SNN hurting telcos revenues

INSTEAD of using short messaging system (SMS), Filipinos are likely to send more messages through social networking sites (SNN), a trend that is expected to hurt the telecom revenue from call and text services this year, according to telecom analysts.

Aside from being known as the "text capital of the world" with more than one billion messages sent daily, the Philippines was also ranked 6th as the country with the most number of Facebook users globally as of November last year.

Marc Einstein, Frost & Sullivan Industry manager in Asia Pacific, ICT Practice, said the Filipinos’ strong adoption of social networking sites like Facebook, Twitter, and other value added services in the web that gives free SMS services are expected to have impact on telco revenues from traditional services which have previously been affected by the unlimited and bucket price offerings.

"This is a major challenge.....people in the Philippines are starting to use things like Facebook and Blackberry Messenger instead of SMS and this will hurt revenue growth in the PH," Einstein said.

For this year, local telcos’ revenues from the wireless business are expected to grow by single digit. While broadband business is expected to grow by double digit, it is not enough to offset the decline in SMS and voice.

At present, there are a lot of alternative to SMS and call services available online for free, including Skype, a voice over internet protocol (VoiP) service, which allows users to talk to anyone else with Skype account for free. If the internet connection is relatively fast, Skype provides good voice quality.

Chikka gives users free outbound text to all networks by sending messages from computer to cellular phone but when the subscribers opt to reply to the messages they will be charged P1 during off-peak hours and higher during peak hours .

Another latest application called WhatsApp Messenger, a smartphone messaging application, allows users to exchange messages with their friends and contacts for free who are using iPhone, BlackBerry, Android and Nokia (Symbian) phones if they have existing smartphone internet data plan or Wi-Fi.

For leading wireless telecom provider side, Danilo Mojica, SMART head of Wireless Consumer Division, admitted that the Filipinos’ strong adoption of social networking sites was another challenge the company is facing. He said that even when they offer services at a very low price, subscribers still choose platforms that are available online.

Mojica said that the second battle for pricing will not be on the telecom area. "The second competitive area will be not among the telco anymore," he said. "It will be the other platforms like What’sApp, on voices side Skype or Facebook and Android."

Alberto de Larazzabal, Globe Telecom Inc., chief financial officer (CFO), said that he expects the SNN adoption will hurt their revenue in the future but currently, it will only affect revenues from the higher end market which have access to computers or smartphone devices. The mass market, he said, will continue to rely on traditional SMS and call services.

For this year, Globe is targeting to capture the market potential in the mobile data. It has earmarked substaintial investment to improve its network to be the preferred brand for "cellphone internet" in the country and also improve broadband profitability and sustain growth of fixed line data business for corporate sector.

Ernest L. Cu Globe president said "Growing our mobile data business is a key priority this year through enhanced customer experiences, wider variety of mobile data plans, devices and content . We are also encouraged by the increasing subscribers take up in mobile data use." In 2010, Globe reported double digit growth year on year on mobile data revenues.

Last year,Globe broadband subscribers grew by 50 percent to 1.1 million compared in the same period last year, while mobile phone subscribers stood at over 26 million.