PTA moves to declare corporate SMS a separate market

The Pakistan Telecommunication Authority (PTA) has proposed declaring ‘Corporate SMS’ a distinct telecommunications market and signaled that all cellular mobile operators (CMOs) may be designated as operators with significant market power (SMP) in the segment.

The proposal, unveiled, comes amid mounting complaints from banks, enterprises and service providers over what they describe as excessive corporate SMS tariffs charged by mobile operators despite the use of the same underlying network infrastructure that carries ordinary text messages.

According to the PTA, corporate SMS services have evolved into a specialised business segment used extensively by banks, fintechs, government departments and commercial enterprises for one-time passwords (OTPs), transaction alerts, promotional campaigns and public service notifications.

“Corporate SMS has emerged as a distinct product and service market with unique characteristics,” the consultation paper stated, adding that concerns regarding pricing, affordability, and potential anti-competitive conduct necessitated a fresh regulatory assessment.

Industry sources say the issue has become particularly sensitive for banks and digital financial service providers, many of whom depend heavily on SMS for customer authentication and security notifications. Rising messaging costs have translated into higher operational expenses across the financial sector.

The PTA’s preliminary assessment argues that corporate SMS cannot be easily substituted by over-the-top (OTT) platforms such as WhatsApp Business, email or push notifications. While such alternatives exist, they require internet access, smartphone usage and application installation, unlike SMS, which reaches virtually every mobile subscriber regardless of device type or connectivity status.

For sectors subject to regulatory compliance requirements, particularly banking and financial services, SMS continues to be viewed as a critical communication channel because of its reliability, ubiquity and security-related functions.

The regulator noted that enterprises also face significant switching costs due to the integration of SMS gateways into their operational and authentication systems, reducing the likelihood that customers would migrate to alternative communication channels in response to price increases.

On the supply side, PTA found competition to be similarly constrained.

Although licensed Class Value Added Service (CVAS) providers and SMS aggregators offer enterprise messaging solutions, they remain dependent on commercial arrangements with mobile operators for final message delivery. Since CMOs control access to their own subscribers, aggregators cannot independently terminate SMS traffic without operator connectivity agreements.

“Any unilateral changes in pricing or access conditions by CMOs can directly impact competition in both direct and indirect Corporate SMS segments,” the consultation paper observed.

Perhaps the most consequential aspect of the proposal is PTA’s preliminary view regarding market power.

Under existing telecom regulations, an operator is generally presumed to possess SMP if it controls more than 25% of a relevant market. However, PTA argues that corporate SMS termination presents a unique scenario because each mobile operator exercises exclusive control over message delivery to its own subscribers.

As a result, no competing operator or service provider can reach a mobile subscriber without obtaining access to the relevant operator’s network.

The regulator therefore considers each CMO to effectively enjoy a “termination monopoly” for corporate SMS delivery on its own network, giving it a 100% market share within that specific segment regardless of its broader market position.

“Each CMO holds SMP in the market for termination of corporate SMS on its own network,” PTA concluded in its preliminary findings.

To support its assessment, the authority has directed all mobile operators to submit audit-certified data covering the period from January 1, 2023, to December 31, 2025. Operators will be required to provide average SMS rates and revenue figures for banking transactional messages, banking marketing messages and messaging services supplied to other sectors, both through direct enterprise contracts and SMS aggregators.

The outcome of the consultation could have far-reaching implications for pricing regulation, competition policy and enterprise communications in Pakistan. Market participants believe a formal SMP declaration could pave the way for PTA intervention in tariff structures and wholesale access arrangements, potentially reducing costs for banks, fintechs and other major corporate SMS users.