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NZ’s telecommunications sector ‘incredible price pressure’

New Zealand’s telecommunications market is seen expanding at a 1.4 percent annual pace over the next five years, belying the intense competition and price pressures in both fixed and mobile services, according to IDC.NZ’s telecommunications sector under ‘incredible price pressure’, IDC says

New Zealand’s telecommunications market is seen expanding at a 1.4 percent annual pace over the next five years, belying the intense competition and price pressures in both fixed and mobile services, according to IDC.

The telecommunications specialist researcher projects the local market will expand to $5.8 billion in 2021 from $5.4 billion currently, propped up by sales of mobile handset, according to its annual New Zealand report, which hasn’t been released for public consumption. IDC New Zealand research manager Monica Collier said retailers face skinnier margins as the level of competition sees them offer more perks to attract customers and she anticipates there will be some consolidation in the market over the coming year.

“This growth disguises the true story of a market that is showing incredible price pressure and levels of competition in both fixed and mobile,” Collier said. “While artificial price increases (brought about by wholesale broadband price changes) have caused growth in the past, and mobile handset revenues will continue to prop up the market in the future, overall ARPUs (average revenue per user) are either flat or declining in both broadband and mobile.”

Dominant retailers Spark New Zealand and Vodafone New Zealand both commented on the state of heightened competition in the market, and Spark’s Simon Moutter has also floated the prospect of consolidation in an industry that’s seen new entrants from power companies such as Contact Energy and Trustpower and media group Stuff as a means to shift to create a bundle of products for consumers.

Government figures yesterday showed monthly data usage doubled on both fixed and mobile connections in the year ended June 30 compared to the same period a year earlier, while fixed broadband usage was more than 10 times what it was in 2012, over the period when Chorus was spun out of Telecom Corp to participate in the government-sponsored ultra-fast broadband roll-out. Fibre technology accounted for about 21 percent of broadband connections as at June 30 compared to 12 percent a year earlier.

IDC’s Collier said both the broadband and mobile connections numbers are expected to rise over the coming five years. Still she said that pace will slow “at the end of the forecast period as the market approaches saturation.”

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