OTT services are web-based ways of communicating that bypass traditional voice/SMS services. These apps are popular & growing rapidly in India ? WhatsApp (70m users; 30m in Nov13), Hike (35m; 15m in Feb14), Viber (33m) & Line (30m). WhatsApp currently has ~70% penetration amongst smartphone owners in India. Popularity of OTT messaging apps can also be highlighted from their ranking in India (on Google Play) based on downloads (WhatsApp ? 1, Facebook Messenger ? 3, Hike ? 20 & Viber ? 27).
SMS as % of rev (GSM) fell from 9% in Dec11 to 3% in Jun-13 but has remained there for the last 5 qtrs; drop rate in no. of SMS sent too has lowered. The subsiding trend comes when rate of OTT app downloads is high. This could be due to early adopters (heavy SMS users) having already migrated. While the overall trend will still be declining rev % from here, pace should be moderate (Airtel's SMS rev % fell 0.2% in last 2 qtrs v/s 1.1% in prev. 2).
Impact on local voice is unlikely to be meaningful in the near term 1) already low tariffs, 2) 3G coverage still inadequate (telcos focusing on top 4-5 cities/circle), & 3) rising 3G utilization (with low spectrum allotment) will start to hurt voice quality on an IP network. Roaming will get hit though some impact has already been felt (6% of rev; down 2.6% in the last 6qtrs).
