The New Zealand telecommunications market is under pressure with revenue falling 1.8% overall and forecast to decline further.
The fixed market declined even faster, at 3.8% from NZ$2.65 billion in the year to June 2012 to $2.55 billion in 2013. Traditional voice revenues fell in excess of 6%.
The decline in traditional services is caused by changing customer usage and a shift to naked broadband with IP voice, mobile and alternative channels for communication, analyst firm IDC said in its annual market analysis.
IDC put total telecommunications market revenues in the year at NZ$5 billion, down from NZ$5.1 billion in 2012 and forecast declines to continue at a compound average rate of 1.5% a year until 2017.
The level and nature of competition has increased dramatically, the report said, with the emergence of the NZ$69 to NZ$75 bundles in the broadband market and increasing popularity of the NZ$19 prepaid bundles in the mobile market.
“Prices have dropped for broadband and fixed line bundles and in mobile there is significantly more value packed into the typical plan than there was a year ago," said Peter Wise, research manager of IDC New Zealand.
Even significant growth in the number of broadband connections could not produce a boost in broadband revenue, which contracted slightly during the year as a result of price competition.
The mobile market grew a modest 0.3% during the year to June 2013, from NZ$2.45 billion to NZ$2.46 billion. Mobile data growth is being offset by declines in mobile voice and messaging.
Telecom also became the third player in the prepaid market by the number of connections, behind Vodafone and 2degrees as a result of shutting down its CDMA network, which also caused an overall decline in the number of mobile connections.
Vodafone retains the number one spot in mobile by revenue, followed by Telecom and 2degrees.
IDC’s Wise said Telecom in particular has been far more aggressive in both the prepaid and postpaid markets over the last year.
IDC said increased competition, cost challenges, capital expenditure needs and a limited scope for increasing revenues in the core market are going to put further pressure on New Zealand telcos.
“It is going to be a tough time for senior management in the sector," said Wise.