China Mobile's short message services fell to 46.5b yuan last year from a peak of 53.6b

Short message services, which once experienced explosive growth in both revenue and volume in China, have now almost exhausted their potential after a more-than-decade development.

Launched in China in 2000, the services quickly became popular among most mobile phone users. Chinese people loved to send greetings, express their concerns, swap information or tell jokes via short words on cellphones.

During holidays, especially the traditional Chinese Spring Festival, millions of people will exchange blessings via text messages with family members, close or long-lost friends. More than 30 billion short messages were sent from Chinese people during Spring Festival this year.

From 2000 to 2008, the volume of short message-sending over the network of China Mobile Ltd, the nation's biggest telecoms carrier, rose to 607 billion from a mere 500 million at the very beginning. However, the rapid growth has dramatically slowed in the past three years. With a little year-on-year increase, the number of short messages sent via the China Mobile network reached 736 billion in 2011.

China Mobile's revenue from its short message service fell to 46.5 billion yuan ($7.3 billion) last year from a peak of 53.6 billion yuan in 2009. Shen Hongqun, deputy manager of China Mobile data business department, said wireless data traffic has replaced short message services to become the biggest revenue source for China Mobile's data business in the first half of the year.

Instead of a short message business, Shen said: "Wireless data traffic, applications and information services could be the most important parts of China Mobile's data services business in the future."

Ted Chan, partner of the Boston Consulting Group, said the rapid development of short message services in the early years was largely due to it being highly cost effective. "Back then phone services were still relatively more expensive (0.4 yuan to 0.6 yuan a minute), while operators charged 0.1 yuan for a short message," Chan told China Daily by email.

"The short message service was quite a cost-effective way to communicate, especially when you just need a quick reply and do not want to disturb others," Chan said.

But as the smartphone penetration rate lifted in China, together with advanced 3G and 4G mobile technologies greatly improving network speed, more cost-effective services, including instant messaging tools and Weibo, have distracted customers from short messages.

"The short message services and voice services users are migrating to data and the market will be dominated by data in the coming years," said Ning Wright, partner of KPMG China. The trend will change end-users' behavior. They are willing to pay more money and spend more time on data related services such as mobile music, mobile gaming and mobile instant messaging services, she added.

In addition, compared with other innovative mobile applications, short messages are very basic in terms of display and cannot send any attachments such as photos to share. "Relatively speaking, short message services cost more than other web-based applications, which are mostly free," Wright said.

Looking into the future, analysts said the short message business in China, if it remains in its current format, will face a steady decline.

"One of the ways to slow down the drop in demand for short message services is to offer them as an add-on package to voice services either free of charge or at a very low cost to attract customers with low spending power," Wright suggested.

Ge Changwei, from the marketing department of China Mobile's Zhejiang subsidiary, argued in his microblog that it would be better for China Mobile to give up promotional activities on short message services. "It is impossible to really push the short message business with simple promotions because the service has fallen into a recessive phase," he said.

Ge suggested reducing the favorable packages that have free short messages or abandoning super low short message service offerings. "We'd better secure revenues from short message services rather than hand out further promotions," he said.

shenjingting@chinadaily.com.cn