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Mobile operators could be in for a shock - if the latest research from Forrester is correct. The firm predicts that European SMS (short message service) revenues will start to stagnate as early as 2004.

Having spoken to around 20 mobile operators in Europe, Forrester concludes that they need to tap this market to its full potential right now, before it stagnates and prices are driven down in 2004 and beyond.

Currently, it is estimated that mobile operators are gaining an average of 11 per cent of their revenues from SMS operations. This is off the back of more than 156 million text message per month - 89 per cent of which are perso-to-person SMS and 11 per cent of which are application to person messages, for weather and sport updates for instance.

This is set to change. By 2004 - Forrester believes - there will be a rise of more than 14 per cent in SMS activity, taking monthly totals to approx. 11.5 billion text messages per month. This will be the peak of activity. Beyond 2004 and up to 2007 volumes are expected to decrease, down to 11.1 billion, as new technologies such as MMS (multimedia messaging service) and Instant Messaging technologies start to take hold in the mobile space.

For the operators this is bad news. During the peak of SMS activity, which is predicted to generate as much as 19.6 billion Euros in 2003, operators will see SMS revenues contributing to as much as 47% of total messaging revenues. But after this, premium prices for text messaging services will fall. In 2007, Forrester predicts, SMS revenues will fallen to € 11.8bn.

Currently the average cost of a text message is running at 0.12 Euros. By 2007, this will crumble to a more modest 0.07 Euros, a drop of 41% from 2002.

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