Telecom 15 3.5. Relevant population, sample size and


Telecom operators’ challenges with Over the Top (OTT) Services


Prepared By:
Mohamed Ahmed Maher Roshdy

Supervised by:
Dr. Ahmed Shalaby

2, Submission date: 9/11/2017

of Contents
1.      Introduction. 2
1.1.       Definition of Key terms. 2
1.2.       Problem definition. 3
1.3.       Research Questions. 3
2.      Literature Review.. 4
2.1.       What is the effect of
the OTT services on the telecom operators revenues, Data Traffic, Voice and
SMS?   4
2.1.1.        Revenues. 4        Telecom operator losses
to OTT applications: 5        Revenue Growth in the
Telecom Market Versus the OTT Market: 6
2.1.2.        Data traffic: 7
2.1.3.        Voice: 7
2.1.4.        SMS: 8
2.2.       What are the alternatives
that the telecom operators could use in dealing with the OTT companies?   8
2.2.1.        Blocking OTT.. 9
2.2.2.        Bundling with OTT.. 9
2.2.3.        Partnering with OTT.. 10
2.2.4.        Developing their Own
Services. 11
2.3.       Conclusion. 12
3.      Empirical research
proposal 14
3.1.       Research problem… 14
3.2.       Exploratory research. 14
3.3.       Research method. 15
3.4.       Proposition. 15
3.5.       Relevant population,
sample size and method of sample selection. 15
3.5.1.        Population. 15
3.5.2.        Sample size. 15
3.5.3.        Method of sample
selection. 16
4.      References. 17

1.  Introduction



Definition of Key terms

Over the top (OTT):

OTT (Over-The Top) refers to the applications
and services, which are accessible over the internet and ride on the Operators’
networks offering internet access services, like social networks, video aggregation
sites, search engines etc. (Mnakri, 2015)

Problem definition


The increase of demand on the e-commerce, advertising, and digital
media content that now transfers over the telecom operators networks has
created significant new opportunities, but telecom companies have been unable
to benefit from them. Instead, these opportunities have been captured by
digital newcomers that have built successful business “over the top” of the
telecom operators’ networks.

like Skype, Google, Facebook, Amazon, Netflix, among many others. (Roman, Bartlett, Groene, &
Mialaret, 2013)

These Over the top (OTT) players are enabled by technology advances
such as smartphones, IP networks, innovative services and shift in consumer
preferences towards the free services. And although they utilize the telecom
operators network and infrastructure, they do not contribute directly to the
telecom operators’ revenue.

The wide variety of applications and services offered by OTT
players is pushing the customers away from the telecom operators restricted,
relatively more expensive and limited number of services. (Sujata, et al., 2015)


Accordingly, the telecom operators are in a big challenge to determine
what is best the strategy to use in dealing with the OTT companies


Research Questions


What is the effect of the OTT services on
the telecom operators’ Revenues, Data Traffic, Voice and SMS?What are the alternatives that the
telecom operators worldwide use in dealing with the OTT companies?








What is the effect of the OTT services on the
telecom operators Revenues, Data Traffic, Voice and SMS?


Telecom players are facing the risk of losing significant revenues
and market share to the emerging OTT challengers. (Thunström, Björn; Almqvist, Erik; Lasku, Agron;
Taga, Karim, 2011)

Figure (1) shows the decline of the ARPU (average return per user) with
the revenues of the telecom operators and number of subscribers with time

(Mnakri, 2015)

According to
Informa’s World Cellular Revenue Forecasts 2018, global annual SMS revenues
will fall from US$120 billion in 2013 to be US$96.7 billion by 2018, due to
increasing adoption and use of Over-The-Top (OTT) messaging applications. (Hibberd,

The OTT VoIP (Voice
over IP) market is growing at a rate of 20% and Its application’s usage will
reach 1.7 trillion minutes by 2018, which makes $63 billion in lost revenue. (Sujata, et al., 2015)       
operators’ losses to OTT applications:

Figure (2) shows the losses that happened to the revenues of the
worldwide operators from 2012 to 2016, in the SMS and Voice areas

(Mnakri, 2015)

Growth in the Telecom Market Versus the OTT Market:

Figure (3) shows the revenue growth in both the
telecom market and the OTT market

(Mnakri, 2015)


2.1.2. Data traffic


The impact of OTT
players is not just limited to telecom voice and messaging services but has led
to an exponential increase in the data traffic causing severe congestion
problems in their telecom network. A major contributor to the increased data
traffic is the growing consumer appetite for more video. (Sujata, et al., 2015)

According to “Cisco
Visual Networking Index” in the years between 2013 and 2018, mobile data
traffic is rising at a compounded annual growth rate of 61%. (Cisco Visual
Networking Index, 2017), and It is expected to grow from 1.5
exabytes to 15.9 exabytes per month by end of year 2018 (Sujata, et al., 2015)

2.1.3. Voice

VoIP providers such as Skype and Viber offer
free calls on-platform and inexpensive calls off-platform. With these options
available to the consumer, it is becoming increasingly difficult for operators
to charge higher prices for voice calls. While some operators have tried to
differentiate their services by appealing to call quality, consolidated billing
and other experiential factors, it’s hard to beat the free services and users
do not seem to be convinced. It is estimated that carriers is losing US$386
billion in voice revenue worldwide between 2012 and 2018. (webb henderson -Legal and Regulatory advisory, 2014)

2.1.4. SMS

The number of SMS messages sent was down
worldwide for the first time ever in 2013, while OTT messages more than
doubled. (Vincent, 2014)

Of the many OTT messaging apps, WhatsApp has
been getting the lion’s share of media attention recently since Facebook
acquired it for US$19 billion. However, it has some strong competitors
globally, with Line (from the Japanese subsidiary of South Korean Naver
Corporation) and WeChat (from Tencent Holdings in China) both are making
significantly more money than WhatsApp. (webb henderson -Legal and Regulatory advisory, 2014)

What are the alternatives that the telecom
operators worldwide use in dealing with the OTT companies?


operators use different alternatives in dealing with the OTT companies, these
alternatives are: 

2.2.1. Blocking OTT

Operators can adopt
a short-term strategy where they can decide to deny users the access to the OTT
services. If applied, it would halt SMS substitution. However, this is a short-term
strategy and has a high dependency on net neutrality policies in each country,
moreover it is detrimental to the business as it will ultimately limit the
revenue-generation possibilities for the operator through increased data usage.
It should be noted that it will only work if all the operators in the same
country adopt same strategy simultaneously.
Telecom companies in many countries have either blocked Skype or slowed down
the speed of skype traffic however users can get access to the blocked content
using VPNs.




In UAE, Etisalat has
blocked the Skype and other VoIP services for using their network and
cannibalizing revenue, such blocking of voice OTT has been possible only because
UAE is a highly regulated market and Etisalat has the support of telecom
regulator. (Sujata, et al., 2015)

2.2.2. Bundling with OTT

Content bundling is
another innovative way of an operator to bundle the data intensive OTTs like
Video apps with their normal voice subscription plans to encourage the customer
for using these apps thus driving the increased data usage. This also enhances the
customer experience as the time bound monthly limit instead of per Mb charging
eliminates the fear factor for customers when signing up to a value-added


After a failed
attempt to block Skype, TeliaSonera, now offers Skype with selected data plans.
Many Indian operators such as Tata Docomo, RCom, Airtel among others have plans
specifically for Whatsapp, Facebook, saavn services. Also, Vodafone UK has
begun to incorporate a choice of one of Spotify Premium, Sky Sports or Netflix
access free for 6 months, as part of their Vodafone 4G Red plans. This gives
Vodafone a nice headline message which encourages customers to sign up to a
higher tier and increases mobile data usage. (Sujata, et al., 2015)

2.2.3. Partnering with OTT

Partnering with the
opponent can be a good strategy when it is difficult to beat them at their
game. Many telecom operators are using this strategy where they are partnering
with the OTT players and benefit from their big traffic.


Axis, an Indonesian
telecom operator has entered into a partnership with Viber wherein Axis lets
its customers buy a Viber data service rather than a full data plan.
DiGi telecommunications, a Malaysian mobile service provider, has partnered
with WhatsApp provider where the DiGi customers can get unlimited access to
WhatsApp service for a fixed fee.

In India, Aircel
partnered with Nimbuzz, Where Aircel encouraged its subscribes to download
Nimbuzz application whereby 40 MB of data usage would be transferred for free
to those subscribers who would download and activate the application within a
time span of 24 hours. (Sujata, et al., 2015)

Developing their Own Services

Another long-term
strategy is to
create entirely new experiences by developing an in-house applications and
services and offering them directly to consumers.

This enables the telecom
operator to have full control over the service. The operator can develop the
necessary expertise in-house or acquire a company with relevant skills and
know-how. But this
strategy has proven to be the most challenging model of all for operators, and
it will likely remain so. The large software and Internet players, such as
Apple, Google, Facebook, Amazon, and Microsoft, have already captured large
segments of this market, including music, search, social networking, and they already
attract very huge volumes of traffic to their sites. (Meffert & Mohr, 2017)


T-Mobile USA has
launched Bobsled application, Telefonica Digital has introduced Tu Me service
both of which offer free voice and texts. Orange have also launched their own
branded OTT communication services namely Libon. Similarly, Comcast has started
providing web access to its films and TV shows in order to compete with
Netflix. (Sujata, et al., 2015)

This table shows
some examples of the alternatives chosen by different operators




There is a big threat facing the telecom
operators from the OTT companies, and each telecom operator must find the best
alternative that suites it to react to this threat. At the same time the
telecom operators are benefiting from the high data usage of the OTT services
from their clients and accordingly gaining some additional revenues.

Although this challenge is happening between
the telecom operators and the OTT companies, but they have to realize that both
of them are benefiting from each other, and that the growth of anyone of them
would benefit the other one, where the telecom operators control the networks
that enable the OTT services and its Quality of service (QoS), while the OTT
services provide new revenue streams to the telecom operators which would allow
them to keep funding their network expansion and growth.

From the different examples of the telecom
operators around the world, the new trend happening now is that most of them
tend to make a partnership with the OTT companies, as it is becoming very
difficult to block the OTT services, especially that there are new technologies
could be used to bypass this blockage (like using VPN), and also it is very
difficult that the telecom operators would develop their own applications and
services to compete the OTT services, because that would require very huge investments
to be done.





research proposal

Research problem

How the revenues of the Egyptian telecom operator “Vodafone Egypt”
is affected by the OTT services and What is the strategy that it is using to be
able to face the OTT companies?

Exploratory research

As an exploratory research for the effect of the OTT services on
the Telecom Operator revenues, it is found that China Mobile, world’s largest
operator, has declared that it faced a drastic decline in its profit for the
first quarter of 2014 and the company’s analysis for such a decline was that
they were severely affected by the new OTT services, where Its profit fell by
9.4% to its lowest point in five years (Ben Chong, 2013).

And as an
exploratory research for the alternatives to be used, the annual report of
Etisalat group for year 2015 (Etisalat Group, 2015), indicated that
Etisalat UAE launched C’Me – the first rich communication suite in the region.
With C’Me, customers can enjoy reliable high-quality rich communications – including
voice or HD video calls from their phones or tablets (iOS and Android) over the
mobile network or Wi-Fi, which enhanced the company’s revenue stream.

Research method

A questionnaire will be used as a research method, where the
questions will be listed to the respondents to see the effect of the OTT
applications on Vodafone Egypt’s revenues and what is its strategy to face the
OTT services.


The huge download and customer usage of the OTT
services have negatively affected the revenues of Vodafone Egypt severely over
the past several yearsVodafone Egypt has adopted a partnership
strategy to face the effect OTT services and has improved the revenues of the

Relevant population, sample size and method of
sample selection

3.5.1. Population

Vodafone Egypt mobile subscribers, which are
about 25 million subscribersVodafone Egypt employees and management

3.5.2. Sample size

For Vodafone Egypt mobile subscribers, will
target the youth from the age group 18-29, as the youth are the main group who
affects the download of the OTT services, and the sample size would be 2500
subscribersFor Vodafone Egypt employees and management, we
will target the company’s CXOs and from each department will target the
department head with 2 employees from the same department

3.5.3. Method of sample selection

Will use the Non-probability judgmental sampling, as the research
is considered an exploratory research, and this sampling method would save the
time and money of the research















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October). GSMA. Retrieved from

Cisco Visual
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Etisalat Group. (2015).
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Hibberd, M. (2013,
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Meffert, J., &
Mohr, N. (2017, January). Overwhelming OTT: Telcos’ growth strategy in a
digital world. McKinsey & Company – Telecommunication.

Mnakri, M. (2015).
“Over-The-Top” Services: Enablers of Growth & Impacts on Economies. ITU
Region (p. 4). Manama, Bahrain: ITU.

Roman, F., Bartlett,
C., Groene, F., & Mialaret, N. (2013). Enabling the OTT revolution:
How telecom operators can stake their claim. Booz & Company.

Sujata, J., Sohag, S.,
Tanu, D., Chintan, D., Shubham, P., & Sumit, G. (2015). Impact of Over
the Top (OTT) Services on Telecom Service Providers. Indian Journal of
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Thunström, Björn;
Almqvist, Erik; Lasku, Agron; Taga, Karim. (2011). Disruptive Threat or
Innovative Opportunity? Arthur D. Little.

Vincent, J. (2014).
Text Messages decline in the UK for the first time as Whatsapp, Snapchat
rise. Independent.

webb henderson -Legal
and Regulatory advisory. (2014, June). Partnering with OTT providers.
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