At a time when Facebook is getting ready to IPO, its
focus on emerging markets like Brazil, India, Mexico and Indonesia to fuel the
next stage of growth is widely quoted, and for good reasons. While the
developed world is mired in economic turmoil, large emerging markets are
becoming the new global growth engines. Their telecom industries are key
enablers of economic growth by connecting people and enabling access to the
Internet, often through a mobile device for the first time like a new $46
tablet in India or low cost smartphones in Indonesia.
Entitled D-20: Rising Stars in the Telecom Space, the
white paper profiles a list of 20 countries and "drivers" of growth
(D-20) that comprises Argentina, Bangladesh, Brazil, China, Egypt, India,
Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Poland, Russia, Saudi
Arabia, South Africa, South Korea, Thailand, Turkey, and Vietnam.
The D-20 represents the twenty emerging markets that are
expected to drive nearly 75 percent of all incremental GDP growth until 2016.
With 4.4 billion inhabitants, these 20 emerging markets are home to almost 65
percent of the world's population and generate 30 percent of current global GDP
today.
The joint study offers a high-level overview of their
macro-economic environments and the impact their projected population growth,
expanding middle class, increased rate of consumer spending, current and
projected GDP growth and mobile competitive dynamics are expected to have on
the telecommunications industry. The findings were announced at the INSEAD Asia
Campus in Singapore today.
Loic Sadoulet, coauthor of the white paper who is also a
professor of economics at INSEAD and initiated INSEAD's Africa Initiative,
said: "The D-20 represents key growth engines for the world economy as
well as the telecom industry. However, their future development will continue
at varying paces, with different sets of drivers and products and services, and
impact on enabling innovation in other industries. This report sets out to
facilitate a clear understanding of where the D-20 markets are headed and to
serve as a strategic guide on understanding the trajectory of the industry,
especially for investors and decision makers."
In their infancy, the telecommunications markets in the
D-20 were dominated by limited competition driven by domestic monopolies; low
penetration of basic services and customer tolerance for low quality. However,
a number of key shifts are reshaping the future of the telecom industry,
especially with the emergence of both foreign and domestic competition. Today,
operators are forced to adapt to a more complex set of circumstances including
intense competition, markets which are reaching saturation for basic services,
explosive demand for data services and growing pressure from investors to
develop on promised returns.
Andreas von Maltzahn, coauthor and principal at Delta
Partners, said: "All of the world's twenty largest telecom operators like
Telefonica, Singtel and Vimpelcom are present in at least one of the D-20
markets to find new sources for growth. This is not surprising as these markets
are expected to add over 1 billion new mobile users until 2015 and are already
a $330 billion industry today. We see large opportunities in D-20 markets with
mobile data revenues growing at a CAGR of 18 percent, as well as many
opportunities around content, mobile payments and other verticals."
In order to understand the industry shifts in more
detail, the authors of the report clustered the D-20 markets by tariff levels
and expected subscriber growth. This allows the mapping of countries from high
revenue growth potential (high tariffs and high expected subscriber growth)
compared to lower monetization potential (low tariffs and low expected
subscriber growth). The result is a set of clusters identified with similar
levels of market maturity, competitive intensity and hence type of
opportunities and challenges.
The following clusters emerged:
The Crown Jewel cluster represents favorable economic
conditions for driving profitable telecom penetration growth. This cluster
consists of Brazil, Mexico and Nigeria and sees high tariffs and relevant
subscriber growth left resulting in strong revenue growth potential. Its
operators are the "Crown Jewels" of respective international players
such as MTN and Telefonica.
The Goldmine cluster denotes relatively mature markets
but with high tariff levels, which allow operators to seek new sources of growth
while still generating stable cash flows from their existing business. Saudi
Arabia, South Africa, Poland, Argentina, Turkey, South Korea and Iran are
included in this cluster. While these countries have smaller populations than
the other D-20 countries, they possess the highest GDP per capita and are the
most developed of the emerging markets with tremendous potential for continued
growth.
The Rough Diamond cluster includes large countries with
low-income populations and high growth rates in service penetration. These
countries are China, India, Indonesia, Pakistan, and Bangladesh. They are some
of the fastest growing economies in the world and the telecom industry is
almost a perfect mirror for their growth. These countries account for 40
percent of the world's telecom market and are expected to drive innovation and
profitability while operating at some of the lowest tariffs.
The Coal cluster includes Vietnam, Philippines, Egypt,
Thailand and Russia where already low tariff levels and near saturation are
causing strong pressure on growth. While the population in these countries is
relatively poor they have robust economies and expect 7-11 percent growth until
2016, but they are experiencing the toughest situation for telecom operators as
new avenues for growth need to be found whilst costs kept under control in a
low tariff environment.
Operators are encouraged to understand the
characteristics that will shape their clusters and the set of challenges and
opportunities this brings so they can work to capitalize or mitigate them.
