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The answer to plummeting revenues and deteriorating relationships with end users in the fixed-line telephony market could possibly lie with the mobile industry. Efforts to emulate mobile functionality - in particular, to replicate the success of mobile SMS and develop fixed line messaging - could signal the comeback of fixed line operators.

The successful deployment of fixed line SMS is likely to set the stage for advancement of the fixed line MMS market as well. However, several challenges stand in the way of both markets achieving their full potential. For instance, while fixed line SMS and MMS have good technical functionality, it is the go-to-market approach taken by device manufacturers and operators that is expected to determine their future.

"The realisation of attractive revenues for both services relies on the fixed (and indeed mobile) operators' ability to define a set of unique service offerings and value propositions for the most appropriate target segments," notes Nathan Budd, Associate ICT Consultant at Frost & Sullivan. "Furthermore, it is the communication of these offers through the appropriate marketing vehicles that is likely to develop the initial market for the service."

While it is unlikely that fixed SMS will turn out to be a killer application and account for the bulk of the total SMS market, it does however mark a positive fight back by fixed line operators. Learning from past mistakes, operators have focused on building on the strengths of fixed line SMS service.

At present, fixed SMS has developed impressively into a niche service with optimistic growth indicators. Frost & Sullivan estimates the growth of fixed SMS traffic at between 15 and 20 per cent per month with subscriber numbers increasing on a similar scale. Western Europe is now thought to have almost three to five million active fixed SMS subscribers with many of these subscribers sending two to three messages a month. Moreover, several operators have already defined a heavy user base segment that averages 8 to 10 messages a month.

"The market has experienced the successful deployment of premium rate voting and application-based fixed SMS services. This continues to show signs of growth and is forecast to represent a significant proportion (20 to 30 per cent) of the revenues for the fixed SMS service in the next three to four years," adds Mr Budd.

Other positive trends include the commercial availability of a range of SMS (soon to be followed by MMS) enabled devices and the establishment of interoperability between a number of fixed, mobile and international networks. Driven by these trends, revenues are forecast to soar from about EUR 14 million in 2003 to nearly EUR 470 million in 2008.

As fixed operators begin to make gains in the fixed SMS market, the market for fixed MMS is expected to follow suit. Telecom Italia and Deutsche Telekom have already deployed fixed MMS services at the start of this year, with other European incumbent and alternative operators accelerating plans to utilise MMS technology in the fixed environment.

"Core issues that are expected to dictate success in the fixed MMS market include interoperability, pricing, quality, reliability, user groups, value proposition creation, application generation, handset adoption and marketing," observes Mr Budd. By resolving these issues, Frost & Sullivan estimates market revenues to be over EUR 600 million by 2009, with a real capacity to generate even more.

Ultimately, two areas are expected to be critical to the successful development of the fixed SMS market - the rollout of new handsets to maximise the number of users and the integration of the service within the mobile environment. Promoting interconnectivity with the mobile industry through a mutually beneficial framework for both fixed and mobile operators is likely to undeniably aid in market development.

Determining strategies to tackle more variable issues such as service design, pricing, distribution and channel strategy are also expected to be key to the success of fixed line operators.

If you are interested in a summary of this research service providing an introduction to fixed line SMS and the migration to multimedia messaging, please send an email to Kristina Menzefricke, Corporate Communications at kristina.menzefricke@frost.com with the following information: full name, company name, title, contact telephone number, email. Upon receipt of the above information, the summary will be emailed to you.

Title: Fixed line SMS and the migration to multimedia messaging
Code: B334

Background

Frost & Sullivan, an international consultancy firm, has been supporting clients' growth for over four decades. Our market expertise covers a broad spectrum of industries, while our portfolio of advisory competencies includes strategic consultancy, market intelligence and management training. Our mission is to work with our clients' management teams to deliver market insights and to create value and drive growth through innovative approaches. Frost & Sullivan's network of more than 500 consultants, industry experts, corporate trainers and support staff spans the globe with 19 offices worldwide.

For further information, please contact:

Kristina Menzefricke
P: +44 (0) 20 7343 8376
E: kristina.menzefricke@frost.com

Published on: 12:00AM on 6th May 2004