SMS is probably the second most used feature in a mobile phone after voice. No doubt then that in a market as large as 500 million plus mobile subscribers SMS forms for sizable usage. According to a recent Gartner report its expected that mobile messaging volumes in India will reach 191.6 billion messages in 2013. This means that SMSing is going to grow atleast for another 3 years.
Now the recent point of discussion in the telecom circle has been the impact of Interconnect charges and how would Bulk SMS players cope with the same.
Firstly a lowdown of what Interconnect charges really are?
Interconnection involves a linking up of one telecom operator to the infrastructure facilities of another. Interconnections can be considered in terms of network interconnection and access interconnection. The former takes place between operators possessing networks, and the latter between an operator with a network and another without one. Interconnection charges include charges for collecting and delivering calls, for installing, maintaining and operating the points of interconnect, payment for supplementary services (such as directory assistance, fault reporting, network maintenance, or inter-carrier billing), and for ancillary and other facilities (such as space in the equipment room). Furthermore, in several cases, there is also a charge to fund the deficit arising due to the provision of universal service. However, if the funding of such a deficit is covered by the telecom tariff, then it should not be a part of interconnection charges, i.e there is a need to avoid double-counting in this context.
So who has increased these interconnect charges?
Now news has it that Airtel has increased its interconnection charges on SMSes and Vodafone is next in the line. Airtel has struck a deal with Tata Teleservices and other telecoms wherein telecoms will pay 15 paise per sms terminating on Airtel’s network. Earlier the interconnect fee, an amount to be paid to network operators that receive the SMS was charged at around 4 to 5 paise per SMS. However, recently it has been tripled as TRAI has no rule on the amount which means operators can charge any amount for termination.
How will this impact bulk sms players? SMSgupshup, Netcore and others..
As this interconnect charges will either be paid by the telecom operator or the end user and the hit of these charges would hurt the business of SMS aggregators and bulk sms provider businesses like Smsgupshup, Valuefirst and Netcore the most. They would have no option but to stop sending smses to the likes of airtel and any other service provider which hikes up these charges as it would hurt their margins big time.
IAMAI has appealed to TRAI to look into the matter and stop these charges as it would put many of the sms aggregators out of business. Currently TRAI hasn’t made any intervention into this matter but expect some action or else the sms players could go into a downward spiral very soon.
In a move to combat TATA’s SMS Pricing move made in 2008 – which drastically dropped SMS rates all over the country – Airtel has initiated the IUC from TATA to Airtel numbers across India. The heat was still on and now Reliance
has also joined the force. The inexpensive services has lead to a high increase in volumes but drastic reduce in margins for Bulk SMS Aggregators. In this tariff war between Old and New Operators it would only lead to the market becoming further competitive and put ‘smaller’ aggregators out of business.
The new rules are harsh for bulk sms resellers and it will slow down the market according to my view. I think it will stop those annoying messages from banks and credit card compaies… lol..
This will have a huge impact on the website that delivers free SMS too.
You are right.. Infact we shall be doing an interview soon with sms guys to further probe into this space
And yes it is true that profit margins have reduced drastically that many small players will soon be out of this bulk sms game.