Mobile voice revenues in nosedive

Telecoms voice services experienced a steep decline in 2022, and technology research and advisory firm BMIT projects that call volumes will continue declining over the next five years.

According to BMIT’s latest SA Voice Services and UC&C Report, traditional voice revenues were particularly hard hit by the impact of load-shedding.

Mobile cell sites experienced significantly higher levels of downtime due to power outages and battery theft, which had the effect of blocking fixed and mobile calls to mobile phones.

However, even if load-shedding ended or the impact was mitigated by operators beefing up their networks’ power resilience, the disruptive long-term trend of substituting traditional voice calling with alternative communication styles would remain intact.

BMIT anticipated exceptional growth in emerging unified communications and collaboration (UC&C) services amid declining fixed and mobile call volumes and revenues.

BMIT managing director Chris Geerdts said this was because UC&C services are disrupting traditional telephony just as Uber disrupted the metered taxi industry.

“Customers want the benefits of high definition calls, conferencing, video and multimedia, as well as the ability to send and receive messages and posts when it suits them,” Geerdts said.

He said people hardly think twice nowadays when using over-the-top apps like WhatsApp and Telegram to communicate individually or with various personal, family, and business groups.

“Similarly, platforms such as Microsoft Teams and Slack have become indispensable daily tools at work,” said Geerdts.

“However, from an industry standpoint, the revenue from UC&C is still well below that of voice.”

With fixed voice, the legacy public switched telephony network (PSTN) market has been in decline for over 20 years in South Africa, which BMIT said was initially due to a shift from fixed to mobile usage.

It said next-generation voice-over-IP (VoIP) services have also been eroding the PSTN market, and these services are slightly more resilient to the longer-term rate of decline.

The Fixed Voice category in the above chart shows their combined revenue.

“Much of the UC&C revenue is attributed to cloud-hosted PBX and collaboration platforms such as Microsoft Teams,” BMIT stated.

“The category has seen a healthy increase of 21% in CAGR over the past three years, but this growth only offsets the rate of decline of the total by 0.7% in each year, due to its much lower weighting in the overall services’ basket’”.

BMIT’s forecast for UC&C is an 11.6% compound annual growth rate through 2027, reaching R4.0 billion.

It said the longer-term disruptive trend of declining voice traffic in South Africa mirrors the global trend.

“The UK, for example, already experienced a 14% decline in fixed line and 2% decline in mobile traffic in 2021, as reported by the UK communications regulator, Ofcom,” BMIT said.

“The sub-trends include ongoing fixed-mobile substitution, and recently also a decline in mobile calling, both of which have been amplified by the acceleration in over-the-top (OTT) voice and multimedia usage during the Covid–19 pandemic.”

BMIT noted that although OTT voice and multimedia usage are general trends impacting traditional voice calling, especially in the business-to-consumer segment, UC&C is having an equally significant impact on the business-to-business market.

BMIT’s survey of enterprises showed that Microsoft Office and Teams are by far the most widely used productivity tools and collaboration platforms, respectively.

“However, the big jump in the past two years has been the massive adoption by businesses of WhatsApp as a collaboration platform, underscoring the disruptive impact the app is having on the traditional voice calling market,” BMIT stated.

“WhatsApp usage in businesses has grown significantly in a single year, increasing by an average of 18 percentage points, across the Small, Medium and Large company segments.”

BMIT said that some local UC&C platform players are integrating WhatsApp into their omnichannel communication solutions — notably Telviva with their Telviva One and Telviva Engage offerings.

“This is a good example of a service provider ‘going with the flow’ of disruption, and exploiting the trend rather than ‘swimming against the tide,’” it said.

BMIT said cloud-hosted communication platforms have reshaped the tariffed voice routing landscape globally and are making a similar impact in South Africa.

“These range from basic cloud-hosted exchanges (PBXs) to systems with a rich UC&C feature-set and, in some cases, integration with other productivity and ERP/CRM platforms (through APIs),” it said.

“Microsoft Teams, generally procured through Microsoft 365 licences, made a massive impact during the Covid–19 pandemic, stimulated initially by Microsoft offering free Teams usage.”

Many companies are strongly invested in the Microsoft ecosystem. They will have top-of-the-range corporate Microsoft 365 licences that include components enabling breakout directly from Teams to fixed and mobile networks.

“The largest growth opportunity in cloud communication platforms, as seen by local players, lies in cloud-hosted PBXs, this being the largest market in revenue terms currently, and one which is still growing at c. 20% p.a. in respect of cumulative active user licences,” BMIT said.

“All leading voice players have this type of product offering, the growth of which mitigates, somewhat, the general maturation in their tariffed voice services revenues.”

However, BMIT said that even for most VoIP-focused players, tariffed voice is still a significantly larger revenue component than their UC&C revenues, and remains the service category that they would most actively need to defend.

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