3G, 4G services eating up voice and text revenues

KARACHI – The introduction of 3G/4G services in Pakistan has disturbed the Cellular Mobile Operators’ (CMOs) voice and text revenues, as it went down by 7% in Fiscal Year 2015 (FY15), Daily Times learnt on Thursday.

Reliable industry sources said that despite significant increase in the numbers of 3G/4G subscribers, the CMOs’ revenues went down almost by 6% to 7% in FY15.

The main reason behind this dismal growth was a considerable shift of voice revenues to data revenues as the Internet based over-the-top (OTT) applications undermined the capacity of network operators’ voice traffic.

An OTT application is any app or service that provides a product over the Internet and bypasses traditional distribution.

The launching of new generation technologies cost billions of dollars to CMOs and now after a year, the huge investment has proved to be only value addition for them.

Before the data services, the mobile termination rates were high and the operators were particularly dependent on voice and text revenues. However, CMOs have become vulnerable to innovation by the Internet based OTT application providers, who offer network independent applications.

The Pakistan Telecommunication Authority’s (PTA’s) first half of FY15 report validates the sources’ claims as PTA revealed that CMOs earned Rs 156.9 billion during the first half of FY15 compared to Rs 157.3 billion for same period of FY14. Although, there was no growth in the total telecom revenues, there has been significant shift from voice revenues to data revenues due to a new wave of data growth in the country, PTA added. A PTA official said that on average, 1 million 3G/4G subscribers were added each month after the launch of 3G/4G services, resulting in surge in the data revenues of CMOs that reached Rs 37.3 billion during July-December 2015, increasing by 69%, compared to Rs 22.1 billion in same period of 2014.

In reality, the data revenues are substituting the voice revenues, as voice revenues are declining and have been replaced by increasing data revenues, he disclosed.

He said this situation doesn’t support the CMOs’ Return on Investment (RoI) prospects as rising usage of data has only increased CMOS’ expenditure, keeping the overall revenues stagnant. “To mitigate the losses, CMOs have been working on the development of such distinctive mobile apps which can stimulate users to consume more data,” he informed.

The PTA official also attributed this decline to lost revenue on international calls and on roaming fees, adding that the CMOs are finding new ways to curtail the losses caused by OTT services through new approaches to bundling, therefore, the possibility of OTT applications’ suspension by the CMOs in near future cannot be ruled out.

Prior to launch, it was also anticipated that the introduction of much awaited 3G broadband services for mobile users would increase the economic output of Pakistan by 1.1% of Gross Domestic Product (GDP) as a the World Bank study indicated that 10 percentage point increase in high-speed internet connections would boost Pakistan’s annual GDP growth by 1.38% point. However, lack of the government’s interest has rendered these new generation technologies unproductive.

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