1 Oct 2013

Telecoms revenues set to fall as competition rises

7:07 am on 1 October 2013

IDC says telecommunications company revenues are likely to keep falling for the next four years as competition intensifies and costs rise.

In its annual report on the industry, IDC said revenues fell 1.8% to $5 billion in the year to June 2013. It forecasts further falls of 1.5% a year until 2017.

In the past year, revenues for the mobile market grew 0.3% but fixed phone line fell sharply, while broadband contracted due to price competition.

IDC New Zealand research manager Peter Wise said the market was under pressure.

"There's been a lot of broadband competition. We've seen a $75 price point established with the tier ones, the Telecoms and Vodafones, and there's a lot more competition in mobile as well, certainly in pre-paid," Mr Wise said.

That was good news for customers but not so good for company revenues.

"They're probably all feeling it, because they all pay the same wholesale prices for the likes of Chorus," he said.

"Margins on broadband are very tight at the moment, so they'll all be hurting there, and I think probably the same on the mobile ... the three operators have all got mobile networks and discounting the price hurts the most."

The consumer would win but it was unlikely to be through prices dropping, Mr Wise said. Instead, companies tended to offer more in their packages.

The Government's intervention on Chorus' copper pricing charges for broadband would lead to lower wholesale costs and could mean higher revenues for providers as people moved to fibre.

The capital-intensive competitive telecoms industry was unlikely to attract new players in the next few years, he said.