Facebook as a phone company and what this means for Australian carriers

Intro – 60 second guide

Here are our findings on the recent news of Facebook as a phone company disrupting the industry with their WhatsApp application. There are more key details in the following article below.

  • WhatsApp and other disruptive technologies will be the future of phone calls for smartphone users in Australia.
  • While Australia’s three largest Telecom companies will loose revenue from traditional calling and texting, increased data usage is set to grow.
  • The increasing popularity of smartphone applications continues to chip away at traditional voice revenue and the national carriers are paying attention.

Why is WhatsApp the future of calls?

Facebook has long been known as one of the major tech companies which enjoy employing disruptive practices in the industries which it enters, much similar to the way in which fellow tech company Google operates.

You would never think to guess that one of the most disruptive technology companies in the history of Australian telecommunications was hidden away inside the head office of Facebook.

WhatsApp is just another application in the long line of emerging technologies, which are eating away at the market share of texts and audio messaging.

This is being done on a daily basis much to the displeasure of traditional service providers such as Telstra, Optus and Vodafone Australia.

At last count, it was reported by Facebook, that WhatsApp has over 417 million users of which 2.5 million are right here in Australia.

For the major carriers, this must be making them worry, due to the lost revenue as users of WhatsApp and similar technologies like Skype are changing the way in which users make calls and send texts.

The WhatsApp voice calling service

Competition in the Australian telecommunications industry is only going to get more fierce as WhatsApp plans to introduce voice calling to their application, to compliment the already disruptive text and audio messaging features.

Back in February WhatsApp began testing by rolling out the feature of allowing selected users in Australia to make and receive calls through the application.

This feature has now been rolled out to all users on the WhatsApp platform, allowing users to make and receive calls through their phone, without the need to use their smartphones calling feature.

While data costs will apply and the Telecom’s will make money from that feature, if a user makes a call over WiFi then there will be no charges as it will be free.

Smartphone Apps are the future of calls

Many Australian users already enjoy using free Applications on their smartphones to make and receive calls such as Skype, Apple’s FaceTime and Viber, so WhatsApp is just another (although extremely popular) in the long list of available applications.

The difference with WhatsApp in comparison to the previous different App choices is the call speed and connectivity. All of this makes for a quality calling experience all while being free if done over WiFi or in most cases cheaper than a standard call, even when done over mobile data.

This has got to be troubling news for the large carriers Telstra, Optus and Vodafone Australia, as they traditional business models, while changing slowly, still heavily rely on the revenue generated by users making calls and sending SMS messages.

On average, the revenues generated from traditional voice minutes are falling across the board as more and more consumers are realising that they can get a better deal by using emerging technologies such as WhatsApp and Skype to remain in contact with their friends and family.

At the same time, the Telecom industry can’t be complaining too much as data usage on average is growing at a rate of 8% per year, resulting in increased revenues even at the same time their traditional calling revenues are dropping.

From the Telecom’s perspective though this is frustrating as mobile data allows them to tap into enormous growth, but it comes with the downside of tighter margins in an industry that is already highly competitive, especially with all new MVNOs entering the already shrinking market each year.

Mobile data set to increase revenues

Mobile data and the popularity of smartphone apps is eating away at traditional voice calls revenue and the major carriers are paying attention.

Prepaid plans on offer by all the three main carriers and those by the much more competitive MVNOs are increasing their monthly mobile data allowances to stay competitive.

In a tight market service providers have no choice but to increase data, as this is what their users want and expect, as smartphones become used for much more than just sending texts and making calls.

With the continual decline in margins on SMS and voice, Australian carriers may be eventually forced to focus more on their prepaid and data only SIM plans, which they currently offer for tablet and handheld device users.

Data revenues are bound to increase year on year, that much is given, but Telstra, Optus and Vodafone Australia can no longer rely on revenues generated as they did back in the old days, of which are long gone.

In Summary

Over The Top (OTT) messaging services like WhatsApp and others will continue to grow in popularity while infuriating Australian mobile service carriers.

While it’s true that Telstra, Optus and Vodafone Australia will be experiencing increased revenues from the year on year increases in mobile data usage, they also have the ongoing costs of expensive infrastructure to maintain, which OTT services such as WhatsApp, Skype and Viber don’t have.

With the upcoming investments in 5G infrastructure and dark fibre, telecommunications companies will be looking to squeeze every penny to recoup their investments.

Emerging disruptive technologies provided via applications such as WhatsApp, will assist with increased data usage, and increased revenues. No doubt this will result in a long-term love-hate relationship with the major carriers.

 

Neil Aitken

Having worked in 3 countries for 4 telcos on both voice and data products, Neil is in a position to give you the inside track. Get beyond the marketing messages to the best plan for you.