New revenue streams keep telcos profitable

Finding new revenue streams have been the key for telecommunications companies in the Asia-Pacific region in keeping profits at healthy levels amid keen competition and maturing market conditions.

The growth in mobile broadband services, in particular, has not only helped offset declining call and text revenues, but has also led to the narrowing of the digital divide by bringing the Internet to low-income consumers.

“The cost of coping with the rise of smartphones and their surging data usage is weighing on the high margins of the region’s telecom operators,” Moody’s Investor Service said in a report.

“However, over the long term, tiered and post-paid pricing plans, coupled with reduced churn, will have a positive credit impact as traffic shifts from voice to data and video applications,” the rating firm said.

The report published on Monday included a total of 23 telecom companies in the Asia-Pacific region. Only Philippine Long Distance Telephone Co., the country’s largest phone firm, was included in the study among major local telcos.

The rating firm noted that the Asia-Pacific region remained one of the world’s largest markets by subscribers and revenues ensuring steady cash flow and stability throughout economic cycles.

In the near term, Moody’s said the cost of acquiring customers and building infrastructure to cope with exponential growth in data usage from smartphones has led to eroded profit margins.

But better pricing schemes for the use of the Internet along with the growing popularity of data and video services will help prop up revenues in the long run.

The Moody’s report also noted that in some emerging markets such as China, Indonesia and the Philippines, smartphones have become the first and main connection for later adopters of broadband technology.