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Telecoms operators explore new platforms, as earnings fall

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A NEW report by PricewaterhouseCooper (PwC) has predicted a decline in Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), for telecommunications operators across the globe, following, what it described as increasing threats to voice and messaging revenue. 

   However, findings have shown that operators, even in Nigeria have started exploring new avenues to boost their earnings.  

  Global Communications Industry Leader at PwC, Pierre-Alain Sur in the report, said in the old days, telecommunications operators could rely on strong revenue growth and EBITDA to provide premium EBITDA multiples.

   “Today, we have segments like fixed lines in absolute decline and others like mobile that are expected to decline. Telecoms need to set aside their focus on EBITDA and cash in favour of capital return. It’s about challenging telecoms’ current internal decision making processes and resetting their expectations in order to get the EBITDA multiples they are looking for.”

  Already in Nigeria, the Association of Licensed Telecommunications Operators of Nigeria (ALTON) has lamented the continuous fall in the sector’s Average Revenue Per User (ARPU), stressing that high operating expenditure profile is affecting the growth of the industry.

   According to the Chairman of ALTON, Gbenga Adebayo, ARPU have consistently declined year-on-year, stressing that between 2001 and 2012, telecommunications sector ARPUs declined by over 87.5 per cent, “and subsequently, some operators have reported a further ARPU depreciation of over 13 per cent from year to year.”

  ARPU is a measure used primarily by consumer communications and networking companies, defined as the total revenue divided by the number of subscribers.

   Report has it that ARPU for voice services is expected to decline by around $5 per month over the next five years, down from $6-$7 in April 2013 and $10 in 2008.

   Meanwhile, adding to problems of slow growth is the issue that there is, according to PwC, no one complete solution that can replace profit declines with higher growth opportunities. It argues that those segments that have been identified as growth areas – including cloud, M2M and mobile advertising – are not expected to entirely compensate for the decline.

   The report revealed if operators can diversify in 2015, the cloud will offer approximately $35 billion, M2M is only expected to contribute $13 billion, and mobile advertising opportunities should reach $30 billion. Together, that’s about $78 billion – a drop in the ocean to an industry worth $2,000 billion.

   For those telecommunications operators willing to adopt a more progressive approach, PwC said a significant change in thinking towards capital expenditure is required.

  For example, it noted that more in-depth analysis is required of capex for services and pricing, centred on each operational company within the operators. In particular, PwC said capital allocation to each operational company, which may appear stable over time, need to be evaluated to determine how the ROI spread is expected to change over time and how the capital allocation reflects that. Also, the impact of service mix changes on different network elements needs monitoring, as does product ROI by month, and how customers and traffic dictate asset additions.

    Sur said, “though growth opportunities still exist, it’s simply not the same playing field as in decades past. Senior telecom leadership teams can’t just control costs – their priority should be on creating value.  It’s time for telecoms to embrace capex best practices and not rely on the familiar measures of the past.”

    Already, telecommunications operators in Nigeria are tapping into video streaming as a fresh revenue source, this is even as consumer preference for this new service continues to rise especially amongst high net worth individuals, at the expense of broadcast television (TV) viewership.

    Indeed, over the next two years, VoD service revenues will reach an estimated $40 billion, growing by 150 percent in 2017, says recent research from iDATE.

    Video streaming however is opening up new frontiers for local and foreign investors, with many keen on taking advantage of the huge potentials here in. This explains why there are a growing number of indigenous firms coming on stream. 9fix, Afrinolly, Dobox, IbakaTV, iRoko TV, and RealNolly are some of the local VoD platfroms currently providing content services.

     MTN’s Afrinolly currently boasts of over four million download across all the major platforms. Afrinolly is a nifty application that allows users to get information about the movie that are being released in the African market and they can watch trailers or stream free content from their mobile devices.

    Other telecommunications operators are also moving in this direction. In recent months, Globacom, national carrier, has launched its VoD platform dubbed, ‘Glo Total Entertainment’. It gives subscribers access to sports, movie trailers, celebrity gossip, TV series and music videos, which can be accessed using a mobile app on all major smartphone platforms.

   Globacom is also moving up the ladder, as MTN is already in alliances with Dobox and Afrinolly. United Arab Emirates’s (UAE) Etisalat Nigeria is in strategic partnership with Dobox, while India’s Airtel has its own platform dubbed, N5 Entertainment Store.



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