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The Good News and Bad from PSA’s 2019/20 Annual Market Review

Several insightful figures for the telecommunications industry have been revealed in the Phone-paid Services Authority (PSA) Annual Market Review for 2019/20. There have been positive indicators that show the market is growing, achieving 2.4% in growth over 2018/19.

 

The significant growth can be attributed to premium SMS messages that consumers spend more on to enter radio and TV competitions.

 

Results of the review

 

A growth of £646.1 million in 2019/20 was observed, according to the PSA’s Annual Market Review. While premium SMS messages are shown to be the main driving force behind this, a significant portion of the figure is also due to an increase in voice-based services and operator billing. This rose to £9.6 million, from a figure of only £4.6 million last year.

 

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The data in the report comes from a survey carried out between March and April 2020, which involved 9,601 consumers. The respondents were asked about their perception of the use of Phone-paid services. Interviews and insights were also taken from seventeen industry participants from different areas of the value chain.

 

 

Radio and TV engagement services have driven the growth in premium SMS spending. An organic increase in operator billing was also observed, although no large-scale new services were presented during the period. There were also no new agreements between large over-the-top (or ‘OTT’) players and mobile network operators.

 

Voice-based services using the ’09’ range of numbers also saw an unexpected growth for 2019/20. ICSS or ‘information, connection, and signposting services’ have been a big driving force behind this development. The PSA introduced new regulations this year, and an advertising ban imposed by Google also came into effect in March 2020.

 

However, services on ‘087’, and ‘118’ numbers declined. This is likely due to the availability of free channels or cheaper alternatives for the services they offer. There has been a lower spend on these premium numbers, and it was found that a number of businesses migrated to online channels or more affordable premium-rate numbers.

 

Industry forecast

 

Phone-paid services are expected to generate around £657.4 million in consumer spending during the 2020-2021 period. This represents a growth rate of 1.7% year on year.

 

Premium SMS spend is projected to fall, since broadcasters on radio and TV will find it hard to present new competitions. Nevertheless, TV competition spending could see a boost due to people staying indoors more amid the COVID-19 pandemic.

 

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The popularity of gaming and entertainment services will also mean more growth in operator billing. People are downloading more music services, which will contribute to higher spend for this channel, and video streaming will also play a role in the growth anticipated here.

 

Consumer spend on this channel will remain stable, but the anticipated increase in usage of such services due to the lockdown will bring the numbers up. Additionally, some mobile network operators have taken steps towards agreements with OTT providers, which will likely have a positive effect on the market in 2020/21.

 

End-user spending on voice-based services is expected to decrease, as has been the pattern in recent years. Consumer spending on ‘118’ services will also slow down in 2020/21, since the price cap set by Ofcom will be normalised during this period.

 

Charity donations

 

While the market grew overall in 2019/20, charity donations saw a decline after growing in 2018/19. Consumer spending on this channel was valued at £40.1 million, which is a decrease of 19.2% compared to the previous year.

 

This decrease can be attributed to telethons such as Red Nose Day only being held every two years. However, this figure is significantly higher (a 7% increase) than 2017/18, which can mainly be attributed to an increase in the spend cap per donation.

 

Charity donations via premium SMS messages will likely increase in 2020/21 because of the coronavirus pandemic. With many campaigns and fundraising events introduced, people might be encouraged to participate in such activities, resulting in higher consumer spending.

 

However, the industry also believes that this sudden rise could be coupled with a displacement effect by 2020/21. Households will likely cut back on donations after pouring in help earlier this year.