FEBRUARY 2024

SAFEGUARDING THE
LONG-TERM FUTURE OF
INTERNATIONAL SMS

IN ASSOCIATION WITH
 C NTENTS
Executive Summary 3

Positioning Statement 4
Recommendations from Contributing MEF Members 4

So What is Artificial Inflation of Traffic (AIT)? 6

The Ideal AIT Market Conditions 7

High International Termination Rates 7
Structure of Exclusivity Agreements 8
Authentication Use Case 8

What The Mobile Network Operators Say 9

What The Brands Say 10

Impact of AIT on Messaging Ecosystem 12

About 16
The Contributing MEF members 16
EXECUTIVE SUMMARY
1. Mobilesquared has identified 50 “at-risk” markets where significant increases to
international termination rates are attracting excessive levels of fraud.
a. The at-risk markets are primarily in Asia, Africa and the Middle East.
2. Brands are no longer willing to bear the increased costs associated with the delivery of
international authentication messages (such as one-time passwords – OTPs) in these at-
risk markets.
a. As the overall spend is not driven by transaction volumes but rather by abnormal rates
increases, the spend itself cannot be justified.
3. The high international termination rates are attracting growth in fraud, and Artificial
Inflation of Traffic (AIT) fraud in particular.
4. The combination of high international rates and AIT a secondary factor, is potentially
jeopardising the long-term future of international A2P SMS in these at-risk markets, where
brands are looking to restrict their spend on SMS business messaging.
5. A number of at-risk markets have now experienced a decline in international traffic up to
50% in the last 4 months; this will extend to more markets unless this risk is tackled.
6. Major brands believe high international rates and AIT fraud has made SMS a damaged
channel in selected markets, irreparably so in some brands’ view.
7. Mobile operators believe they lost $4.7 billion in revenues in 2023 (separate from grey
route fraud).
8. The availability of new (and cheaper) verification channels is placing additional pressure on
A2P SMS in at-risk markets.

Source: Mobilesquared ASPIR report, issue 2

POSITIONING STATEMENT
High international SMS rates in identified at-risk markets where authentication is the
dominant use case, coupled with the accompanying increase in AIT fraud, are placing
increasing pressure on brands and forcing them to exponentially and unjustifiably increase
their spend on A2P SMS. The brand response is to limit their use of SMS in at-risk markets,
and expedite their migration of traffic to alternative channels and solutions. The high SMS
rates are having a damaging impact on international A2P SMS, and if measures are not
agreed and implemented immediately by the messaging ecosystem to redress existing
market conditions, the delivery of authentication use cases over international SMS could
disappear.

RECOMMENDATIONS FROM CONTRIBUTING MEF MEMBERS

a) Mobile network operators (MNOs) and aggregators operating in at-risk markets to review
their A2P SMS strategy, including:
I) Introducing stable and reasonable pricing equal to market demand on a long-term model
i.e. no price shocks within a budgeted year.
II) Review prices where AIT might have distorted reality.
III) Review exclusivity agreements to introduce sound bidding mechanisms based on realistic
traffic volume commitments and realistic pricing as per current market demands.
IV) Incentivise the messaging service providers to provide a high and reliable quality of SMS
service.
b) Implement solutions to stop AIT:
I) Enterprises:
Protect their authentication services on web forms and apps, to avoid AIT fraud at origin.
II) MNOs:
To apply an A2P SMS pricing policy accounting for competitive factors (such as
alternative technologies), fraud, and general value for money for brands using
International SMS.
MNOs need to work with their firewall vendor to identify volumes and share data with
enterprises to ensure that AIT is not happening.
III) Aggregators:
In at-risk markets to adopt the same pricing policy as the MNOs based on competitive
factors, fraud and general value for money for the brands using international A2P SMS.
Aggregators to deploy solutions with the capability to trace, alert, and block AIT traffic.

04
Collectively the messaging ecosystem to:

Establish a Task Force for tracing AIT originators:

I) Develop industry best practices on A2P SMS commercial models, with a view to stopping
AIT at source.
II) Establish a tracing solution with MEF acting as independent investigator to review source
of AIT traffic (no sharing of commercial sensitive information outside of MEF review).
Originators of AIT should be revealed and face the consequences for their actions.

MNOs and aggregators to implement revised contract terms to avoid brands paying for
identified AIT fraud. Aggregators to cascade these terms to brands. With action now from
the players within the A2P industry the downwards trends can be managed to a point where
A2P SMS has a long term and viable future, but it does require attention now. Brands need to
see value for their money and a quality service without AIT.

As part of the research for this whitepaper (commissioned by six MEF industry leaders in the
A2P space in conjunction with MEF), Mobilesquared spoke to 10 key stakeholders in the A2P
SMS ecosystem (6 hyperscalers and 4 mobile operator groups with a combined reach of over
70 opcos). All of these companies are either some of the biggest users of A2P SMS or some of
the biggest suppliers. These companies were all united on four major points.

1. SMS remains the most effective channel and “should” be the most popular channel among
all brands big and small.
2. Current international SMS pricing is unsustainable and unworkable in at-risk markets.
3. The popularity and trust of SMS among brands in at-risk markets has been rapidly
diminishing over the last 12 months.
4. Artificial Inflation of Traffic (AIT) fraud alongside significantly high termination rates means
SMS is no longer the preferred channel for brands sending large volumes of authentication
use case traffic.

05
SO WHAT IS ARTIFICIAL
INFLATION OF TRAFFIC (AIT)?
According to the Mobile Ecosystem Forum (MEF), there are two overarching types of Artificial
Inflation of Traffic (AIT) fraud types. The first is defrauding a business, by having bots in the
guise of fake users send out one-time-password verification SMS via the business’ messaging
account to a number for which the fraudster is part of the SMS delivery chain and can block
the artificial traffic when it hits its network node. The fraudster makes a profit directly or
indirectly from the messages at the business’ expense.

The MEF's second AIT fraud type is defrauding a mobile network operator (MNO), by
generating fake messages and repeatedly sending the same message to virtual numbers
controlled by the fraudster that generate an outpayment. The fraudster makes a profit as the
cost of sending the messages is lower than the outpayment.

Such is the impact of AIT on the international messaging ecosystem, that the messaging
industry now view AIT as the biggest threat to the A2P SMS monetisation, surpassing grey
routes even though AIT fraud accounts for a quarter of the brand spend associated with grey
routes.

The Rise of AIT

Source: Mobilesquared research 2019-2023

Over the last 2 years AIT has emerged as the one fraud-type that could have a more
devastating impact on the international A2P SMS industry than anything that has gone
before it. It is a fraud type fuelled by the SMS value chain’s desire to maximise revenues in the
short-term by forcing brands to pay a premium for mission-critical authentication messages.

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THE IDEAL AIT MARKET
CONDITIONS
Three elements have converged to create the perfect market conditions for AIT to flourish.
These are:
1. High international termination rates
2. Structure of exclusivity agreements
3. The rise of the one-time password (OTP)

High International Termination Rates

Mobilesquared’s research revealed that between 1Q 2021 and 4Q 2023, 90% of MNOs
increased their international termination rates. When broken down, 25.3% of MNOs increased
their rates by 20%-49%, and 20.5% by 50%-100%. This means that more than one-third of
MNOs (36.4%) increased their rates by over 100%. In fact, 3.9% increased their rate by in
excess of 500%.

Mobilesquared research has identified 50 “at risk” markets as of 4Q 2023, where high
international termination rates will attract significantly higher-than-expected levels of fraud.
These markets are predominantly in Asia, the Middle East, and increasingly in Africa. Major
SMS markets and regions, such as North America, Europe, Australia, New Zealand, and
Singapore, as well as Brazil and India, have not experienced high prices, therefore limiting the
AIT potential to fraudsters in these markets.

07
 Source: Mobilesquared ASPIR issue 2.

The high ITRs are very attractive for fraudsters inflating (and generating) traffic, primarily
targeting the 30 major brands (hyperscalers) that make up the bulk of international SMS
traffic sending authentication use case SMSes. To date, Tesla CEO and owner of X, formerly
Twitter, Elon Musk remains the only public figure to speak out against this type of SMS fraud.

Structure of Exclusivity Agreements

The second key component is the structure of exclusivity agreements between a mobile
operator and aggregator, which can lead to an exponential increase in the international
termination rate.

Over 200 exclusivity agreements are now in place, which equates to almost one-third of
MNOs, with Mobilesquared research indicating that approximately one-third of these
agreements have resulted in a significant increase in termination rates, primarily in at-risk
markets.

Authentication Use Case

Mission-critical authentication traffic, such as one-time passwords (OTPs), rely on the
effectiveness of SMS to provide a compelling user experience. No other channel can match
SMS’ effectiveness and reliability in the delivery of authentication use cases. AIT fraudsters
are exploiting this. Such is the demand for OTPs that they now account for 89% of total
international A2P SMS traffic.

Brands are being forced to pay the going market rate to ensure their authentication traffic is
delivered to their customer anywhere in the world, regardless of the cost. One major brand
told Mobilesquared that AIT fraud had increased their spend on A2P SMS for the delivery of
OTPs in the last year by almost 40%. Another brand explained, “we are being charged
excessive amounts of money for a worse service”.

08
WHAT THE MOBILE NETWORK
OPERATORS SAY
The MNOs believe they have adopted a long-term A2P SMS strategy with the ability to
adapt to reflect changing market dynamics. This latter point clearly accounts for the primary
elements of their existing strategy focusing on “capitalising on the A2P SMS opportunity” and
“maximising revenues”. Evolving to RCS was viewed as a secondary level strategy, but still
ahead of the tertiary element of “A2P SMS longevity”.

Three external factors are shaping their “changing market dynamic” element of their A2P
SMS strategy. This is to compensate for the loss of voice revenue, losing traffic to WhatsApp,
and a belief that A2P SMS was on the decline.

All MNO groups said that they had increased their international termination rates over the
last year, with one group citing that the increase was on the recommendation of their
aggregator partner. The MNO groups said their opcos were “acting opportunistically” with
regards to their pricing strategies. Adding that while group are not always in agreement with
the price increases, their role is to advise if they feel the price is to high (or to low).

MNOs believe the fall in SMS traffic as a direct result of AIT fraud would result in a 16% drop
in revenue in 2023 (separate to the lost revenue from grey routes), which would be £4.7
billion based on Mobilesquared’s data for 2023. Consequently, mobile operators are now in
the process of reviewing their commercial models.

09
WHAT THE BRANDS SAY
The brands that Mobilesquared spoke to as part of this research believe that AIT fraud has
transformed SMS into a damaged channel in at-risk markets, irreparably so in some brands’
view. Trust in SMS as a channel has gone permanently for some brands in these markets,
while others readily admit their trust is diminishing but it could be restored with swift action
to address the existing market conditions enabling this perfect storm.

Brands are exploring alternative channels for the delivery of authentication use cases, and in
the meantime, are trying to restrict their usage of SMS where possible.

One of the brands interviewed admitted that they were paying more in SMS traffic charges
than the total revenue generated in the country. For the brand, the impact of AIT brought
them to consider terminating the use of SMS or stopping services in the country.

Uber
The high international termination rates and excessive levels of AIT fraud on SMS is
expediting our need to limit the amount of traffic and spend using SMS.

Meta
We are on a painful journey with SMS right now. Not knowing how much we will need to
allocate to SMS from one day to the next is a frightening prospect and one that is not
sustainable in the short-term, let alone the long term. SMS costs need to come down.

Brand speech bubble

“AIT fraud is making SMS a damaged channel.”
“AIT fraud has increased our spend on A2P SMS in the last year by over 30%.”
“Our trust in SMS has gone.”
“The excessive levels of AIT fraud is expediting our need to limit our spend on SMS.”
“Carriers are guilty of allowing this to happen on their watch.”
“There will be a rude awakening.”

10
As a direct consequence of high SMS costs and AIT, some of the biggest users of SMS have
now switched a percentage of their traffic to alternative channels in at-risk markets, (such as
flash calling, call-out, silent network authentication, and RCS), or in the process of exploring
omnichannel options. Passkey and similar verification services are attracting a lot of
attention from brands and creating a more competitive medium in the security space.

From an omnichannel perspective, WhatsApp Business launching an authentication use case

was incredibly timely, and potentially poses the biggest threat to A2P SMS traffic. But
WhatsApp does not offer the universality of SMS and is also constrained by its own stringent
opt-in guidelines. Email and in-app push notifications are alternative avenues being
considered, but both have their own user limitations and challenges. A2P SMS, therefore, still
remains the ideal channel for the distribution of OTPs for brands provided the business
models are reflective of the channel.

Ultimately, it is the high SMS prices that are forcing the brands to seek cheaper alternatives
in at-risk markets. Were the high rates to remain, according to the contributing MEF
members to this report, the shift in traffic on alternative channels which has seen a drop in
traffic of 20%-to-30% in the likes of Indonesia, Bangladesh and a number of African
countries, will continue.

11
IMPACT OF AIT ON
MESSAGING ECOSYSTEM
The industry now views AIT as the biggest killing the Golden [SMS] Goose that is
threat to their monetisation of international authentication traffic.
A2P SMS, but AIT is a consequence of the
high SMS termination rates. Mobilesquared believes that AIT directly
cost brands a total of $585.4 million in
High SMS costs and AIT reveal a concerning 2022, and that leaptto $1.16 billion in 2023,
short-termism regarding the potential and before dropping to $655 million in 2024.
well-being of international A2P SMS. Between 2022 and 2024, AIT will cost
Whether it is the primary cause (high SMS brands a cumulative total of $2.4 billion. The
rates), or the secondary cause (AIT), or the drop in AIT between 2023 to 2024 can
combination, either way, the existing market primarily be attributed to the drop in brand
conditions are having a direct impact on spend on international SMS authentication
international SMS brand spend, and traffic.
ultimately could be held responsible for

Source: Mobilesquared

12
Aside from the significant drop in brand The data reveals that there is a direct
spend, there are additional reasons for the correlation between the rise in international
drop in AIT fraud from 2024 onwards, termination rates and AIT, and an increase
including a number of messaging industry in grey routes. So not only should brands be
initiatives designed to make AIT less concerned about market developments
attractive to fraudsters and make the since 2021, MNOs should be concerned also.
practice harder to execute. These include:
Collectively brands were haemorrhaging an
Greater transparency relating to Bot average of $2.19 million per day to AIT
creators between 2021 and 2023. That is in stark
Aggregators refusing to enter inflated contrast to the previous years, when AIT
exclusivity agreements cost brands a total of $121.24 million in
MNOs rejecting aggregators known to be 2022, equivalent to $66,430 per day
complicit in AIT fraud between 2017 and 2021.
MNOs and aggregators revising
contracts to not charge brands for The longer-term picture paints a bleaker
identified AIT traffic view for the international SMS marketplace
Greater network visibility identifying AIT unless international SMS costs are
traffic and capability to stop overhauled and AIT is reduced.
Firewall providers able to detect and
prevent AIT traffic Since Mobilesquared published its
A reduction in international termination Alternative View, the market conditions
rates. continue to deteriorate. Based on data
The rapid emergence of AIT as a result of shared by multiple companies with
the increase in international termination Mobilesquared international traffic into
rates, has also resulted in an increase of several markets has plummeted by up to
grey routes, in particular SIM farms. 50% over a 4-month period.

Source: Mobilesquared

13
Aside from identifying the 50 at-risk regardless of its use case. In the map,
markets, Mobilesquared believes a total of Mobilesquared has highlighted where
80 markets could be considered at-risk markets have at least one mobile operator
within 12 months. Research reveals that the with an international termination rate in
messaging industry believes a price ceiling excess of $0.10. These markets will remain
should be considered to A2P SMS highly attractive to fraudsters.

The outcome is not that brands are looking conditions have deteriorated, and continue
to use alternative channels and limit their to do so. Markets that should continue to
spend on international SMS in the future, experience growth under alternative
that is happening now. The outlook is most circumstances are now in decline. By 2026,
likely to be considerably bleaker than around 60% of A2P SMS markets will be in
outlined in the below graph from decline, and based on existing market
Mobilesquared’s global A2P SMS forecasts conditions, that is a conservative figure as
published in June 2023, after which, as conditions are now deteriorating on a
outlined in the above, international market monthly basis.

14
 Source: Mobilesquared

The precarious state of the international the messaging ecosystem redresses this
A2P SMS industry is its own making and situation, the damage limitation can start in
should be considered a “pandemic” among earnest. But for this to happen the
A2P SMS in at-risk markets. The high messaging industry collectively needs to act
international termination rates can be a now to safeguard the long-term future of
catalyst for AIT but also are growth A2P SMS, before the damage is irreparable
inhibiting in their own right, and the sooner and everlasting.

15
 ABOUT

As a leading communications platform company, BICS is connecting the world by creating

reliable and secure mobile experiences anytime, anywhere. We are a global voice carrier
and the leading provider of mobile data services worldwide. Our solutions are essential for
supporting the modern lifestyle of today’s device-hungry consumer – from global mobile
connectivity, seamless roaming experiences, fraud prevention and authentication, to global
messaging and the Internet of Things. We are headquartered in Brussels, with a strong
presence in Africa, Americas, Asia, Europeand Middle East. For more information visit
www.bics.com

Global Message Services (GMS) is the trusted communications service provider for
Enterprises and Mobile Operators worldwide. GMS’ CPaaS solution enables brands to unify
multichannel customer communications via a single API and self-service platform.
Complementing this is an AI-driven chatbots and CCaaS platform that enables brands to
build engaging, two-way, 24/7 communication at any touch point, significantly enhancing
the customer experience. As a valued partner of Mobile Operators, GMS enhances their
messaging business and protects revenues by optimising A2P, P2P, and P2A traffic
exchange, while preventing SMS and voice fraud. Established in 2006, GMS is the leader
and industry ambassador for secure, legitimate, and transparent messaging. It is
headquartered in Baar, Switzerland, with regional offices across the globe. www.gms-
worldwide.com

Infobip is a global cloud communications platform that enables businesses to build

connected experiences across all stages of the customer journey. Accessed through a
single platform, Infobip’s omnichannel engagement, identity, user authentication and
contact centre solutions help businesses and partners overcome the complexity of
consumer communications to grow business and increase loyalty. With over a decade of
industry experience, Infobip has expanded to 75+ offices globally. It offers natively built
technology with the capacity to reach over seven billion mobile devices and ‘things’ in 6
continents connected to over 9,700+ connections of which 800+ are direct operator
connections. Infobip was established in 2006 and is led by its co-founders, CEO Silvio Kutić,
Roberto Kutić and Izabel Jelenić. www.infobip.com
 A global fast-growing telecommunication company offering innovative technology and
communication solutions. We provide cutting-edge digital products and services for mobile
network operators, enterprises, and service providers across different industries. Founded
back in 1998, with its head quarter in UK London and 18 offices globally. Serving 1.8 billion
subscribers worldwide, covering more than 120 countries and connected to more than 500
Mobile operator and aggregator. www.montymobile.com

Established in 2004, Route Mobile Limited ("RML") is a cloud communications platform

service provider catering to enterprises, over-the-top (OTT) players, and mobile network
operators (MNO). RML's portfolio comprises solutions in messaging, voice, email, SMS
filtering, analytics, and monetization. RML has a diverse enterprise client base across
various industries, including social media companies, banks and financial institutions, e-
commerce entities, and travel aggregators. RML is headquartered in Mumbai, India, with a
global presence in Asia Pacific, the Middle East, Africa, Europe, and the Americas.
www.routemobile.com.

Sinch powers meaningful conversations between businesses and their customers through
its Customer Communications Cloud. More than 150,000 businesses – including many of
the world’s largest tech companies – rely on Sinch and its global super network, which is
the most secure and reliable network for messaging, voice and email. Sinch has been
profitable and fast-growing since it was founded in 2008. It is headquartered in
Stockholm, Sweden, with shares traded at NASDAQ Stockholm: XSTO:SINCH. Learn more
at sinch.com.
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Mobilesquared: We are recognized as the global #1 for business messaging intelligence,

delivering an unrivalled depth and accuracy of data and forecasts. Our data is used by
companies to identify opportunities & threats in the messaging and customer engagement
omnichannel. Our clients include GMS, Sinch, BICs, Monty Mobile, Infobip, Orange, PWC,
Vodafone, Bain, Mastercard. Find out how our data and insight can help you:
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