Global voice market: advantage Indian majors?
05-02-2010
Falling margins in international wholesale voice are forcing a strategic reappraisal
With margins and call volume growth falling, and competition from VoIP rising, international wholesale carriers are reapprising their business. One option, outsourcing, could be a boon for Indian majors interested in this business
Recent mergers in the wholesale market highlight the need for carriers to bolster or exit their international voice businesses in the face of greater pressure from VoIP service providers. Skype's on-net international traffic volumes grew 63% last year to 54 billion minutes according to Telegeography, making it the largest provider of international communications in the world.
"It is widely accepted that the industry will continue to consolidate as scale has become paramount" says Chris Ward, senior director of marketing at iBasis.
International voice traffic amounted to 406 billion minutes in 2009 for all wholesale operators combined, according to Telegeography estimates, up 8% from 376 billion minutes in the previous year. But the recession has not helped the international wholesale market. Traffic on routes into Mexico, the world's busiest call destination, were down 4% in 2008, while traffic to Central America fell by 5%.
Until two years ago international call volumes enjoyed a compound growth rate of 15%, says Telegeography, but since then growth has fallen to 8%. And it is likely to erode further both as Skype services become more prevalent on mobile phones and as Google adds more features to its voice application: In November, Google bought IP voice communications company Gizmo.
Already the world average retail price of an international call is under one-fifth of the US$1.20 per minute price of 15 years ago, says Telegeography. Margins are correspondingly tight: iBasis achieved margins of 0.64 US cents per minute in the second quarter of 2009, only after getting rid of 1.5 billion minutes of even lower-margin traffic, says Telegeography.
Such trends have driven wholesale operators to focus on data services such as content distribution networks. And those left in international wholesale voice are seeking scale and cuts in opex.
In December, Belgacom International Carrier Services (BICS) and MTN completed the merger of their international carrier operations, which Belgacom says makes it the largest international wholesale operator in Africa. Also at the end of last year, KPN completed its merger with iBasis, which claims to be one of the largest international voice wholesalers carrying 28 billion minutes of voice traffic in 2008.
iBasis also struck an agreement with Telecom Italia's wholesale arm, Sparkle, to migrate their bilateral voice traffic to IP. According to Ward, IP ports can be 15 times cheaper than TDM ports, and he adds that IP transmission and operational costs are lower. Outsourcing is another trend, notes Ward. In June last year BT outsourced international voice termination to Tata Communications.
Based on story in www.totaltele.com
With margins and call volume growth falling, and competition from VoIP rising, international wholesale carriers are reapprising their business. One option, outsourcing, could be a boon for Indian majors interested in this business
Recent mergers in the wholesale market highlight the need for carriers to bolster or exit their international voice businesses in the face of greater pressure from VoIP service providers. Skype's on-net international traffic volumes grew 63% last year to 54 billion minutes according to Telegeography, making it the largest provider of international communications in the world.
"It is widely accepted that the industry will continue to consolidate as scale has become paramount" says Chris Ward, senior director of marketing at iBasis.
International voice traffic amounted to 406 billion minutes in 2009 for all wholesale operators combined, according to Telegeography estimates, up 8% from 376 billion minutes in the previous year. But the recession has not helped the international wholesale market. Traffic on routes into Mexico, the world's busiest call destination, were down 4% in 2008, while traffic to Central America fell by 5%.
Until two years ago international call volumes enjoyed a compound growth rate of 15%, says Telegeography, but since then growth has fallen to 8%. And it is likely to erode further both as Skype services become more prevalent on mobile phones and as Google adds more features to its voice application: In November, Google bought IP voice communications company Gizmo.
Already the world average retail price of an international call is under one-fifth of the US$1.20 per minute price of 15 years ago, says Telegeography. Margins are correspondingly tight: iBasis achieved margins of 0.64 US cents per minute in the second quarter of 2009, only after getting rid of 1.5 billion minutes of even lower-margin traffic, says Telegeography.
Such trends have driven wholesale operators to focus on data services such as content distribution networks. And those left in international wholesale voice are seeking scale and cuts in opex.
In December, Belgacom International Carrier Services (BICS) and MTN completed the merger of their international carrier operations, which Belgacom says makes it the largest international wholesale operator in Africa. Also at the end of last year, KPN completed its merger with iBasis, which claims to be one of the largest international voice wholesalers carrying 28 billion minutes of voice traffic in 2008.
iBasis also struck an agreement with Telecom Italia's wholesale arm, Sparkle, to migrate their bilateral voice traffic to IP. According to Ward, IP ports can be 15 times cheaper than TDM ports, and he adds that IP transmission and operational costs are lower. Outsourcing is another trend, notes Ward. In June last year BT outsourced international voice termination to Tata Communications.
Based on story in www.totaltele.com
