TRAI (Telecom Regulatory Authority of India) has asked the mobile operators to limit the number of SMSes to 100 per day for each subscriber. While this is aimed at reducing the number of spam massages sent by unauthorised telemarketers, this is likely to impact the SMS volume and therefore the profitability of operators who can increase the prices to compensate for their losses.
Although operators insist that there will be no major impact on the SMS tariffs due to the ban but it will be difficult for them given the tight margins that they operate in, which has in recent past lead to increase in prices of call rates and SMS alike.
One of the executives of a leading telecom operator on condition of anonymity said, “The volumes will definitely take a hit, however it will impact the new players more than the older ones. As SMS revenue are a very small part of the revenue for larger well established players. But then new operators’ ability to survive with a price hike is very limited and therefore even they will wait for the larger operators to hike prices.”
Rajan S Mathew, director general, Cellular Operator Association of India doesn’t believe that there will be any impact on pricing. “All though volumes will definitely take a hit, the cost implication will be very minimal and will not reach retail subscribers. In fact we have already communicated to the TRAI that this move is not going to be beneficial for anyone in the eco-system as the unscrupulous elements that send out spam massages will end up buying more connection to continue to send these spams, and only the end consumer will suffer,” he said.
There are two three things that needs to be considered here, one on a day to day basis very few consumers will realise that there is a limit as most users do not send even 50 massages a day.
The impact will be felt during the festivals and special occasions when most people send a lot of SMSes to wish their near and dear ones. And the impact on the operators will also be the highest on these days as the discounted rates are not applicable on these days and therefore they earn a lot of profit. And since, they will not be able to make as much profit, they will be forced to profit from other days by either increasing the SMS rates or making the discount vouchers costlier or reducing the number of free SMSes that users get with special vouchers.
What can help prevent this hike is that fact that the registered telemarketers are still free to send as many massages as they want but only to people who have opted for promotional SMSes. And since the volumes here are huge, it might be able to absorb the impact from the reduction in retail user generated volumes.
However, any of this is a long term game and the impact will only be felt only after some time when operators have ascertained the kind of impact this regulation has on volumes.