Wholesale providers not measuring up

Catherine Haslam and David James/Ovum
11 Oct 2011

An increasing number of telecoms service providers now appreciate that wholesale is a valuable source of revenues that also helps reduce unit costs by increasing traffic volumes. Yet our 2011 Wholesale Customer Survey has found that many are in danger of limiting or missing out on revenue opportunities by not responding to the needs of their customers as the financial crisis deepens.

Worryingly, Ovum’s biennial survey of wholesale customers found that the performance of suppliers has declined against most of the criteria that matter most to buyers. The service levels, repair times, and product and service features offered by suppliers influence the buying decisions of wholesale customers the most after price, yet supplier performance on all three has declined during the last two years.

Some blame cost-cutting exercises put in place by carriers to offset the price pressure and other adverse effects of the economic downturn, while for others it is a result of wholesalers failing to recognize and respond to the retail trends driving the businesses of their customers. In some instances, this failure is in danger of breaking the wholesale model because wholesale product features and pricing are not enabling intermediaries to differentiate.

Price pressure becoming untenable

Price has been, is, and always will be the most important decision-making criteria for customers buying wholesale services. Prices are reducing as competition among carriers increases and pressure on intermediaries from the retail side is being passed on to wholesalers. The result could become unsustainable for both buyer and seller.

For international commodity services, margins are being squeezed to a dangerous point according to one European mobile operator we spoke to, which said:

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