Over the years, the traffic from wholesale market in voice calls have increased by 50% in 2012 from

2008 levels of 330 million minutes, the revenue remained flat and modestly declined to $13.4 billion in
2012. The major reason for revenue decline is reducing international call rates due to price war among
various players. Notably, the price decline is also the key driver for double digit growth over the past 20
years. However, after two decades of continuous price reductions, and with global mobile penetration
approaching 90 percent, the incremental effectiveness of further price cuts or mobile subscriber growth
is wearing off.
TeleGeography projects that retail prices will fall an average of 6 percent annually between 2013 and
2018, outstripping traffic growth, and causing global retail revenues to decline by about 2 percent
annually. At this pace, global traffic would increase 26 percent by 2018, to 688 billion minutes, while
retail revenues would fall 8 percent, to $88.8 billion.
These factors are compounded by the fact that OTT (over the top) services are siphoning off at least a
share of international voice traffic. Hundreds of millions of people now use over-the-top (OTT) voice,
video, and text communications on their computers and mobile devices for a growing share of their
calls. Skype, which launched its service in 2003, has long been the bellwether of this market.
TeleGeography estimates that Skypes on-net international traffic grew 36 percent in 2013, to 214 billion
minutes. While the volume of international telephone traffic remains far larger than international Skype
traffic, Skypes traffic is growing far more rapidly. Skype added approximately 54 billion minutes of
international traffic in 2013, 50 percent more than the combined volume growth of every carrier in the
world, combined. Given these immense traffic volumes, its difficult not to conclude that at least some
of Skypes growth is coming at the expense of traditional carriers.
While the use of OTT services will grow and number of international carriers will decline, PSTN will stay
for longer. We believe there is no threat to existence of PSTN. In coming year, we will see lot more
consolidation in international voice market. It is crowded, offers narrow margins, presents no easy
growth opportunities, and holds the prospect of a longer-term decline. Consequently, a growing number
of retail service providers, including many incumbents, will choose to get out of the business of
transporting and terminating international voice traffic. Others will seek to steadily reduce their
involvement in this market. While the international calling market will be around for many years to
come, the number of participants must contract.