT ecosystem across verticals such as power generation, oil & gas, manufacturing, and others.
The embedded SIM (eSIM) market is also rapidly gaining pace, thereby creating new opportunities for mobile operators and also for connected devices manufacturers. With expanding application area of SIM cards to laptops, tablets and connected devices for the IoT ecosystem, eSIM cards are set to witness rapid growth over the next period.
Messaging Services (A2P)
Another area of growth in the field of mobile services is A2P messaging where an SMS message is sent from an application to a mobile subscriber. Based on application, the A2P SMS can be connected to industries such as finance, banking, entertainment, tourism, retail, marketing, healthcare, media as well as OTTs.
Main factors of global growth of A2P SMS traffic are 2FA, M2M traffic, banking, finance, OTTs and airlines. The importance of A2P SMS in retail is somewhat diminished by development of own proprietary mobile apps with push notifications for customers as well as OTT solutions such as WhatsApp, Viber or Telegram, yet there is a vast market and virtually unlimited possibilities across most industries for A2P messaging.
While the market of international A2P SMS is highly competitive and maturing, it is important opportunity for growth, both through monetization of traffic terminating into MNOS own networks as well as for transit and especially on the B2B segment where there is increasing need for so called CPaaS solutions that connect most communication channels including A2P SMS with enterprise.
The A2P SMS industry will continue to grow thanks to growing volumes and also upwards pricing trends in most markets.
Covid pandemic influenced A2P area as well, as the need for 2FA messages, transactional messages (e.g. delivery) and similar, increased the demand and overall volumes of A2P traffic globally and substantially.
Lockdown intensity impact was noticed globally incuding in the EMEA region where e.g. a national lockdown in place for almost 3 months resulted in an increase of 13% in International A2P traffic. SMS is being extensively used as an essential communications channel during the pandemic both by governments and private entities. Growth in international A2P of the order of 30% was recorded across many markets, with a clear relationship between lockdown intensity and traffic increase.
While the international A2P traffic flourished, overall levels of domestic A2P traffic remained largely static during lockdown periods. Retail marketing suffered in particular with shops and food outlets closed, while notifications, transactions and alerts traffic increased in line with online commerce growth driven by people based at home. Overall, growth in certain types of domestic traffic, largely government notifications was nullified by decreases in other areas.
If you would like to learn more about trends in telecommunications and how to prepare your business for them please do not hesitate to contact us.