The nature of messaging has changed significantly in the last decade. OTT messaging platforms like WhatsApp and Facebook Messenger dominate in some markets, while others use services such as Viber, Zoom, Snapchat and Skype all play a role in how people communicate.
When experts say SMS messaging is also a growing market, it may seem counter-intuitive, given the expansion of alternatives on offer, but it is on the enterprise front where SMS is seeing a lot of growth.
Business messaging or application-to-person (A2P) has grown into a global market worth an estimated $26.5 billion in 2022 and is predicted to reach $38 bn in 2025, according to MobileSquared. With only 5% of companies using SMS A2P, business adoption of messaging is still in its infancy but is starting to surge as organisations come to realise that business SMS can become a key revenue generator for mobile operators.
When you think about it, this makes sense. When you conclude a food order through Deliveroo, or when you’re waiting on a package from Amazon, the provider will send you an SMS confirming the order. Everything from gyms to banks use application-to-person messaging to keep in touch with customers, or confirm identities.
For telecoms provider Tofane Global, SMS offers a real opportunity to expand its portfolio of services.
Founder and CEO Alexandre Pébereau was formerly head of Orange’s international carrier division, looking after the French telco giant’s global connectivity footprint. But during his 11 year stint with Orange, Pébereau found that messaging was not a key area of focus, despite the growth potential of the market.
“Voice was neglected, and we saw an opportunity there when we launched Tofane and bought iBASIS,” he explains. “Many of the innovations in wholesale have come on the IP side or in voice, but we don’t necessarily see the same resources from the larger operators but into SMS. And that provides an opportunity for us to work with those players and enterprises.”
It is with that in mind that Tofane and subsidiary iBasis, the wholesale operation Tofane acquired from Dutch national telco KPN in 2019, reached a deal to acquire global SMS aggregator Dimoco Messaging for an undisclosed amount. The deal was signed at the end of last year, but announced in January.
Speaking to TI, Pébereau said the company’s seventh acquisition would help its mobile services contribute around €100 million to the company’s revenues this year – about 20% of its total revenues.
He explains: “Tofane established itself as the first independent leader through acquisitions in international voice. We are replicating our model in the similar but high-growth Business Messaging sector to build our second pillar. By adding Dimoco Messaging and its senior team, we are boosting our growth path to become the preferred Tier One partner for our customers in mobile services.
“New services are growing at 20-30% a year and are becoming meaningful for all our activities.”
Based in Liechtenstein and Austria, Dimoco delivers around two billion messages per year. Following the acquisition, it will sit under Tofane’s iBasis unit, enhancing its carrier-grade network infrastructure by adding more than 100 direct connections to mobile operators worldwide, boosting speed and reliability for message termination. It also expands the company’s reach to include Liechtenstein, Austria, Germany, and Serbia.
More importantly, perhaps, is it gives iBasis direct access to the enterprise market segment where Dimico already has an established sales force which allows it to serve large financial institutions, through its SMS Application Program Interfaces for system integration, APIs for rapid onboarding, and SMS campaign deployment.
“We can deployed firewalls to make sure that messages are delivered safely but paid at the right price. For SMS for a very long time, it was not an issue. SMS was sold, to the OTTs or citizens or to the banks, and the aggregators would revert to operators for zero or very small money. But the price of SMS across Europe is increasing (due to A2P demand increasing) and so is the value.”
For A2P messaging, one challenge is other systems that offer similar services like two-factor authentication, such as online authentication tools, or OTT messaging apps like WhatsApp. But, according to Pébereau, this is not a problem, due to the universal nature of SMS messaging.
“The problem with OTT platforms is once you use them, you are in their ecosystem,” he tells TI. “Once an enterprise signs up with WhatsApp, it is stuck using WhatsApp and not everyone has access to it. You are not in all of the world, you are in the world of WhatsApp or Messenger.
“With SMS, due to aggregation services, you have greater global reach as well as security and a proven track record of delivery.”
So what next for Tofane/iBasis? As a company who has never shied away from an acquisition, Pébereau acknowledges that more purchases could be on the cards.
“We are regularly reviewing acquisition opportunities, but as we are very disciplined on the delivery of our M&A strategy, we have yet to find the perfect match in terms of getting the right business run by the right team, and at the right valuation.
“If we can find a company or service that will complement our existing offering, whether that be in mobile, in IoT or in messaging.”
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