KEY POINTS

  • Native voice and messaging services, which once accounted for the vast majority of telecoms' subscriber revenue, are struggling to compete with over-the-top (OTT) apps. As digital continues to disrupt the telecom industry, OTT apps and services will drive a projected 24% decline in global messaging revenue between 2015 and 2021, according to ABI Research.
  • A fierce ongoing price war among the Big Four is only compounding the pressure telecoms are facing. Carriers are increasingly rolling out consumer-friendly services to differentiate themselves from the pack, but these perks are making it more challenging for telecoms to snatch subscribers from their competitors. The average churn rate for the Big Four carriers fell to 1.75% in Q2 2017, the lowest it's been in two years.
  • Nevertheless, telecoms are now better positioned than ever to play a bigger role in their subscribers' lives. Currently, consumers spend 57% of their digital time on smartphones, compared with 34% on PCs. This shift has effectively placed telecoms at the front door of consumers' digital experience.
  • Declining or flatlining revenue resulting from capped data plans and, subsequently, lost overage fees, has prompted carriers to explore new ways to diversify their revenue streams. As the competitive price war wages on and the US smartphone market continues to crawl toward saturation, carriers are merging with or acquiring digital media content businesses, ramping up expansion into the Internet of Things (IoT), and probing their subscriber usage habits to derive advertising-based revenue. 
  • As digital continues to reshape the wireless industry, telecoms are preparing for the next wave of disruption. A multitude of new and upcoming devices and standards could threaten smartphone ubiquity, and provide carriers with new opportunities to drive up network usage and revenue.
  • Despite a plethora of opportunities, several existing and emerging threats could impede telecoms' growth and expansion efforts. Carriers will have to contend with mobile virtual network operators, an influx of noncarrier mergers, potentially restrictive government regulations, and vertical integration, among other barriers.

Introduction 

It hasn't been smooth sailing for telecoms in recent years. Native voice and messaging services, which once accounted for the vast majority of telecoms' subscriber revenue, are struggling to compete with over-the-top (OTT) apps — and they're losing. OTT refers to the delivery of audio, voice, and media to a device over any internet connection. Some of the largest OTT players, including Facebook Messenger, WhatsApp, and Viber, are eroding telecoms' voice and messaging revenue by offering mobile users new, attractive, and simple ways to communicate. [...]