VOIP iPhone App Viber will kill telcos sooner rather than later

VOIP iPhone App Viber will kill telcos sooner rather than later phone

I talk about this issue about investing in telcos in past article that in terms of usage, there will be a shift from voice to data.

The upside of Pingchat, WhatsApp and Skype

Web Services such as Skype, Whatsapp and Pingchat have slowly changed the way we communicate. It is so much easier to instant message your friends rather than SMS or call.

On PingChat, I group chat with 2 other friends and do not have to care whether they are there or not. Messages gets pushed to them. My 2 friends have iphone at work so they communicate on and off during office hours while I checked their messages at home on my ipod touch and respond accordingly.

The greatest part of this form of communication that Whatsapp and Pingchat promotes over MSN Messenger and the like is that, there is no AWAY or not available, as your friends are deemed always available since they have their smartphones with them most of the time.

Viber the free VOIP App

Viber right now is abit of a game changer. Its like Whatsapp only its to call between users.

According to Daring Fireball, here are its good features:

  • Initial setup is very easy. Your phone number is your Viber identifier. You launch the app, tell it your phone number, and a moment or two later they send an SMS to that same number with a code to confirm it. Enter the code in Viber and you’re done.
  • It works over 3G (and Wi-Fi, of course).
  • It’s designed as a replacement for, or at least an alternative to, the built-in Phone app. Call another Viber user and the call goes through Viber over IP; call a non-Viber user from Viber and it switches you to the iPhone’s built-in Phone app and initiates a regular voice call. The idea is you can always go to the Viber app when you want to make a call, regardless if the recipient is on Viber or not.
  • Incoming Viber calls work even when the app isn’t running, thanks to push notifications.
  • Call quality, even over AT&T 3G, is pretty good — far superior to actual phone calls. The poor audio quality of iPhone voice calls in the U.S. is shameful. A call to a friend in the Netherlands sounded great too — a few very brief glitches, but good sound overall and very low latency.

And whats bad:

  • Poor matching of existing phone numbers. The Viber app detects when your friends sign up for Viber by matching their numbers in your address book. But I had a friend (who signed up for Viber) whose contact entry in my address book was in the form “1 (###) ###-####”. The Viber app couldn’t identify him until I edited his phone number to the form “(###) ###-####”.
  • No custom ringtones — you’re stuck with the single default one Viber provides.
  • When you sign up for Viber, they send a push notification to everyone in your address book who has already signed up for Viber. I’m not sure it’s right to call this a privacy issue, per se, because it’s only sending notifications to people whose phone number you have and who have your phone number, but I’m opposed to any service that sends notifications to others on my behalf without my consent. And there is no way to turn this feature off.
  • As stated above, the Viber app attempts to serve as a replacement for the built-in Phone app — acting as a front-end for both Viber VOIP calls and regular cellular voice calls. But it’s not really a replacement for the Phone app — it can’t access your voicemail or your recent (voice) calls list. So you still need the Phone app.
  • You don’t pay Viber a cent for using it, but when you’re on 3G, calls using Viber count against your data plan limit. And, given that Viber is iPhone-only and AT&T offers free calling between AT&T users, it raises a question as to why you’d use it. (One answer: the audio quality really is far superior.)

What it means to telecom stocks like Singtel, Starhub, M1, China Mobile and Telefonica

Here is what I think:

  1. It will make data plans more popular. It makes it easier for telcos to sell such plans. Make no mistake, data plans will be more prevalent
  2. This cannibalizes existing voice plans. Think about it: out of a 40 buck plan you are paying 5 dollar for caller id, 15 dollar for additional data and 20 dollar for voice and sms. Essentially why would you need to pay for voice and sms in the future? look for telcos ARPU to fall.
  3. Although voip on data is only 60% of the data bandwidth compare to voice, if voip gets popular and everyone use smartphones, data transmission between cell tower and your phone will be pretty congested especially in areas like Raffles City and Orchard. This requires more capital expenditure. Cost for telcos up.

The end state is that probably more opportunities but telcos becomes worse off. What do you guys think?

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  • http://contestsinkie.blogspot.com Contestsinkie

    IMO, it will take a few years for most people to get used to VOIP even though it is “free”.

    There are still a substantial number of people that are not on data plans, and even more traditional uncles and aunties who are used to the usual way of making calls.

  • yyt

    I’m not too sure if ARPU will decrease to a significant extent for concern though.

    Here are some points for consideration.

    1. ARPU decrese will be offset by phone subsidy cost.
    e.g. Taking Singtel’s iFlexiLite($39/mth) and iOnePlus($25.68), both 100mins plans, an iPhone4 8Gb will cost $350 and $598 respectively. Singtel allows for recontract after 12mths. For simplicity, we ignore other cost (GST,etc)

    So you gain ($39-$25.68)x12mths=$159.84. But you’ll have to fork out $248 upfront.

    So even though ARPU decreases, the operators still has the ability to cover that decrease by reducing handset subsidy.

    2. Mobile operators can make it mandatory to purchase a voice plan first then a data plan when selling handsets. Pretty much like Starhub’s Cable TV. Base Package then whatever you wanna add on.

    3.It implicitly requires everyone to shift their paradigm and abandon your voice plan. As long as 1 of your friend is not using VOIP, you’ll still need to have a voice plan(unless you wanna lose this friend).

    Off my mind, for the guys, as long as there’s reservice and no camera phone allowed, voice plans will still be required.

    4. VOIP might be chargable in future.

    yyt

  • Drizzt

    very good analysis there yyt and i agree with all your points. VOIP chargable is a interesting point because at how much would they charge it? The bottom line is that when there are substitutes like Viber around i can op for a cheap plan to call via VOIP.

    Needs abit of experimenting

  • yyt

    The proliferation of smartphones could finally be the catalyst needed for mass VOIP acceptance and a lesser dependence on voice plan.

    I believe Google is in this fray too with it’s own GoogleVoice. http://www.google.com/voice
    Though not a local service (yet), it’s good news for consumers though, as competition like this is likely to bring more value-added services.

    Like what you’ve pointed out, it’s BAD news for telcos.

    I agree with you, it’s unlikely that VOIP services to charge for local calls. And with them around, smart consumers will most likely switch to VOIP to potentially reduce and limit their phone expense.

    Allow me to digress for a bit, if you’re talking about hurting revenues for local Telcos, I think the bigger enemy out there is the saturated market thus the undercutting of telcos to make themselves attractive.

    Based on your extensive knowledge of local telcos, what do you think is their greatest challenge moving forward?

  • Drizzt

    hi yyt,

    off my head it ranks this way

    Unable to further monetize to offset increase capital expenses => falling free cashflow
    commoditizing of service due to focus on smartphones rather than service
    VOIP essentially creates a very potent substitute for low cost calling

  • Drizzt

    another interesting point is that of google voice. i thought about this and any local competitor coming up with a google voice like service may work very well.

  • http://www.phototour.sg SE Lau

    Nice post about the telco industry. I did a small comparison on calling using Viber vs Voice plan. In fact Viber allows you to call for 10 000 minutes if you use all 12GB of your data plan to call base on estimation. Thats huge. I wrote it as a Facebook note. Check out the details here: http://www.facebook.com/note.php?note_id=173079686045445

    For those who don’t know what is Viber. You can see a demo here: http://bit.ly/ViberDemo

  • Big wide world

    ~~~given that Viber is iPhone-only and AT&T offers free calling between AT&T users, it raises a question as to why you’d use it. (One answer: the audio quality really is far superior.)~~~

    This may come as a shock to you but the rest of the world is bigger than the US or AT&T. We don’t all live in mud huts and communicate by smoke fires. Here in Singapore where many people travel regionally on a monthly basis this is a killer app.

  • Drizzt

    pretty true. many do not realize it is only in countries like US where the handset and telco tieups be very deterministic of service quality.

    here in singapore, if you not happy with one service you can easily switch over.

  • googgy

    how much was put into developing Viber?

  • Bob

    With Viber introducing an IM function in Feb 2011, and being available on Android (in March 2011) and Blackberry (sometime soon) is Whatsapp’s days numbered? Surely you won’t need both apps.

    Further, Viber is free whilst Whatsapp is not. I also never understood the rationale for having a one-off charge of US$0.99 for iPhone, and US$1.99 per year for Android, BB, Nokia. Why segment your customer market in such a manner?

  • Drizzt

    it is indeed puzzling bob but really i think Viber’s free model might not be sustainable.

  • jonnyBgood

    i think viber will model itself after skype i.e. charge for non-viber-2-viber call, and yes, surely it will kill off whatsapp unless whatsapp responds with voice capability, and overtime kill off skype as a mobile number as ID sure beats having to ask around for a skype ID. Can’t wait for viber on android to be released. Must be less than a week now?

  • Drizzt

    hi jonnyBgood, the craze currently is group messaging and i think these companies are finding their feet in this crowded arena. viber may just fail because they do not have as good a strategy as skype.

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