3 Telecom Companies Exposed to New Texting Apps

Brittney Barrett |

The number of text messages being sent by wireless customers has notched steady growth essentially since the service began. Earlier in the month; however, Analyst: Text Messaging Decline In U.S. Threatens Carrier Profits

UBS analyst John Hodulik revealed that trend is edging to a close.  In the first quarter of 2011, the number of texts being sent by subscribers fell sequentially, bucking a trend that began almost a decade ago. Hodulik, came to this conclusion using the data from based his from three major U.S. carriers, AT&T (T), T-Mobile USA (DTE)and Verizon Wireless (VZ) as well as estimates from the wireless trade association CTIA and UBS.

Published in a research note to investors, there was indicated to be around 10 percent universal growth in domestic text messaging for the first three months of the year, down 6 percent from the final quarter of 2010 and 22 percent from the fourth quarter of 2009.  In the last quarter of 2008 growth was 116%. Hodulik’s findings point to an obvious trend; the market appears to be saturated and these telecom companies will gain increasingly few new subscribers. What it ignores is the emergence of these facts in time with many cloud messaging services and apps that although messaging to become easier, more direct and in most cases totally free.  The latest company to unveil a program like this was Apple (AAPL), via their new cloud computing services. Apple is known for increasing ease and convenience while erasing the lines between one tech device and another. The release of the cloud computing service and its imitators could mean considerable profit declines for telecom companies beyond what the initial decline would imply.

These declines would be exacerbated by the growing number of smartphone users in the coming years. Today, smartphones account for around 40 percent of all mobile devices, over the next three years; however, around 75 percent of handset devices will fall into the category of smartphones. While it’s difficult to project the number of smartphone owners that will download and use third-party apps as their primary messaging services, the number could at least be predicted to cut revenues for service providers, like Verizon Wireless, At&T and T-Mobile. After all, texting represents around 25 percent of EBITA for these companies a revenue source that may be unable to comptete with the real time offerings and embedded photo options offered by the emerging third party services.

Because many cell phone users pay for their text messaging services month-to-month rather than by message, the trend in text message count won’t immediately impact revenues. As the cloud computing services prove capable as stand-ins for traditional texting; however, and the number of smartphone users climbs cell phone carriers will be exposed to losses.

messaging for the first three months of the year, down 6 percent from the final quarter of 2010 and 22 percent from the fourth quarter of 2009.  In the last quarter of 2008 growth was 116%. Hodulik’s findings point to an obvious trend; the market appears to be saturated and these telecom companies will gain increasingly few new subscribers. What it ignores is the emergence of these facts in time with many cloud messaging services and apps that although messaging to become easier, more direct and in most cases totally free.  The latest company to unveil a program like this was Apple, via their new cloud computing services. Apple is known for increasing ease and convenience while erasing the lines between one tech device and another. The release of the cloud computing service and its imitators could mean considerable profit declines for telecom companies beyond what the initial decline would imply.

These declines would be exacerbated by the growing number of smartphone users in the coming years. Today, smartphones account for around 40 percent of all mobile devices, over the next three years; however, around 75 percent of handset devices will fall into the category of smartphones. While it’s difficult to project the number of smartphone owners that will download and use third-party apps as their primary messaging services, the number could at least be predicted to cut revenues for service providers, like Verizon Wireless, At&T and T-Mobile. After all, texting represents around 25 percent of EBITA for these companies a revenue source that may be unable to comptete with the real time offerings and embedded photo options offered by the emerging third party services.

Because many cell phone users pay for their text messaging services month-to-month rather than by message, the trend in text message count won’t immediately impact revenues. As the cloud computing services prove capable as stand-ins for traditional texting; however, and the number of smartphone users climbs cell phone carriers will be exposed to losses.

 

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Companies

Symbol Name Price Change % Volume
DTE DTE Energy Company 93.05 0.00 0.00 2,833
EXTN.W Exterran Corp n/a n/a n/a n/a
T AT&T Inc. 40.73 0.00 0.00 696
VZ Verizon Communications Inc. 52.12 0.00 0.00 787

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