Profit margins for mobile operators’ retail business are on the decline, forcing mobile network operators (MNOs) to break away from more traditional focuses. Wholesale business is now becoming more and more important, as the revenue generated by A2P messaging in many markets is exceeding P2P messaging revenues. So, what are the main challenges that could stand in the way of A2P messaging growth?
Why is retail failing, and wholesale thriving?
There's a clear trend: subscriber revenues in the traditional retail business for MNOs are stagnating and declining. Tough competition combined with commoditized offerings keeps squeezing profit margins - which is why MNOs now need to look for other revenue streams.
Wholesale, on the other hand, has great business potential! And A2P messaging is an area that MNOs are increasingly turning towards to drive growth. The pandemic has even accelerated the growth of A2P messaging, and healthier profit margins make it an opportunity not to miss out on. Operationally, overhead costs are also usually low - it typically only requires a team of two or three people to manage. In other words, a great route to profit that doesn’t rely on retail!
Fraudulent A2P messaging, the OTT threat, and internal lack of knowledge
But there are always pros and cons. The business of A2P messaging has its own set of challenges - external as well as internal. Let's take a look at some of them.
- Protecting the SMS channel
SMS is still a trusted and reliable channel for both enterprises and end subscribers, but it can be vulnerable to fraudulent activity. Proper precautions need to be taken.
MNOs often miss out on termination fees for messages delivered to their subscribers. Revenue leakage can also strike due to messages routed over gray routes, or through P2P SIM cards used in SIM farms to take advantage of unlimited retail offers. Or even deliberately masked as P2P traffic instead of A2P traffic.
Secondly, SMS messaging can also be used to exploit end customers. Bad actors can use phishing and other methods to gain sensitive data from subscribers by masquerading as a trustworthy sender, such as a bank. In both cases, MNOs need to make sure that the correct measures are in place, with firewalls and monitoring tools, to keep SMS safe as a channel. The trust that people have in SMS has been built up over many years - but we need to work to keep it intact!
- A growing threat from OTT players targeting the A2P market
OTT players like WhatsApp, Facebook Messenger, and Telegram have already captured a portion of the P2P messaging market. They offer a better user experience in some use cases, by allowing users to send enriched messages with pictures, videos, location data, etc. MNOs are now facing the risk of A2P messaging going down the same road, as more and more OTT players let enterprises use their channels to reach consumers.
At the same time, customer expectations of a richer A2P messaging experience are increasing. MNOs must offer RCS, a richer messaging experience, where enterprises and consumers can engage with one another. Without it, for some messaging use cases, they risk losing out on both existing and future A2P revenues to OTT players.
- Internal lack of knowledge about wholesale messaging
A third key challenge for the MNO’s wholesale department is that the wider business typically doesn’t understand wholesale messaging, or how the organization can grasp the full potential by monetizing this business opportunity. Often, they're also not aware of (or lack the understanding of) the challenges mentioned above. This, in turn, means that they're accidentally enabling fraudulent business – by offering SIM cards with unlimited text messages, for example.
It also means that the incentive to invest in services and technology that can prevent this is relatively low. It’s therefore important to educate the wider business within the MNO, by providing them with information about how wholesale generates revenues, so that they know how to best support the growing business opportunity.
Successful A2P messaging calls for the right services and technology to support it
As A2P traffic trends increase, this area of wholesale messaging will have an ever-more important role for MNOs as revenue generators and margin contributors. With the transition to 5G and future generations of mobile networks, MNOs must now take steps to protect the SMS messaging channel to ensure both today’s revenue and future business.
In SMS, MNOs already own a valuable messaging channel between enterprises and consumers. Investing in the Sinch A2P monetization service provides them with total management and control of their A2P business. It’s proven to dial down revenue leakage, has a massive impact on grey routes, and puts MNOs in the perfect position to make the most of the shift towards richer communication formats.
As A2P messaging becomes increasingly more important for mobile network operators to drive growth, you need to ensure you capture your share of the growing enterprise messaging market. Download our guide to learn more about what you can do to seize the wholesale business opportunity.