Global challenges for telcos

Telecom operators in the region remain remarkably upbeat despite facing some serious challenges such as falling ARPU and tariffs.

Tags: 3GARPUIPTVTariff
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By  Roger Field Published  December 1, 2009

At a number of the events that the CommsMEA team attended in November, from Telecoms World Middle East and FTTX Megna in Dubai to Iraq Telecoms in London, a common theme that emerged was the continuing battle that operators face against falling ARPU and the continual downward pressure on prices. 

Certainly, as the global economy continues to stagger along, operators are feeling the pinch, despite the sector being somewhat insulated compared to most other sectors.

According to research from US-based Infonetic Research, capital expenditure from global telecom service providers hit a plateau in 2008, marking the end of a five-year investment cycle and the start of a three-year disinvestment cycle.

Furthermore, global telecom capex is expected to decline by 6% in 2009 compared with the previous year, mainly due to a shakeout in the Middle East and Africa, a weakening US dollar, expected declines in the Brazilian and Mexican currencies, and delays in US broadband stimulus funding.

While operators in markets as diverse as Iraq, Jordan, the UAE and the USA may operate in very different conditions and face some very different challenges, falling ARPU and downward pressure on prices seem to be challenges that are common to all operators.

Despite this, the messages that have emerged from recent telecom events in the region have been remarkably upbeat, with operators and vendors taking a realistic but optimistic approach to the tough challenges they face.

For example, the ARPU problem is particularly familiar to operators in Jordan, where competition is fierce and spending on telecoms extremely low by international standards.

As Nayla Khawam, the recently appointed CEO of Orange Jordan told CommsMEA at a recent event in Dubai, Jordan is a mobile market that is "completely and exclusively price driven".

While such a market may not sound like the best place to invest in new services, Orange Jordan remains optimistic that it will succeed with the roll out of its 3G network, for which it gained the county's first licence in August for about $70 million.

Part of the reason for this optimism is perhaps Khawam's plan to take the case for 3G to the people of Jordan by explaining to customers how they can benefit from 3G services and the many applications that can be launched on the back of it.

Similarly, while Orange Jordan makes its first steps towards 3G and mobile broadband, operators in countries with far more developed telecoms markets are also taking a pragmatic approach to the challenges they face - namely churn and declining ARPU - by assessing the merits of advanced services such as mobile TV and IPTV over fibre networks.

And as operators roll out fibre networks, the need to offer customers such services becomes even more pertinant. As Simon McGrath of IPTV specialist SeaChange said at the recent IPTV forum in Dubai, if operators don't launch and manage these services on their own networks, other companies will, and they will monetise on the operators's network in the process.

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