At Vodafone’s first half results announcement this week, Group CEO Vittorio Colao noted that revenue from mobile data is nearing that generated by messaging, which is predominantly made up of SMS traffic. And Vodafone, like other operators, expects data to be an even greater source of revenue growth in the future. Indeed, all carriers are looking at the best way to exploit that trend. Vodafone talked at its results meeting about tiered pricing plans. So have its rivals.

In fact, some operators in the Vodafone group are ahead of their peers and have already experienced the mobile data vs SMS revenue changeover. A dig into the company’s figures reveals some major markets have made the transition. For instance, Vodafone Germany reported £584 million in data revenues in the six months to end of September, compared to £382 million for messaging over the same period. There is a similar picture in Spain where the figures were £265 million for data and £177 million for messaging. And just to show this is not a tendency limited to particular European markets, both Vodacom in South Africa and Vodafone Essar in India recorded a disparity in favour of mobile data. 

Of course the same trend is visible with other mobile operators. It’s wise to conclude eventually mobile data will comfortably surpass SMS revenue throughout the industry. But will it ever be as profitable? Vodafone does not break out the margins for data versus messaging traffic. And neither do its rivals. But we know the capex demands on data networks have been formidable whereas the beauty of SMS was its low-cost model. No messy or unexpected demands to install additional capacity. Messaging has always been a neat, predictable business.

Even when mobile operators started to introduce buckets containing hundreds of SMS every month (the equivalent of flat-rate pricing for data), operators never ran short of network capacity to the same extent, or so dramatically, as some operators holding exclusive arrangements for the iPhone. The mobile industry will probably never find such a lucrative, and reliable, source of revenue ever again.

Richard Handford

 

The editorial views expressed in this article are solely those of the author(s) and will not necessarily reflect the views of the GSMA, its Members or Associate Members