Emerging markets will lead the global economic recovery in 2010, with countries such as China and India likely to show the most obvious signs of upturn, but prospects for other emerging economies are also promising. Developed economies are expected to grow about 1.7 percent next year, while emerging markets will increase their GDP by 4.9 percent, according to a recent report by Bank of America Securities-Merrill Lynch Research.
The term “emerging economies” was first used in 1981 by Antoine W. Van Agtmael of the World Bank. There are currently 28 emerging markets in the world, which constitute approximately 80 percent of the global population and about 20 percent of the world's economies. With most consumers located in emerging markets, we simply can’t ignore this fact and the unique, innovative consumer trends we see coming out of these markets.
In the communications industry in particular, companies have lagged the market’s recovery since March 2009, according to Bank of America Securities-Merrill Lynch Research. But despite the fact that there were wide variations across markets, emerging economies will continue to develop at a pace that will surpass developed economies and probably further influence the future of our industry, particularly in the mobile sector. China's communications market is already the second largest telecommunications services market in the Asia-Pacific region after Japan, according to Pyramid Research, and it will surpass Japan by 2014.
As we move towards a more customer-centric business model, we can’t ignore the power of 80 percent of the world’s population, and these consumers buy products and services, love or hate brands, influence their peers and demand services from their providers in their own, particular way. And as globalization forces continue to expand, these consumers can influence the wider “global village”. Service Providers in emerging markets are preparing for the future, and that is why they have continued to experience healthy growth in terms of IT spending this year despite the global financial crisis.
The Mobile Revolution
As the world becomes more and more mobile, the global communications market is expected to recover in 2010, with mobile data being the major engine of growth. Global mobile penetration is estimated at 60 percent and will jump to 84 percent by 2013, led by growth in India, China and other emerging markets. China and India will add 829 million mobile subscribers in 2009-2013, which will represent 44 percent of the world's total net additions during that period (Pyramid Research). Given this data, it’s clear that organic growth will come mostly from emerging markets.
Currently, China’s mobile penetration stands at just over 50 percent, in Indonesia it is at 63 percent, and India is at 34.3 percent (it is expected to pass 54 percent by 2010). But in other emerging markets in Asia, mobile penetration is close to/or has exceeded 100 percent (like Malaysia and Taiwan). Looking at other parts of the world, mobile penetration in Peru and Mexico has reached 66 percent and almost 75 percent, respectively. But in countries such as Brazil and Colombia, mobile penetration is already at 81 percent and 83 percent, respectively, and well over 100 percent in Argentina and Russia.
While there’s still room for organic subscriber growth in markets such as China and India, for the most part the future for service providers in emerging markets – that have focused so far on increasing connections – is going to be about increasing the level of additional, innovative services and improving the quality of their customer experience. Saturation is around the corner, and the increase of triple and quad-play offerings has turned the telco-cable competition increasingly fierce in many emerging markets.
In a recent column published in TM Forum’s Inside Latin America, Wally Swain, Senior Vice President Emerging Markets, Yankee Group, indicated that “churn management becomes even more critical of an issue, and keeping customers from churning is the best way to improve the bottom line. Prepaid churn management is all about using sophisticated data mining and CRM techniques to target offers that appeal to a particular client’s profile.”
Swain added, “This is the OSS challenge as penetration rises, growth slows and it is no longer sufficient to merely hang out a sign for clients to know where to sign up. Using advanced OSS tools to reduce prepaid churn and also the percentage of inactive customers is the route to an improved bottom-line in these difficult economic times.” And I would add, and this is the right strategy even beyond this challenging economic stage (and beyond Latin America).
The innovation of services has been in most instances about delivering an “integrated” offering that is mostly just about combining the bill with a discount for a package of services. That was a relatively easy move, but according to Ignacio Perrone, Industry Manager, ICT, Frost & Sullivan, the next step will be a much more significant and qualitative effort, as service providers move from bundling to what he calls “blending of services” but in an even more complex mobile world, determined by not just one device, but a scenario of multiple mobile devices per consumer and an overload of content.
What is consumed and how it’s consumed will change radically. How services are packaged, offered and paid for, will have to change too. This new, more complex type of convergence will further affect the customer experience. This is a challenge that affects developed and emerging markets at the same time. It is a world with more of everything, everywhere: services, devices, content, you name it.
According to Perrone, whoever understands it first and develops the necessary capabilities and appropriate business model will be the clear winners.
We don’t really know where the global mobile market will be 10 years from now, or how OSS/BSS systems will continue to transform themselves to support our industry’s needs. But one thing I know for sure, I’d be looking in emerging markets for clues. The customer is king, and the greatest percentage of future global subscriber growth is in those markets. Watch closely, many of the most innovative solutions are flourishing from emerging markets these days. (source:
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