Costs Rise but Revenues Drop - New Zealand's Telco Industry Feels the Squeeze
Published on: 1st Sep 2014
Note -- this news article is more than a year old.
New Zealand's telecommunications market showed declining revenues in 2013. Mobile services revenue declined by 1.1% in a year to the end of December 2013 while fixed revenue fell by 3.7% as legacy revenue continued to decline at pace meaning that overall total telecommunications spending fell by 2.5% to NZ$4.92 million.
Data consumption continues to climb rapidly in tandem with the expansion of 4G LTE in mobile and UFB in fixed networks.
With strong adoption in smartphones and tablets, there is a shift from traditional data platforms (SMS and MMS) to over-the-top (OTT) applications (such as YouTube, Skype and WhatsApp). While telco's are capturing some of this increase through higher data caps, the majority of value is being captured by OTT players. This report shows that a traditional telco strategy is no longer sustainable as network investment needs increase and associated revenues continue to decline.
"Connectivity is no longer enough to capture revenue growth. Although operators must continue to invest in network capabilities to protect their core revenue they must adapt their strategy to create new streams of revenue or risk becoming irrelevant from a consumer perspective, as those providing services on top of the network steal the show," says IDC's Senior Market Analyst, Shane Minogue.
In the long term, the market is set to continue to grow (in terms of connections) as broadband penetration increases and the population becomes increasingly mobile. Despite this increase in connections, revenue is forecast to continue to decline as competition drives average revenue per user (ARPU) down and squeezes margins in both mobile and fixed. This report not only highlights this critical issue in the market but also highlights a number of key strategies that could be employed to overcome this obstacle.
"The continued consolidation in the market, a significant rebranding of the incumbent and continued investment by the main players in offering new services shows how the market is in a state of transformation. Each player is implementing new strategies to be successful in the modern telecommunications environment, however in a market where there is increasing competitive pressures only a small few will be successful." says Senior Market Analyst, Shane Minogue.