SMS Payday: Carriers Cash In On Mobile Messaging

Teenagers around the world love Short Message Service text messaging. Some businesses here and overseas are beginning to make use of it, too. But the biggest fans of mobile messaging may be telecommunications carriers, which hope to cash in on SMS in a big way.

SMS may be dirt cheap, but on most mobile plans, it isn't free. Carriers generally charge a premium of several cents for every message sent. If you have a customer base of tens of millions of people, and some of them send dozens of text messages a day, those pennies really add up.

In 2003 alone, SMS will produce more than $1 billion in revenue for carriers in the United States, according to the Yankee Group. By 2007, the messaging technology will contribute more than $2.5 billion a year.

AT&T Wireless views SMS as a top priority and wants to encourage its customers to use it more frequently. Thanks to awareness-raising promotions with TV shows like American Idol, the company at the end of June had 4 million users who were sending more than 30 messages a month.

During the recent Major League Baseball playoffs and World Series, Fox Sports invited viewers to become "virtual managers" and send messages on players and strategy via E-mail and SMS. For the first time, all the major cellular carriers cooperated to make the system work for all users, and twice as many messages were sent from phones as were sent in via E-mail.

Carriers plan to forge similar partnerships with other TV shows and content providers because they often charge customers even higher fees to send an SMS vote to a TV show.

Overseas, SMS fees and services are so lucrative that European carriers now collect as much as 20% of their revenue from data services.

"SMS has been fantastic," says Kent Thexton, chief data and marketing officer for U.K.-based mobile operator mm02 plc. Some 60% of the company's customers are heavy text-messaging users, sending more than 80 messages a month.

But SMS is just the beginning. Text messaging can introduce users to other mobile-data services, which are all premium services for which carriers charge even more money. "This world starts with text," says Thexton. "If you get [customers] comfortable using that, you can get them into a whole range of data services. Text clearly is a killer app."