SMS market faces slowing growth

  Investors were unhappy when China Mobile decided to set the price of sending an SMS message at 0.1 yuan (1.2 US cents) several years ago.

  "I had to avoid meeting investors in our listed firm," recalled Lu Xiangdong, deputy general manager of China Mobile Communications Corp, the parent of the listed firm China Mobile (Hong Kong) Ltd.

  "They went after me and asked why we set such a low price?" Lu said the price of sending SMS in the Chinese mainland was the cheapest in the world. At that time, sending an SMS message in Hong Kong cost HK$2 (25.6 US cents), which later dropped to HK$1 (12.8 US cents).

  "Now I can say some consumers might think our price is still expensive," Lu said.

  The later runaway success of SMS in China, largely fuelled by the low-prices, took most investors and even China Mobile by surprise.

  In 2002, about 90 billion short messages were sent via mobile phones in China.

  That number jumped to 217.7 billion last year, according to the Ministry of Information Industry (MII).

  "That is an astronomical number. Frankly speaking, our initial idea was just to replace the beeper with the mobile phone," Lu told the launch ceremony of a joint SMS business centre last month.

  Among China Mobile's more than 200 million cellular users, 75 per cent send an average of more than 100 SMS messages every month.

  Slowdown What was also unexpected is that the growth of SMS in the country is now losing momentum, with an even greater slowdown expected in the years to come, according to analysts.

  That is pushing operators and mobile service providers to find ways to spur SMS growth and search for other profit engines.

  The number of SMS messages sent in China last year grew 58.8 per cent year-on-year, said the MII, but it did not give a comparable figure for 2003.

  But based on the earlier statistics not fully confirmed by the MII, the number in 2003 stood at 220 billion.

  If it is the case, it represents a fall in SMS growth.

  And the number of SMS messages sent last year largely fell short of many research houses' forecasts.

  Beijing-based Analysys International had predicted the number of SMS messages could hit 300 billion.

  And the Chinese Academy of Telecommunications Research under the MII was even more bullish. The academy had forecast the number could more than double to 550 billion in 2004.

  In total, in addition to those sent via the limited mobility PHS (personal handy system) networks, the total number of SMS messages in 2006 was forecast to hit 1.4 trillion.   

  But such forecasts are apparently overly optimistic.

  "I believe the SMS market will experience very flat growth this year," said Wang Yuquan, president of consulting firm Frost&Sullivan (China).

  However, "SMS has become a major communications tool for Chinese people, and SMS will remain a major profit engine for wireless value-added service operators," Wang said.