Telecom giants challenged by smartphone messaging apps
Source: Xinhua |
March 29, 2013, Friday
|
Print Edition
Print Edition
CHINA'S telecommunications operators are being squeezed hard by messaging applications installed in the smartphones after encouraging users to buy them.
The applications use the networks, in which the telecom operators invested heavily, but are losing business to these new apps.
Take for example Yang Yifan, a clerk in the Chinese branch of ITOCHU Corporation. Yang now uses WeChat, a WhatsApp-like messaging service, to contact clients and chat with friends on his new Android phone instead of using the paid services of the operators.
"It has all the functions of short messaging service (SMS) and is basically free, except for some minor charges for network flow," Yang said. "Anyone with a handset can download it and register for free."
The application, developed by one of China's largest information technology companies, Tencent Holdings Ltd, also offers voice messaging and photo transfers. The app's low-cost and convenience has earned it a huge - and growing - user base.
WeChat was followed by many other IT firms that rushed to launch their own instant messaging (IM) services, including Sina Weibo, China's most popular Twitter-like platform, and messaging applications Mi Talk and Momo.
As these apps have become popular, which has cut into the telecom operators business.
The number of SMS sent by individual users declined 10.6 percent year-on-year in the first two months of 2013, a report from the Ministry of Industry and Information Technology showed last week.
Drop in SMS
The growth rate of SMS sent slowed to 0.7 percent, markedly lower than 5.7 percent and 7.6 percent in the same period of 2011 and 2012, respectively, according to the report.
The drop in SMS business was also confirmed in a recent survey conducted by the Data Center of China Internet, which showed that the message volume handled by telecom operators dropped 20 percent in 2012 from that of the previous year, while telephone services fell 5 percent.
He Huajie, a senior manager at China's second largest telecom operator, China Unicom, joked that the company may have to cede its rank to Tencent if the calculations were based only on the number of users.
Li Yue, president of China Mobile, China's biggest telecom company, also admitted that the telecom service providers have taken a hit from emerging and fast-developing IT firms that used existing networks to expand their businesses, much of which overlapped with that of the telecom giants.
In contrast, Tencent saw a jump in its income from telecom value-added services which grew 13.8 percent year-on-year to 3.72 billion yuan (US$593.2 million) last year.
Although messaging applications in mobile services weighed on traditional services, they also boosted network flows, indicating major potential business for telecom companies, said an industrial insider who declined to be named.
His words were echoed by Yan Xiaojia, an analyst with Internet solution company Analysys International, who advises telecom companies to tap their profit potential by improving their bandwidth and establishing more Wi-Fi hotspots, although this could dramatically drive up operating costs.
To improve the lackluster performance, the country's three dominating telecom operators have launched their own mobile apps, but could only grab a small market share compared with other software applications.
Fetion, an IM service available on mobile devices promoted by China Mobile, once enjoyed great popularity but has faded out. The company confirmed that its targeted customers are phone users who already have a China Mobile SIM card.
Hope of cooperation
Recently, Ma Huateng, chairman of Tencent, expressed hope of cooperating with the telecom giants, saying operators and IT firms should seek a relationship featuring multiple beneficiaries and win-win results.
But his China Mobile counterpart Li Yue said he was not concerned about contracting profits in messaging services, which were offset by booming network flows, stressing that it is an inevitable trend in technological advancement.
But insiders predict a gloomier outlook as the conflict of interests shows no signs of easing without the mediation of a third party, hinting at MIIT.
In 2010, the ministry facilitated the reconciliation between Tencent and China's most popular security software developer, Qihoo 360, as their heated competition in pursuing users triggered numerous complaints from netizens on deteriorating user experience.
Dong Xu, an analyst with Analysys International, said operators have no reason to worry so much, as trends in tech fields often change, suggesting that even die-hard fans of WeChat will have a new favorite sooner or later.
Even Yang, who has purchased three cell phones since he started working two years ago, has already lost count of the number of apps he has used.
The applications use the networks, in which the telecom operators invested heavily, but are losing business to these new apps.
Take for example Yang Yifan, a clerk in the Chinese branch of ITOCHU Corporation. Yang now uses WeChat, a WhatsApp-like messaging service, to contact clients and chat with friends on his new Android phone instead of using the paid services of the operators.
"It has all the functions of short messaging service (SMS) and is basically free, except for some minor charges for network flow," Yang said. "Anyone with a handset can download it and register for free."
The application, developed by one of China's largest information technology companies, Tencent Holdings Ltd, also offers voice messaging and photo transfers. The app's low-cost and convenience has earned it a huge - and growing - user base.
WeChat was followed by many other IT firms that rushed to launch their own instant messaging (IM) services, including Sina Weibo, China's most popular Twitter-like platform, and messaging applications Mi Talk and Momo.
As these apps have become popular, which has cut into the telecom operators business.
The number of SMS sent by individual users declined 10.6 percent year-on-year in the first two months of 2013, a report from the Ministry of Industry and Information Technology showed last week.
Drop in SMS
The growth rate of SMS sent slowed to 0.7 percent, markedly lower than 5.7 percent and 7.6 percent in the same period of 2011 and 2012, respectively, according to the report.
The drop in SMS business was also confirmed in a recent survey conducted by the Data Center of China Internet, which showed that the message volume handled by telecom operators dropped 20 percent in 2012 from that of the previous year, while telephone services fell 5 percent.
He Huajie, a senior manager at China's second largest telecom operator, China Unicom, joked that the company may have to cede its rank to Tencent if the calculations were based only on the number of users.
Li Yue, president of China Mobile, China's biggest telecom company, also admitted that the telecom service providers have taken a hit from emerging and fast-developing IT firms that used existing networks to expand their businesses, much of which overlapped with that of the telecom giants.
In contrast, Tencent saw a jump in its income from telecom value-added services which grew 13.8 percent year-on-year to 3.72 billion yuan (US$593.2 million) last year.
Although messaging applications in mobile services weighed on traditional services, they also boosted network flows, indicating major potential business for telecom companies, said an industrial insider who declined to be named.
His words were echoed by Yan Xiaojia, an analyst with Internet solution company Analysys International, who advises telecom companies to tap their profit potential by improving their bandwidth and establishing more Wi-Fi hotspots, although this could dramatically drive up operating costs.
To improve the lackluster performance, the country's three dominating telecom operators have launched their own mobile apps, but could only grab a small market share compared with other software applications.
Fetion, an IM service available on mobile devices promoted by China Mobile, once enjoyed great popularity but has faded out. The company confirmed that its targeted customers are phone users who already have a China Mobile SIM card.
Hope of cooperation
Recently, Ma Huateng, chairman of Tencent, expressed hope of cooperating with the telecom giants, saying operators and IT firms should seek a relationship featuring multiple beneficiaries and win-win results.
But his China Mobile counterpart Li Yue said he was not concerned about contracting profits in messaging services, which were offset by booming network flows, stressing that it is an inevitable trend in technological advancement.
But insiders predict a gloomier outlook as the conflict of interests shows no signs of easing without the mediation of a third party, hinting at MIIT.
In 2010, the ministry facilitated the reconciliation between Tencent and China's most popular security software developer, Qihoo 360, as their heated competition in pursuing users triggered numerous complaints from netizens on deteriorating user experience.
Dong Xu, an analyst with Analysys International, said operators have no reason to worry so much, as trends in tech fields often change, suggesting that even die-hard fans of WeChat will have a new favorite sooner or later.
Even Yang, who has purchased three cell phones since he started working two years ago, has already lost count of the number of apps he has used.
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