JupiterResearch: Sending an SMS SOS...Sending an SMS SOS...

Thomas Husson at JupiterResearch posts that "ARCEP (the French telco regulatory body) asked the European Commission if the SMS market could be regulated on a wholesale basis. Viviane Reding's services have given their answer: "YES"." Husson writes that "A fair pricing according to ARCEP would be between 0,03 euros for SFR and Orange and 0,035 euros for Bouygues Telecom (the 3rd player is disadvantaged by a smaller customer base). Given the retail price are between 0.10 and 0.15 euros, there is still room for a very interesting margin."

He is "unsure to which extent this new regulation, which could well be adopted in the other EU countries, will impact the retail prices for consumers," but notes "natural trends have shown a decrease in SMS prices, because of the following":

• impact of SMS bundles (e.g O2 Bolt-ons in the UK)
• unlimited offers from MVNOs (Virgin Mobile in France)or aggressive price promotions from SIM-only offers (Simyo in Germany)
• inclusion of free SMS in voice packages

Husson concludes that:

Price-elasticity is a key issue and volumes of SMS continue to increase, as shown in the UK or in France. However, if you had regulation constraints and long-term subsitution from new messaging formats (IM in particular), the increase in volume may not offset the decrease in price. Some operators have already reported declining SMS ARPUs in 2006. Given the huge share of data revenues deriving from SMS, the cut in termination rates and the recent roaming tariffs slash, it is clearer why mobile music and TV generate such buzz in the industry.