Singapore’s top two mobile operators SingTel and StarHub have made known today that they are taking the fight to WhatsApp, which has become the dominant messaging service in many parts of the world. Faced with declining revenues from SMS, both telcos are developing their own chat apps that they hope to launch within the next few months.
While the Today article is vague about SingTel’s plans, it reports that StarHub will be working with Vodafone to create an ‘interoperable’ service that includes instant messaging, video calls, and file sharing.
But here’s the problem: what StarHub has described sounds exactly like WhatsApp.
Sure, it would have been feasible to develop a WhatsApp killer one or two years ago, but the fact is that market conditions have shifted dramatically in one important way: They’re no longer battling against just Whatsapp or Vibe, but also Kakaotalk, Wechat, Line, and many others.
These competitors aren’t minnows. KakaoTalk has 95 percent market share in Korea and almost 30 million daily active users, Line is dominant in Japan, and WeChat is favored in China. While Southeast Asia remains an open field, it’s getting increasingly muddled as Kakao and WeChat are already deploying their troops here. There’ also the small matter of Facebook Messenger, which recently introduced free voice calls to its users.
Furthermore, assuming that both SingTel and StarHub have not started on app development (and it will take months to deploy one), both telcos may find themselves falling further behind in the sweepstakes for the untapped markets.
So, it’s a battle against time for traction, and given the nature of chat apps and how network effects come into play, first movers would have a distinct advantage.
What this means is that it’s foolhardy for StarHub and SingTel to build an app from scratch. With too many competing products already out there, finding traction would be immensely difficult. And given that their motivation to build a chat app is to stem the revenue decline coming from lesser SMS usage, it is more logical to acquire a mature, profitable chat app that is already occupying a niche in Asia.
Acquisitions not only cuts deployment time dramatically, it gifts these telcos instant market share in the mobile messaging space. They would also acquire expertise that they would need to integrate their own digital content ventures like mioTV and StarHub TV with the apps.
There is no shortage of candidates out there. SingTel has a quarterly net profit of around USD 759M, giving it the wherewithal to be ambitious and go for the biggest fishes in the pond.
Kakao, with a valuation of about USD 454M, is just slightly more expensive than Amobee, an advertising platform that SingTel acquired for USD 321M. Kakao is profitable, with a large chunk of revenue coming from its Game platform and virtual emoticon stores. There’s also, Viber, which at 140 million users (the author doesn’t say what kind of users), is well within SingTel’s reach.
It is anybody’s guess whether these telcos have made a serious play for these popular apps. Ruminating about an acquisition is easy, but negotiations can fall through should either party disagree with the terms. Nonetheless, given the large number of apps with millions of users out there, it shouldn’t be difficult to acquire at least a mid-tier company.
So, if SingTel or StarHub wants to build their own chat app, they’ll have offer something that’s truly different rather than adding to the noise by offering more of the same. One way to do it would be to create an API that links all the disparate apps together, resolving the fragmentation issue that is plaguing the market.
But given their track records at in-house app development, which have been underwhelming, I’ll be surprised if they manage to pull it off.
No doubt, both telcos should be lauded for trying to adapt to the shifting winds. But instead of steering the Titanic, they should be acquiring speedboats that have been running circles around the mobile operators.
SK Telecom, Korea’s largest telco, learnt this the hard way when it got blindsided by Kakao. Faced with the threat of becoming irrelevant, it acquired a mobile chat app and leveraged on the startup’s expertise to create a product with promising traction. It too is competing for market share in Southeast Asia.
It’s time SingTel and StarHub get a grip on reality before its too late.