How social media, OTT, erodes revenue of legacy telecoms
There has been hues and cry about the activities of the Social media Over the Top (OTT) from the telecom operators, as they are said to erode the revenue of legacy telecoms’ operators in the country.
This is equally a fall out from the challenges which telecoms’ operators have been facing ranging from declining subscriber figures month-on-month since last year, culminating in the loss of over 3.8 million subscribers on the major operators’ network in May.
The latest statistics obtained from the Nigerian Communications Commission (NCC), disclosed that active mobile voice subscriptions on the four networks crashed from 148.7 million last April to 144.9 million in May, representing a loss of over 3.8 million existing subscribers.
The general decline was a result of the fall in the subscriber base of each of the networks in GSM segment.
According to NCC data, as at May, this year, Airtel’s active voice subscriber base crashed to 34.15 million, representing 23.56 per cent market share. Etisalat’s active voice subscriber base also fell to 18.5 million, equivalent to 12.76 per cent market share. Also, Globacom’s active voice subscriptions dropped to 37.3 million subscriptions (25.77 per cent) while MTN’s subscriber base also declined to 54.9 million, representing a 37.89 per cent market share.
However, investigations across technology segments of GSM, Code Division Multiple Access, fixed wired/wireless networks as well as voice over Internet protocol, revealed that mobile subscriptions dropped from 149.2 million to 145.3 million in April and May respectively.
Between the two months, while GSM subscriptions dropped from 148.7 million to 144.9 million, fixed lines fell from 153,804 to 142,496. Also, VoIP dropped from 104,125 to 46,348, while CDMA subscriptions remained unchanged in the two months at 217,566.
Industry analysts, including the regulator, have said that operators will continue to face revenue generation threat from OTT for many years to come.
The social media Over the Top (OTT) includes the Facebook, Whatapp, Instagram, etc which people explore in networking both in social, business sphere, Facebook call, Skype, WhatsApp, BBM and Viber, among others, on their revenue.
Commenting on the activities of the OTT, the Chairman ALTON, Engr. Gbanga Adebayo informed the Daily Times in a chat that statistics available has shown that bigger players lost some market share when the floor price was set and smaller operators got some space in the market place.
He added that the Internet service providers have been badly hurt by none determination of a floor price as they are left to compete at prices below their costs.
He decried the situation whereby the social media Over the Top (OTT) like the Facebook, WhatsApp, Instagram, etc have taken over the voice revenues, adding that the activities of the social media operators have greatly eroded the revenue of the legacy operators.
According to him, more subscribers are dropping the voice call to embrace the OTT operations which are offered free of charge on data services.
He argued that “since the OTT operators do not have any regulatory obligations, no taxes and no operational levy, there is the need to revisit the suspended Data Floor Price in order to save the telecom industry.”
Adebayo noted that with the increasing usage of data-driven OTT platforms to chat and make VoIP calls by subscribers, the number of voice subscriptions has, over the last few months, dropped from over 154 million to 149 million as at last April.
“People use OTT platforms to make IP calls instead of the traditional voice calls, which is relatively cheaper for them,” adding that the drop in voice subscriptions was resulting in declining revenue for telecoms operators.
“Reduction in ARPU has been partly traced to the emergence of the OTT players, which operators said were eating into their profitability potential,” he stressed.
He hinted that the Telecommunications Service Providers have no local substitutes for its plant and machinery, constrained to source FX from interbank market at higher rates compared to other sectors such as Manufacturing, Aviation and Agriculture accorded priority in FX allocation at reduced rates by the CBN.
Notwithstanding the prevailing economic situation in the country, he said ALTON members cannot transfer the increased cost burden to the consumers, thereby contracting profitability and ability to make further investment to drive growth in the industry.
Telecoms’ operators in Nigeria have called on the NCC to regulate OTT, but the regulator has said it does not regulate technology, but charged operators to be innovative.
Studies by Ovum, a global tech-focused research giant, have predicted that telecommunications industry in Nigeria and others will lose a combined $386 billion between 2012 and 2018 from customers using OTT voice applications.
According to analyst at Ovum, Mr. Emeka Obiodu, “the use of VoIP will grow increasingly over the next five years to become the underlying technology for delivering voice over telecoms infrastructure.”
He noted: “Blocking these services, entering into alliances, or trying to out-compete OTT players are not going to stem the tide.
Already, a report by the NCC on the emergence of OTT has indicated that it would remain a threat to traditional telecoms model by licensed operators.
Executive Vice Chairman, NCC, Prof. Umar Danbatta, ruled out licensing OTT last year, thereby foreclosing OTT regulation.
The NCC report stated inter alia that with the increase in uptake of mobile VoIP services provided by apps such as Google, Facebook, Skype, Viber and WhatsApp, among others, telecoms operators “face the risk of eroding revenues and profitability.”
The study also revealed that “Many traditional telecom service providers are of the opinion that traditional telephony and SMS revenues are under threat from newer, IP based alternatives like WhatsApp and Skype, Viber, among others.
“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 suggested that traditional telephone network providers need to start exploring more innovative and cost effective ways of competing with these OTT service providers.
A report by a global consult firm, PriceWaterhouseCooper (PwC) said, “If telecom operators are to 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.”
Stories by Tony Nwakaegho
