LIME on death bed?

Two recent developments underscore the depth of the problem facing both men: the near revolt by shareholders at the recent annual general meeting and the reported $1.3-billion loss for the first quarter of 2011-12. An analysis reporting on the first-quarter losses mentioned 'a ray of hope' in the improvement in the company's average revenue per user (ARPU).

ARPU for fixed line, mobile and broadband improved by three per cent, seven per cent, and 14 per cent, respectively. At the risk of being the Grinch that stole LIME's Christmas, I am offering an analysis of the company's ARPU, using recent data from the International Telecommunications Union (ITU) and voice/data trends in other markets.

An analysis of the ITU data of 222 countries for fixed lines from 2000-2010 shows an overall increase of 22 per cent for the 11-year period. China had the highest actual increase of 149.5 million, an increase of 103 per cent, and a density of 21.95 lines per 100 persons. Density measures the number of phone lines (wired or wireless) per 100 persons. Indonesia has the second-highest increase of 31.3 million (470 per cent), density 15.83.

China's impact is massive and actually skewed the data, as absent China, the overall increase is only eight per cent. In addition, between 2006 and 2010, China has shown a decrease of 73.4 million fixed lines. Of the 222 countries in the survey, 158 showed increases and 62 decreased.

The USA had the largest absolute numerical decrease of 41.3 million (21 per cent), density of 48.70, followed by Japan with 21.5 million (35 per cent), density 31.94. Jamaica's numbers declined from 493,523 to 263,055 (47 per cent). Jamaica's density has declined from 19.12 in 2000 to 9.60 in 2010. The data suggest that, internationally, fixed-line usage is increasing at a decreasing rate, and in Jamaica, persons/organisations are disconnecting their fixed lines.

Consequently, the three per cent increase in the fixed-line ARPU for LIME should be viewed from the perspective that the increase is gained from a reducing base of users. In general, younger persons in Jamaica do not own a landline and don't intend to acquire one. These lines are owned by their parents and by businesses. Gary Sinclair was quoted as saying, "Landline is our lifeline - if it dies, we die." Trends do change, however. If the current trends continue, is LIME dead?

Growth market

The data suggest that cellular is a growth market, with all countries showing an increase. The overall increase was 628 per cent. China had the largest actual increase of 773.7 million (908 per cent), density 64.04, followed by India, 748.6 million (20,928%), density of 61.42, and Russia, 234.3 million (7,184%), density of 166.26. The USA had an increase of 169.4 million (155 per cent), density 89.86, and Jamaica, 2.7 million (746 per cent), density 113.22.

Countries like Jamaica which have a high cellular-density rate invariably start showing a decline in ARPU for voice. In the USA, for example, the growth in voice minutes used by consumers has declined by seven per cent over the last four years, while data revenues have increased by 132 per cent.

While there are no local statistics on the revenue from voice and data, I would hazard a guess that the trend is similar to the USA's. Instead of talking on cellphones, people are making use of the extra features that their BlackBerrys and other smartphones are designed to do - send email and text messages, browse the Internet, watch television and play games. With BlackBerry messenger and other social network services available on phones, persons are spending more time sending messages than talking.

There are several mobile applications such as WhatsApp, Kik, textPlus and GroupMe, which allow persons to send messages over data networks, essentially bypassing the cost of sending and receiving standard text messages. According to a recent New York Times report, companies like Apple, Facebook and Google are offering ways to make free phone and video calls over the Internet. Industry analysts posit that the ultimate risk for mobile carriers is becoming 'dumb pipes', providing only the data connections and not selling any more sophisticated communications services.

I have not examined LIME's financial report to determine if it separates revenue from mobile data and mobile voice. However, all indications suggest that ARPU from mobile voice will decline. LIME already has a relatively small market share in this segment, and the improvement in ARPU of seven per cent has not been substantial to suggest that the company will improve either market share or ARPU.

Unlike fixed lines and cellular, broadband data cover the period 2005-2010. This segment is also a growth market with a global 140 per cent increase over the six-year period. China again leads the way, with 88.9 million (238%), density 9.42; followed by USA, 30.5 million (60 per cent), density 26.34; and Germany, 15.2 million (141 per cent), density 31.59. Jamaica showed an increase of 71,685 (159 per cent), density 4.26; and Trinidad 134,225 (1,242 per cent), density 10.81. Liechtenstein has the highest broadband density of 63.83, followed by Bermuda with 61.75. This is the segment that LIME has shown the highest increase in ARPU, the segment which Jamaica has a low density (would have to more than double to reach Trinidad's density) and, therefore, has a good potential for further growth.

The data from the ITU for Internet users cover 2000-2009 and indicate only density. As expected, this is also a growth segment, with all countries showing increases. Andorra has the highest density of 67.99; Antigua and Barbuda, 67.72; St Vincent and the Grenadines, 66.34; and the Slovak Republic, 66.75. Jamaica is 106th of the 222 countries, with 21.18.

The analysis for broadband and Internet usage is similar, although the delivery of the service may be mobile or fixed. One very important factor that must be noted from the analysis is that the future of telecommunications, especially mobile, will be data and data networks. All services - voice, video and text - will travel over data networks and service providers, and regulators must be prepared for this new paradigm.

Dr Paul Golding is senior lecturer in the School of Computing and Information Technology, UTech. Email feedback to columns@gleanerjm.com and pgolding@utech.edu.jm.