TMCnews Featured Article

If you’re trying to protect the revenue of mobile operators, the rise of WhatsApp, Line and others such as WeChat is not a good sign. Nor is the impending purchase of over-the-top (OTT) communications market-leader, WhatsApp, by social media juggernaut, Facebook (News - Alert).

The cash cow for mobile operators has long been SMS and voice minutes. But OTT services such as WhatsApp directly cannibalize this revenue, allowing consumers to send SMS and make calls through the data portion of their mobile subscriptions and bypass the lucrative SMS and voice minute subscriptions mobile operators rely upon.

Research firm Ovum (News - Alert) estimates that services such as WhatsApp have cannibalized SMS revenue by more than $32.5 billion globally in 2013 alone.

Recognizing this OTT trend, Facebook wants to make sure that it has a controlling piece of the action. That’s why it has plans to purchase WhatsApp, and it is now working directly with important governments to ensure that its acquisition will be able to continue plying its trade after the purchase.

Instead of waiting for potential regulatory and anti-competitive concerns, Facebook has taken the noteworthy step of reaching out directly to the European Union (EU0 and U.S. government about any potential objections they might have to the purchase of WhatsApp.

The U.S government has already given the go ahead for the acquisition, and Ovum predicts that the EU also will not object.

By going directly to the EU, Facebook hopes to address any concerns at a macro level rather across multiple markets within Europe.

“Ovum does not expect the deal to face much trouble due to this investigation but expects further guidelines around personal data protection for WhatsApp users,” noted Neha Dharia, a senior analyst for consumer services with Ovum.

The issue that might give the EU pause is the impending rollout of voice calling on the WhatsApp network. The company has plans to let its 600 million subscribers start making voice calls with the service some time in the fourth quarter, and this could have a big impact on operators.

For countries that want to control voice and SMS traffic or protect national telecom firms, the mix of WhatsApp and Facebook with voice calling could raise some objections. It will be hard for mobile operators to avoid having their margins cut if a Facebook-owned WhatsApp starts taking OTT calling mainstream.

It will be hard for countries to permanently forestall the rise in cheap calling and SMS through services such as WhatsApp, though; voice and SMS communications is getting pretty easy to roll into services, and consumers are growing to expect it.

So even if the EU takes issue with the latest moves around WhatsApp, it probably can only slow down the evolution of communications and not halt it.