The Nigerian telecom industry is experiencing unprecedented revenue erosion, excess of 31%

The Nigerian telecom industry is experiencing unprecedented revenue erosion, excess of 31%

The telecom players are indeed in trouble. Things do not look great for them anymore.

The monthly revenue that accrued to Nigeria’s telecoms operators from the provision of voice services to their over 151 million subscribers has witnessed a dramatic crash by an estimated 31 per cent in one month.

From N241.6 billion in December last year, aggregate voice revenue by the operators including the Global System for Mobile Communications (GSM), Code Division Multiple Access (CDMA) and fixed networks fell to N166.4 billion in January.

The decline, representing N75.2 billion revenue losses, is equivalent to 31.1 per cent fall in their income accrual. The figures, which represent the amount of money spent by telecoms subscribers in making calls on their respective networks, also represent the revenue generated by the telcos. This can be linked to the reduction in Average Revenue Per User (ARPU)

According to analysts, reduction in ARPU has been partly traced to the emergence of the Over the Top (OTT) players, which operators said were eating into their profitability potential.

OTT services are services carried over the networks, delivering value to customers, but without any carrier service provider being involved in planning, selling, provisioning, or servicing them; thereby implying that traditional telcos cannot directly earn revenue from such services.

Already, industry analysts say that OTT is a service-based on the Voice over IP communication protocol (VoIP), a disruptive technology that is rapidly gaining ground against traditional telephone network technologies.

According to a report by the NCC on the activity of OTT in Nigeria, with the increase in uptake of mobile VoIP services provided by apps such as Google, Facebook, Skype, Viber, WhatsApp, among others, telecoms operators “face the risk of eroding revenues and profitability.”

The report noted: “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, Skype, Viber, among others.”

That is the reality that these telcos can turn out to be dumb pipes in near future. Their best strategy will be to begin monthly data subscription as is done in most advanced economies. That way subscription will guarantee their revenue base.

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