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Business News of Friday, 16 March 2012

Source: citifmonline

Telcos profit margins dwindle

“Profit margins in the telecom industry in the last five years seem to have dwindled significantly despite massive growth and investment in the country”.

This is according to the Chief Executive Officer of the Ghana Chamber of Telecommunications Kwaku Sakyi Addo.

In 2008 for example, when mobile users were about 10.5 million, the operators made almost $10 dollars from each user every month. But in 2010 when subscriber base increased to over 16 million, the average revenue from each user dropped to about $6 dollars.

Recent figures even show the Average Revenue Per User (ARPU) has shrunk further to between $2 and $3 dollars.

Meanwhile statistics show that in the last decade investments in the industry has reached $5.6 billion and the industry currently contributes about 10% of government’s revenues.

According to the telecom operators the declines are a result of high operational costs and massive investments without corresponding returns. This is not to say that they are not making profits internally but comparing their profit margins to the operational cost and what they used to make a few years back, the shareholders are raising eye brows.

Meanwhile the operator of the industry, National Communications Authority (NCA) will have none of the comp lains from the operators. The Director General Paa Rock Van Percy stating the position of the authority said “I will not pretend they are not facing difficulties but it’s a business they are running and I am bit at a loss when some people want to stress too much some statutory obligations they must meet. There is a responsibility on all our part, operators are here to make money and business is not free”. He stressed.

The two organizations were responding to questions from a section of the media being trained by the Media Foundation for West Africa in Telecoms reporting.

The decreasing ARPU figures highlights the growing concern in the industry about a possible inflection point which is pushing the operators to invest massively in infrastructure for data which according to them could be the most reliable source of income to augment revenues from voice.

Most of the telcos have also diversified their portfolio by not only generating and terminating calls but have also moved into business solutions management.

Some have also partnered with banks and insurance companies to develop products to increase their revenue channels.