OTT services, threat to Sri Lankan Telco revenues and state taxes: Dialog Chief

Dr. Hans Wijayasuriya

Dr. Hans Wijayasuriya

May 10, 2016 (LBO) – Sri Lanka’s telco industry may face a threat of increasing severity arising from revenue erosion due to the impact of Over the Top (OTT) communication services, a telecom operator said.

As OTT companies like Netflix, Skype, Whatsapp, and Google encroach on the telecom industry, operators need to find ways to counter the threat.

Dialog Axiata’s Group Chief Executive Dr. Hans Wijayasuriya releasing their annual report highlighted that providers of OTT services invade the legacy revenue field of telco operators by offering Free of Cost or Near-Zero Cost communication services.

The wave of erosion is seldom time linear and could be envisaged to be exponential and hence catastrophic in consequence, unless managed with proactive strategies, Wijayasuriya said.

“The early symptoms of such an avalanche are in fact already evidenced in Sri Lanka’s Telecommunications sector,” he said.

“It feature in the main, the depletion of International Termination and IDD revenues (by circa 12.4%), mutation of local voice revenue growth (down to 5.1% relative to past 5 year average of 8.5%) and a rapid decline in SMS revenues.”

Wijayasuriya points out that Sri Lanka’s telecom industry led by TRC and ICTA needs to be expeditious in instituting the structural changes pre-requisite to enabling a sustainable, data and IP service led future.

“We look forward to the institution of “Same Service Same Rules” based regulation – whereby neutrality in service licensing and taxation is enforced across OTT services on par with traditional communication counterparts,” he said.

“In the absence of the aforesaid adjustments to industry structure and governance, real economic returns to shareholders as well as the sustenance of government revenues will be at grave risk in the medium term.”

However a report published by PricewaterhouseCoopers in 2013 observes that telco operators can employ three possible strategies to counter the issue.

The first involves developing advanced connectivity services in order to defend their core networking and infrastructure business.

The second requires that they create new services such as data analytics and billing, which they can sell to businesses in different verticals.

The third, and the toughest of all, is to develop new apps and other services and offer them directly to consumers.

The report further says the key is not for operators to fight against the OTT players but rather to find and develop the profit pools where their particular capabilities offer the greatest chances of success.