Heavy text messaging boosts Telcos revenues

Mobile service providers are benefitting from increased number of text messages sent by Kenyans.

Kenyans sent 13 billion text messages in the year to June as they took advantage of flat-rate bundle offers from mobile operators and aggressive promotions during the period.

Latest statistics from the Communications Commission of Kenya (CCK) indicate that Short Messaging Services (SMS) rose a “whopping” 208 per cent in the 2012/2013 financial year.

“The significant growth in the number of SMS sent could be attributable to flat rate bundle SMS offers which have increased popularity in the market,” the CCK said. The preference of text messages to calling by young people is also a key driver of the new trend.

Some 12.4 billion of these  text messages were on-net, a category that registered 300 per cent growth.

CCK says this trend is further proof that the growth in SMS was driven by company promotions. Many of the promotions are only applicable to subscribers sending messages within their network.

Analysts however say that the volume of SMSs sent will decline overtime when internet use rises significantly as seen in developed markets.

Internet subscriptions shot up 61 per cent to 12.9 million, also attributed to promotions and offers run by the telecom operators.

CCK now estimates that 19.6 million people, or nearly half the Kenyan population, have access to the Internet.

These trends in the non-voice revenue streams in the telecom sector are in sharp contrast to the relatively sluggish growth experienced in the voice category, which has been the traditional key source of revenue.

CCK notes that voice traffic has been declining when analysed quarter on quarter, since December 2012. Annually, though, voice traffic grew 6.8 per cent to about 28.9 billion minutes.

“The decline in mobile traffic over [the quarter] could be due to availability of other affordable communication alternatives such as SMS and other mobile applications such as WhatsApp that have continued to gain popularity,” writes CCK.

Realising that revenues from this segment of the business are most likely about to plateau, telecom operators have been eager to develop alternative sources of revenue, hence the flooding of local media with SMS and data offers.

Net profit up

This strategy already seems to be paying off. Safaricom, the only listed mobile operator locally, on Tuesday reported a 45 per cent increase in half-year net profits to Sh11.26 billion.

The company attributed the profits to a strong performance in data and SMS, which raked in Sh5.47 billion and Sh6.35 billion respectively.

In Wednesday’s trading at the Nairobi Securities Exchange, the company hit the Sh400 billion market capitalisation mark after its stock rallied to Sh10.20 following demand by investors eyeing bigger dividends.

According to CCK’s numbers, Safaricom is gradually gaining market share that had been eroded.

The company has grown its market share by subscriptions to 65.9 per cent up from 64 per cent in June 2012. Safaricom also controls over  93.6 per cent of the SMS market.

Airtel and yuMobile also experienced growth in market share by subscriptions to 17.1 per cent and 10 per cent respectively.

However, Telkom Kenya recorded significant losses in its place in the market as it lost 31.7 per cent of its subscribers and saw market share eroded to 7 per cent from 10.5 per cent.