Telcos must be more innovative to stop customer flight

Over the past couple of days there has been a lot of coverage of the price wars that local telcos are engaged in following the reduction of interconnection rates set up by the industry regulator.

Interconnection agreements are established between telcos to allow their subscribers to dial across networks.

Such agreements include clauses on how revenues will be shared between telcos.

It is characteristic for competitive industries to use pricing as a tactic to win over customers.

Unfortunately, this tactic has short term benefits and rarely gains customer loyalty in the long term.

In the telecommunication industry, prices of voice calls have been declining over the years.

As a result, the key performance indicator for telcos, average revenue per user or ARPU has been declining.

This state of affairs has forced telcos to rethink their strategy on how to grow revenues and maintain profitability.

Retain customers

The reality of the matter is that telcos can no longer depend on voice calls as their primary source of revenue because the voice category is fast becoming commoditised.

In the very near future, voice calls will be provided for free alongside other value added services.

Experience from more advanced countries shows that our local telcos will have to rethink how they acquire and retain customers.

They will probably have to consider insisting that all customers enter formal contracts with them in order to enjoy their services.

These contracts will probably oblige customers to pay a fixed annual fee regardless of whether customers are active or inactive.

With the mandatory registration of customer SIM cards, this makes this proposition all the more compelling for telcos to consider.