With growth returning to the telco market this year, retail competition is intensifying.
IDC's 2022 New Zealand Telecommunications Competitive Landscape report noted growth returning to the telco market with retail competition intensifying. The analyst said smaller broadband retailers are gaining market share from the incumbent.
IDC estimates the New Zealand telco market grew 1.7% YoY to March 2022. Endless Data mobile plans and continuing ultra-fast broadband (UFB) adoption are fuelling the growth. The competitive trends show incumbents losing a collective 2.9% market share by connections to smaller players including Trustpower and Contact Energy.
"An ongoing market shift is a growth in market share from energy retailers bundling in broadband services," says Monica Collier, associate research director for telecommunications at IDC New Zealand.
She cited Trustpower (recently bought by Mercury Energy) and Contact Energy as growing their market shares. She also noted that smaller energy retailers such as Electric Kiwi and Nova Energy are offering broadband services as well.
“While their market shares are modest, they still contribute to the shift in connections away from the incumbents," she added.
Energy retailers’ advantage over telco retailers
The energy retailers have a distinct advantage over the telcos; energy retailers don't need to make a profit on their broadband services. Broadband services simply augment the energy proposition and allow the retailers to offer compelling bundles and deals to customers.
"For example, one energy retailer continues its successful 'joining rewards' for broadband sign-ups that include fridges, TVs, and washing machines. Another offers Fibre 300 for a relatively low NZ$59.99 per month when bundled with power and gas services", continued Collier.
Emerging opportunities
The research found post-paid mobile connections increased 5.5% YoY. This is due to the popularity of endless data plans and ongoing efforts by providers to migrate customers from prepaid to post-paid connections with a higher average revenue per user (ARPU).
All providers gained post-paid connections and lost prepaid connections. Spark had the overall highest growth in mobile connections in the year to March 2022.
Competitive landscape
IDC expects the nature of retail telco competition to continue to evolve. The 2degrees merger and resulting 'challenger mindset' strategy will put competitive pressure on the traditional telcos such as Spark and Vodafone. The non-telcos must also watch the market closely to remain competitive in a changing market.
