Why US$25bn Isn’t Worth US$25bn

Interesting news from Africa via SubexAzure. It says here: http://www.cellular-news.com/story/19951.php that African telcos are losing US$25bn every year, or a quarter their revenues.

Stop and think about that for a moment. Imagine that those telcos cut their loss to 0% for next year. So they would be US$25bn richer next year, right? No. Of course not. Communications is very price elastic – if you charge more then people use it less. The poorer the person, the more price elastic they act. The idea that African customers have a spare US$25bn p.a. they will gladly pay over to telcos is nonsense. Even if all telcos got better at recovering revenues, the likeliest impact is that they would (a) have to reduce prices or (b) get reduced business to offset their improved recovery. After all, many of the customers who make most use of telco services – fraudsters and bad debtors – have no intention of paying anyway.

Eric Priezkalns
Eric Priezkalns
Eric is the Editor of Commsrisk. Look here for more about the history of Commsrisk and the role played by Eric.

Eric is also the Chief Executive of the Risk & Assurance Group (RAG), a global association of professionals working in risk management and business assurance for communications providers.

Previously Eric was Director of Risk Management for Qatar Telecom and he has worked with Cable & Wireless, T‑Mobile, Sky, Worldcom and other telcos. He was lead author of Revenue Assurance: Expert Opinions for Communications Providers, published by CRC Press. He is a qualified chartered accountant, with degrees in information systems, and in mathematics and philosophy.