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July 10, 20222 min read

Mobile Operators Can Start Growing Their A2P Business Today

It is widely recognized today that the enterprise A2P messaging market is a large and fast-growing sector. SMS is the most effective communication channel used by enterprises to communicate with their consumers. Many may be unaware of SMS’ significance or think it is declining, when in reality, quite the opposite is true. Thanks to years of innovation, investments, and partnerships across the telecom industry, SMS is the only universal and standardized messaging platform. A2P messaging has rapidly more than offset the decline in traditional P2P messaging, making SMS an emerging industry again.

At Capacity Media’s Messaging and SMS World event held in June, Mobilesquared shared that even though the YoY brand spend on messaging grew by 50% over the last four years, the average number of emails per user a day is 32 times more than messages. There is still a lot of room to grow, considering that SMS is five times more effective in terms of open rates, speed of response, and security.

Whilst enjoying some of the market value, many Mobile Network Operators (MNOs) have not actively participated in the A2P market due to concerns around complexity, profitability risk, and resource limitations. Some of them want to run the messaging business in the same way as their voice business, i.e., managing their enterprise customers’ needs and commercial requirements, the relationships with other MNOs and carriers across the globe, and doing all of that with a small team of people. As a result, most rely on aggregators to manage this ecosystem, whilst monetizing a share through SMS termination fees, although margins on these messages can often be tight.

The good news is that a few MNOs have already proved that there are alternatives to address these challenges. During 2021, our customers experienced outstanding growth, noting between 22-29% revenue growth in A2P messaging. Most operators would be hard-pressed to find any other products or services able to bring this level of substantial and consistent growth with these margins.

Although no two MNOs are the same in terms of their subscriber base, network reach, or ability to sell to enterprises, the traditional roadmap consists of taking control of the business relationships and terminating more SMS messages on their subscribers. The next step consists of trading with key partners’ MNOs for the termination of the off-net SMS messaging traffic for enterprises. This will allow the MNO to start participating in the larger inter-carrier exchange of A2P traffic.