China VoIP OTT Set for Big ShakeOut as Tencent Weixin Goes Live

Mobile VASTencent recently added VoIP (Voice over Internet Protocol) to its standalone Weixin address book app “Weixin Dianhuaben“. This service enables users to make free calls (not including data traffic costs charged by the carrier) when connected to the internet (Wi-Fi or cellular data). The new product claims to support high quality voice calls. In the absence of a Wi-fi network, the service simply shifts back toanormal telephone call, with normal charges assessed. The app also includes voicemail functionality, real time address book contact back up, Weixin contact profile picture import, group SMS and other features.

Is this new in the Chinese market ?
This product actually is not new to the industry. China Telecom launched Yichat (an IM app) with Netease in 2013 and China Mobile has had a Skype-like service called Jego. We however believe that this app could gain much more traction by leveraging Weixin’s large user base (Weixin/Wechat’s combined MAU of 468m as of Sep 2014). If successful, the VoIP product could further improve Weixin’s user engagement and establish unparalleled leadership in messaging social networking apps.

Globally, telecom Operators have been facing pressure from Mobile OTT Apps. First there were basic instant messaging services, which drew users away from the short message (SMS) offerings of the mobile companies. Now there are voice features which threaten the operators’ basic telephone services.

According to a recent report published by Juniper Research, voice and messaging traffic lost to OTT players such as WhatsApp, Facebook and Skype will cost network operators $14 billion in revenues globally this year, up 26% on 2013. China Mobile, for instance, may begin trials for data-based charges on short messages (SMS) in 2015. Text messages and multimedia messages are not charged per message, but on the basis of the data flow involved instead. With regard to the calling apps, though the telcos could capture some incremental data charges, the risks lie on faster decline in voice rev and slower than expected data rev growth.

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