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Business

Losing ground

Released at: 03:39, 17/06/2014

Losing ground

Telecom operators need to jump on board and come to terms with mobile messaging apps.

by Do Huong

Instead of trying to fight over-the-top (OTT) messaging application providers, MobiFone, the second-largest telecom operator in Vietnam, is launching its own OTT service with free messaging and voice on the internet while waiting for licensing approval from the Ministry of Information and Communications (MIC). Viettel, the largest mobile operator in the country, has already told local media that it intends to buy an OTT company such as Kakao Talk, the South Korean-based provider. Vinaphone, meanwhile, remains tight-lipped about its business plans. All three mobile network operators, which are seeing turnover and profit decline daily, need OTT applications soon rather than later.

The OTT messaging apps industry in Vietnam has seen rapid growth in user penetration for mobile chat apps since 2013. Instead of paying a set amount to send a text message via a mobile provider, smartphone users have turned to apps like Whatsapp, Viber, Line, Zalo and Kakao Talk, all of which boast a large customer base and offer innovative features like the ability to send pictures and videos and even make calls based on 3G connections. Last year Viettel, MobiFone and Vinaphone, which account for 90 per cent of the telecom market share, recorded monthly losses of $5 million, equal to 10 per cent of total turnover, due to the appearance of these free chat apps. MobiFone said that Viber attracted 3.5 million subscribers from the operator, with 280,000 calls and 8.7 million messages sent for free last year. Given that early 90 per cent of its total revenue comes from text messages and calls, the provider is none too happy.

Around the world telecom companies have already shaken hands with OTT messaging app providers. In late 2013 Singapore’s second-largest mobile carrier, StarHub, signed a deal with Line to offer OTT-based data plans. This followed a similar arrangement with WeChat - the second-largest active-user free chat app of the Chinese-based company Tencent. The Singaporean company also plans to launch its own OTT app for customers this year. Chinese telecom operator China Mobile predicts its revenue from text messages and calls may fall to below 50 per cent by 2018. Analysts say that telecom operators no longer dominate the telecom industry in terms of customers, partners, devices and content providers, instead occupying only a modest position in the industry and are working with relevant units to build a sustainable business model.

Simply put, local operators must adapt to the new environment or die. What they don’t seem to realise is that Zalo and Viber gets people on to 3G and this may bring in greater revenues from other online services in the future, such as virtual items, SMS banking, and e-commerce. There are two key points telecom companies are currently missing, according to Techinasia. Firstly, they remain too focused on texting and calling rather than on the growth of 3G. Secondly, they are skimming way too much off the top of SMS transactions (sometimes up to 40 per cent), stifling many potential business models. If they get more people signed up for 3G and making SMS transactions, they will significantly grow their revenue in the long term.

The OTT messaging industry is in the midst of a land grab, as Rakuten, a Japanese e-commerce giant, has bought Viber for $900 million, while Facebook spent $19 billion on gaining exclusive access to Whatsapp’s 450 million subscribers. The large personal computer-based service providers began invading the mobile-based data market after seeing the potential of free messaging apps, which secure a great deal of personal information on registered users. “This is an advantage for telecom companies that have a large number of subscribers,” said Mr Bui Quang Huy from a member unit of Viettel. “The challenge is how to monetise the amount of data, like OTT service providers are doing. Cooperation with or acquisition of OTT messaging apps is the way to continue to attract and retain subscribers.” Actually, the military telecom company has spent a lot of money and human resources on developing mobile apps over the last two years. Mr Nguyen Manh Hung, General Director of Viettel, has said many times at OTT-related conferences that the operator is willing to cooperate with OTT service providers for a win-win outcome. It’s also clear that the other two telecom giants have had the same idea as Viettel. “Telecom operators have little time to decide to penetrate the free chat apps market when demand in user communication is changing,” Mr Huy said. “Change in the ICT industry occurs every second.”

Analysts commented that the mobile chat apps production line continues unabated. Just a few months ago a Singaporean-based company, Garena, launched BeeTalk, a mobile chat app, in Thailand and Malaysia, and then headed to Vietnam. Vietnam still has space for mobile chat apps, with 2.5 million instant messages (IMs) per user per year and 44 per cent daily active users (Taiwan has 3.6 million IMs per user and 60 per cent daily active users and is considered the most saturated market for mobile IMs worldwide), according to TNS Mobile Life 2013. Vietnam falls into the category of moderate saturation and an increase is anticipated. According to market research and consulting company Spire, Vietnamese consumers have shifted to using smartphones to connect to messaging, social networks, digital entertainment and internet access. In particular, smartphone users who own an iPhone, Blackberry or Samsung can take advantage of in-phone services such as Facetime, iMessage, or Blackberry Messager.

OTT service providers haven’t neglected approaching feature phone users as the market hasn’t been fully exploited. Whatsapp, Line, Kakao Talk and Zalo are available on the Nokia Asha series. Estimates show that Asia and Africa have 580 million mobile phone users and while 70 per cent have internet-connected devices most are not smartphones. “The demand for basic-function mobile phones that access the internet is high,” said Mr Nguyen Duy Hien, CEO of GSM. “Mobile chat apps are doing well in building their user community on feature phones before feature phone users move to smartphones in the future.”

Co-existence

Mobile messaging apps approach users simply by allowing them use the