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Ovum Survey Highlights Impact of A2P SMS Price Strategies on Market Growth

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Mobile network operators (MNOs) are not currently realizing full revenue or growth potential due to inappropriately pricing A2P SMS for each marketplace, according to Mblox and Anam Technologies.

The A2P SMS market is poised for significant adoption in the coming years, which provides MNOs an opportunity to increase revenues if the optimal SMS price is charged for each market and networks are closed to fraudulent routes.

The report, based on a global survey of enterprises and analysis of global SMS volumes, found a high level of price elasticity for A2P SMS. Specifically, half of respondents would send two to four times less traffic if the per-message price of an A2P SMS increased from the industry average of US$0.03 to US$0.05. Conversely, 33.9 percent of respondents said they would send between two and four times more traffic if the price was US$0.01.

"MNOs in every market should consider the effect of price elasticity on their pricing strategies for A2P SMS," said Pamela Clark-Dickson, principal analyst, Consumer Services, Ovum. "Ovum estimates that A2P messaging traffic will total 2.2 trillion messages by 2017, representing 31.3 percent of total messaging traffic, up from 1.8 trillion messages in 2014."

Additionally, the report highlighted the difference pricing strategies will have around the globe. For instance, MNOs in Belgium would more than double their revenues by reducing the price of A2P SMS by 25%. By contrast, MNOs in India currently charge below the optimal price. A price increase would cause a small drop in traffic but a windfall for the bottom line.

"This report underscores the impact pricing has on A2P SMS adoption and growth across the globe," CEO of Mblox Tom Cotney said. "A2P SMS is poised for significant growth because it provides enterprises with a cost-effective channel for engaging with customers. This new study proves that adoption could increase and MNO revenue will be maximized, if MNOs can identify the optimal price point for their market."

The report also reiterated that, in order to maximize revenue and enforce the optimal price point, MNOs must close their networks to fraudulent routes. Without commercial agreements, MNOs are losing a portion of revenue to messages sent over grey and black (fraudulent) routes, which bypass proper compensation for the MNOs. The most effective way MNOs have begun battling fraudulent routes is by deploying a managed SMS revenue assurance platform and SMS firewall, enabling them to close and protect their networks, identify legitimate traffic, block spam and ensure that aggregators and enterprises pay them for SMS services.

"For mobile network operators, deploying managed revenue assurance platforms and firewalls is a vital first step to realizing the full revenue potential of application-to-person SMS," said Anam CEO Louise O'Sullivan. "These tools enable MNOs to be part of the value chain of an already robust A2P market. When combined with managed protection of the channel and pricing optimization efforts, mobile network operators can achieve maximum profits while ensuring adoption and utilization of application-to-person SMS within the business market."

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