The growing importance of social
media platforms and apps as well as
Internet voice applications has hit
telecommunications firms hard,
claiming a chunk of their revenue,
OZIOMA UBABUKOH writes
The telecommunications industry in
Nigeria, Africa’s largest economy, is
projected to lose a total of N109tn
($386bn) in voice revenue to the
growing usage of Over-the-Top Internet
voice applications by 2018.
United Kingdom-based research and
analytics company, Ovum, stated in a
report that “the $386bn loss will
accrue over a period of six years –
between 2012 and 2018 – from
Nigerian customers using OTT voice applications.”
Checks by The PUNCH show that the
increasing rise of the OTT players who
provide voice and Short Message
Services, or apps such as WhatsApp,
Skype, Facebook, BlackBerry
Messenger and Viber, is currently
eating deep into the voice revenue of
telecommunications companies in the
country by more than 50 per cent.
The impact of these new services is
further explained in a report by Credit
Suisse.
In the report, the multinational
financial services company said,
“Proliferation of Over-the-Top content
services such as Skype and WhatsApp, among others, could trigger more than
a whopping 50 per cent revenue hit on
Nigerian telecoms companies’ voice
services in the coming months.”
A report by the Nigerian
Communications Commission also
indicated that the OTT could be a
threat to traditional telecoms model by
licensed operators.
“To further worsen this issue, the
traditional operators still have to make
significant investments in upgrading
their networks to handle the increasing
volume of data generated by the same
providers of OTT services,” the NCC
report read in part.
The Executive Vice Chairman, NCC,
Prof. Umaru Danbatta, at a forum with
telecoms operators recently, ruled out
licensing OTT, thereby foreclosing its regulation.
However, findings by our
correspondent showed that the
monthly revenue accruing to the
telecoms operators from the provision
of voice services to the owners of the
over 151 million mobile telephone
lines witnessed an estimated 31 per
cent crash in six months.
According to findings, the aggregate
voice revenue by the operators,
including the Global System for Mobile
Communications, Code Division
Multiple Access and fixed networks
fell from N241.6bn in December of
2015 to N166.4bn in June.
Experts say the OTT trend and the
declining Average Revenue Per User occasioned by subscribers’ low
purchasing power in the face of
increasing cost of operations is
responsible for the fall in operators
revenue.
“Reduction in the ARPU has been
partly traced to the emergence of the
Over-the-Top players, which operators
said are eating into their profitability
potential,” the President, Association of
Licensed Telecoms Operators of
Nigeria, Mr. Gbenga Adebayo, said in
an interview.
Analysts told our correspondent that
while telecoms companies in Nigeria
had become wary of the effect of such Etisalat in the country’s $38bn
telecoms market said they were also
struggling to counter a trend in which
the prices of basic voice and data
services were declining.
MTN Nigeria said that OTT content
services had a “cannibalising effect”
on network operators’ voice and data
revenue, because they provide “free”
services, which duplicate services
already provided by network operators
such as voice calls and SMS.
According to the firm, a ready example
is WhatsApp, which provides free
instant messaging services as an
alternative to text messaging services
OTT platforms, the revenue loss was
only going to get worse. This was also the position of the
Commonwealth Telecommunications
Organisation at its OTT conference in
London last month, where it said it was
conducting a research into the
dynamics that could stop the trend.
“The CTO’s plan is to carry out a study
to understand the market dynamics
and policy and regulatory challenges of
Over-The-Top services, both in the
context of their impact on traditional
business models and of opportunities
for innovation and stimulating
economic growth,” it stated.
At the same time, major operators
such MTN, Globacom, Airtel and provided by mobile network operators.
“It (WhatsApp) has also launched a
free voice service,” the company’s
Public Relations and Protocol
Manager, Mr. Funso Aina, said, adding,
“The point to note in this argument is
that OTTs allow users to send
unlimited texts, images, video and
audio messages free of charge, using
their current data plans.”
According to him, the problem is that
these services are provided using
network infrastructure of the operators,
but without commensurate
compensation to operators.
Aina added, “At the same time, they
are denying operators of revenue to
grow their networks, thereby impacting on service delivery and long-term
sustainability.
“For instance, to date, MTN has
invested over $15bn in building its
network in Nigeria. You can now
imagine an OTT leveraging on the
network to deliver its content without
investing a kobo locally. The impact on
revenue is huge.
“Furthermore, because these entities
are not licensed, and because they
have not built any infrastructure
locally, they do not have the same
costs as licensed operators.
“They do not pay taxes, they do not
employ any people locally, and indeed,
they have no local presence
whatsoever, meaning they do not make
any contribution to our economy and their services are denying those who
make contributions of income.”
The MTN public relations manager
stated that it was the view held by
most within the industry, but noted that
“at MTN, we are looking to find win-win
solutions for all stakeholders.”
Aina, however, dismissed the allegation
that some telecoms operators had
continued to dispute a view that they
were making enough money from their
higher paying data services to offset
the loss of voice and messaging
revenue.
He explained, “Every service is
provided at a cost, and we cannot
subsidise one service through revenue
from another; so, the argument as to
whether loss of revenue from one is
being offset by another is really not a fruitful argument.
“The important thing is that services
must be produced efficiently and all
stakeholders, including our customers,
must get fair value for their
investments.”
An analyst at Ovum, Mr. Emeka
Obiodu, who shared Aina’s views, said,
“The use of Voice over Internet
Protocol will grow increasingly over
the next five years to become the
underlying technology for delivering
voice over telecoms infrastructure.
“Blocking these services, entering into
alliances, or trying to out-compete the
OTT players are not going to stem the
tide.”
Obiodu said that a number of factors drove the growth of the OTTs in global
demand, including improvements in the
availability and speed of broadband
networks, the growing capability and
affordability of wireless devices such
as smartphones and tablets, and
continued dominance of social media.
The Research Director, Gartner, Mr.
Sandy Shen, said, “The impact seen
today of the OTT VoIP services on the
traditional revenue streams of
telecoms is just the tip of the iceberg.
“The OTT chat apps such as WhatsApp
and WeChat are putting more pressure
on telcos than VoIP services because
they offer social networks that retain
user loyalty and stickiness. That is
pushing people to go for smaller voice
and text plans, though they still need a big data plan.”
PriceWaterhouseCooper, a global
consultancy firm, however, said there
was a way out.
It suggested that the telecoms
operators should develop a successful
strategic response to the rise of OTT
competitors.
“They must first take stock of the
considerable assets and capabilities
they already possess and determine
how they can leverage them in order to
compete against, or work with the OTT
players,” it stated.
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