DOUG RICHARD, the American software entrepreneur best known from the Dragons’ Den TV programme, is aiming to take a big bite out of the profits mobile-phone companies make from text messaging with the launch tomorrow of Hotxt.

He plans to undercut the main network operators by offering unlimited messages for £1 a week. Many mobile users, particularly younger ones, spend far more than this on their SMS text habits. Text messaging is an important source of profits for mobile-phone companies.

Richard, who is chairman of Hotxt, said he hoped to create “the Skype of text”. Skype is the British-run firm that became a telecoms-industry sensation, growing from nothing to 60m users in only two years, before attracting a $2.6 billion (£1.5 billion) takeover from Ebay last autumn.

Richard is initially aiming Hotxt primarily at 16 to 24-year-olds. “They do far, far more texting than anybody else. They’re also the most price sensitive.”

Hotxt is an internet-based service that makes use of a mobile phone’s data connection. It requires users to download a small program to their handset. This can be done either from the Hotxt website, or by texting “join” to the firm’s 80468 short code.

Once installed, Hotxt can be used to send messages either to Hotxt users or other contacts who will automatically be invited to join the service. Every new user will receive two free weeks of messaging, plus another free week for every friend who signs up with the service. Richard hopes this “viral” marketing approach will help duplicate Skype’s rapid rate of customer acquisition.

Hotxt messages can be four times the length of normal text messages — 640 characters long rather than 160. Another difference is that messages are sent to a “tag” — such as Doug, or Diana — rather than to a number. Hotxt believes this will appeal to a youth audience, allowing people to use their nickname or hide their true identity. Users can also block messages from particular senders — partly a response to so-called “text bullying”.

Because Hotxt is sending messages as packets of data, it can avoid hefty SMS charges — which, per megabyte, are the most expensive services that mobile-phone companies offer.

On top of the £1 a week payment to Hotxt, users will also incur data-usage charges. The variety of tariffs available from network operators makes it hard to estimate this cost, but Richard believes it should be less than a penny a message. In comparison, mobile-phone companies charge as much as 12p for each text.

Most mobile-phone users should be able to use Hotxt, but not all of them. Pre-pay users on O2 will not be able to because it has restricted the internet access available to customers.

A further obstacle is the multitude of handsets, operators, and software with which Hotxt has to work. The number of permutations means that the installation of the application will not always run smoothly, particularly for those who use the short code number. “The primary variable is how easy is it to install,” said Richard. “Sometimes you just hit a button and it all goes ahead. Sometimes you have to read the instructions.”

Richard said Hotxt was only one of many challenges to the profitability of mobile-phone companies from the internet. “They’re playing a defensive game,” he said. “If it’s not us today, it’s going to be someone else tomorrow.”

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