IDC's COVID-19 Coverage: A/NZ Telcos Acting Fast to Meet Changing Customer Needs

Six months ago, telcos focused on 5G deployment, mergers and acquisitions, and corporate sustainability. Now COVID-19 is forcing industry changes to cope with shifting demand from a locked-down population. Video app use is skyrocketing as remote employees use conferencing and collaboration apps. Consumers watch more video and play more online games in lieu of going out. Enterprise customers' focuses are shifting to connectivity, data centre, and collaboration. 

There have been significant shifts in customer behaviour. Vodafone NZ says voice calls on its network are up 60%, fixed broadband data up 20% and international roaming is down 99%. Chorus' midday peak data flows doubled, and NBN Co notes peak increases in broadband traffic.

Telcos Acting Fast to Meet Changing Customer Needs

The telcos have taken steps to provide for their customers changing needs and avoid churn. Several have pledged to not disconnect customers for non-payment. Spark, Vocus NZ, Vodafone NZ, and Telstra have removed data caps on broadband plans for a limited time. No data caps means no 'surprise bills' for customers.

Chorus and the LFCs are providing free wholesale connections for households that the Ministry of Education has identified are without internet where students are e-learning. Spark has relaunched its Jump service, providing discounted prepay broadband for families without fixed broadband.

Telstra, Optus and Vodafone Hutchison Australia (VHA) are offering mobile customers one-off blocks of extra data for April. VHA is giving its mobile customers unlimited national calls in April.

NBN Co is boosting capacity (CVC) to retailers at no charge. It’s a smart move on NBN Co's part to front foot the capacity charge issue, given the history of some retailers 'scrimping' on capacity to the detriment of customer experience.

The major Australian telcos have formed a COVID-19 impacts working group to share information and collaborate.

Revenue Deferral is Better than Churn

Some of the above measures may result in revenue deferment. This is preferable to customer churn. Customers in acute financial hardship may churn but will connect again in better times. Telcos would rather let them pay later than lose them to another provider.

Voice calls and data usage are up, much of this will be higher utilisation of plans, rather than increased ARPU. The loss of roaming revenues is a material impact; Comcom figures show the NZ telcos earnt $90.7 million from international roaming annually in its last telco questionnaire.

While New Zealand telcos can still sell mobile devices via online channels, IDC has lowered its device shipment forecast for New Zealand. Even before the lockdown, retail traffic was down. In lockdown, uncertain times may defer discretionary spending. As Australia moves to stricter lockdown, expect a similar pattern.

Families with several prepay mobiles (e.g. for children) may defer top-ups. Children aren’t leaving the house and can use OTT communication apps over Wi-Fi instead. 

Chorus and the Local Fibre Companies (LFCs) may take a hit on incremental revenues as they reprioritise field workforce and reduce install volumes during the lockdown.

Network Impact

Fixed networks in New Zealand are holding up well. The networks are somewhat futureproofed. Last year, network providers reviewed their dimensioning and upgraded capacity ahead of the live-streamed Rugby World Cup.

Chorus' midday traffic doubled from normal to 1.99Tbps on the first day of lockdown but has since settled to a steadier state. Chorus' capacity accommodates for broadband traffic increasing to 3.5Tbps. IDC expects the LFCs to hold a similar position, relative to their customer base size.

As more Australians elect to work from home, increasing network traffic puts pressure on the National Broadband Network (NBN). NBN Co reports that its business hour peak is up 21% at 9Tbps. A full lockdown will put the NBN under pressure. In particular, the 20% of consumers on contentious HFC connections and rural/remote customers.

5G: An Opportunity and a Challenge

In New Zealand, 5G coverage and capacity creates a larger addressable market for fixed wireless broadband connections. With Chorus curtailing most installs, customers wanting 'similar to fibre speed' connections could choose fixed wireless. With no truck roll requires, fixed wireless installs can continue under lockdown.

The inhibitor to New Zealand's 5G deployment is the lack of available spectrum. The government will auction temporary licenses in the 3.5GHz band. The auction, due to take place end of March, has been deferred, with a new date to be announced. This will be a frustration to the mobile network operators keen to push ahead.

In Australia, mobile networks tend to perform better, speed-wise, than the NBN. The opportunity for mobile network operators is to migrate suitable customers to 5G fixed wireless plans. Telstra has already announced it will expedite its 5G rollout during the pandemic as demand for connectivity increases.

Enterprise Services

Telcos can expect an increase in enterprise requirements for connectivity and data centre. More organisations are working remotely and migrating apps to the cloud. Business travel is replaced with collaboration technologies. Webex, Zoom, Microsoft, Zoho, Avaya and others are offering free solutions remote working. IDC expects enterprises will also need to evaluate their digital resiliency and increase their focus on Enterprise risk management.

Final Word

Telcos have made initial moves quickly to respond to changing customer demands and do their best to protect revenues. Telcos must shift their focus to de-risking churn, controlling costs, and pivoting to provide for Enterprise customer needs.

IDC has published a report on the impacts of COVID-19 to the Australasian telco industry. This complimentary report is available for decision makers in the Australasian telco industry, and to telco tech suppliers. The report includes full coverage on the topics covered in this article, plus forecast scenarios and guidance. If you would like a copy of the report, please connect with your IDC account manager or send me a message on LinkedIn.