Telcos see fibre-based revenues level off

Paul Reynolds, Telecom chief executive. Photo / Dean Purcell

Forecasts show dark clouds looming over telcos in a fibre-based world, as spending creeps up and revenues level off.

IDC's Rosalie Nelson says the average growth in revenue from the likes of voice, broadband and mobile-data will be as low as 0.27 per cent a year.

Nelson said these calculations included the early years of the Government's ultra-fast broadband roll-out.

Nelson said revenues in "traditional telephony", or fixed-line phone calls, are expected to decline between now and 2015, with the mobile-voice market going much the same way.

Telcos have tried to offset this by growing the mobile-data and broadband markets, but Nelson said these areas were growing from a low base and were not worth as much as the sectors in decline.

"The new areas that are emerging, they're highly competitive and the margins are lower," she said.

Part of the problem was that New Zealand invested a lot in telecommunications for its size and wealth, she said.

"When we're looking internationally and to the OECD, we've got the lowest GDP and highest broadband penetration," she said.

"You can keep adding costs, but at some point someone has to pay for the investment."

Nelson said the whole telco market was in flux, and the giants who have dominated in the past were not making the amounts they once were.

Content providers, such as those providing internet television, were taking more of the profits.

"The underlying story and the big challenge is that the nature of the market is changing and [services] are becoming embedded in other applications. Previously, [telcos] built the networks and made the money from voice, and then broadband came a little bit later.

"But as we go forward, you see massive growth in [new] services, but [telcos] aren't getting a lot of money from it, and simple economics say that if your market's not growing, why do you keep investing?"

Telecom chief executive Paul Reynolds echoed this sentiment last month, saying the industry had gone from the "darling to the dogs" of the technology world.

IDC's predictions of a flat market were matched by research firm Ovum.

Ovum's David Kennedy said there would be low revenue growth for New Zealand telcos out to 2014. This growth would lag behind the rest of the world.

A report last week revealed the global telecommunications market grew by 4 per cent last year to be worth $1.85 trillion, driven by growth in Brazil, Russia, India and China.