WhatsApp and LINE Take Aim at Mobile Carriers

whatsapp instagram facebook iphone

Mobile messaging services WhatsApp and Japanese rival LINE have recently announced new voice-calling features, and if one thing’s for certain, it’s this: mobile carriers aren’t happy about it.

Mobile messaging app WhatsApp unveiled its plans to start offering free voice-calling for its more than 450 million customers later this year in February, just days after being acquired by Facebook Inc. (NASDAQ:FB) for an impressive $19 billion. The company aims to have voice-calling available by the second quarter of 2014, according to a Reuters report.

Japanese messaging app LINE launched its own flat rate voice-calling feature, called LINE Call on Monday, expanding on an already existing feature. Voice-calling will debut on phones running Android in eight different markets: Colombia, Japan, Mexico, Peru, the Philippines, Spain, Thailand, and the U.S.; users must download the most recent version of the app to access the flat rate calling feature.

It’s hard to say just how big of an impact mobile messaging apps will have on mobile carriers long term, what is certain is that the rise in messaging apps is draining revenue from telecom companies. Thanks to WhatsApp’s recent acquisition by Facebook, mobile carriers can look forward to a revenue cut of approximately $32.5 billion, according to a recent Mashable report. By 2016, that number will likely rise to more like $50 billion.

As more and more messaging apps unveil voice-calling features, rival apps are facing pressure to add the feature as well, in order to attract and maintain users. LINE added the feature in order to better compete with Skype and Google for their inexpensive, in-app calls, which utilize mobile data rather than a user’s minutes, according to TechCrunch.

WhatsApp and its rivals like Korea’s KakaoTalk, China’s WeChat, Japan’s LINE and Viber — which is based in Las Vegas — and Cyprus have already won over telecom operators’ customers in recent years by offering a free alternative to text messaging. Who’s to say that it won’t do the same with voice-calling? It seems likely that mobile carriers ought to start bracing for further declines in revenue.

While mobile carriers’ revenues slide, mobile messaging apps seem to be growing in a big way. In 2013, rumors surfaced that Japan’s LINE is considering an IPO this year, along with other Asian messaging giants like Korea’s Kakao and Sina Weibo, which are both planning to list soon.

Mobile carriers have reason to feel threatened by the plethora of mobile messaging apps that have sprung up in recent years. Text messaging accounted for approximately $120 million of telecom operator’s revenue last year, according to a Reuters report.

WhatsApp’s revenue for 2013 clocked in at around $20 million, according to several media reports, and LINE made $156 million in revenues last quarter, with approximately $120 million of that stemming from its core product, the LINE messaging app, according to TechCrunch.

More From Wall Street Cheat Sheet: