I’m an optimist about the future of emerging markets, and I think that the communications industry has a lot to do with how emerging markets have been shaping up in the past few years. According to a recent special report issued by The Economist (“The Power of Mobile Money: A Special Report on Telecoms in Emerging Markets,” Sept. 24, 2009): “In the grand scheme of telecom’s history, mobile phones have made a bigger difference to the lives of more people, more quickly, than any previous technology… Mobile phones will have done more than anything else to advance the democratization of telecoms and all the advantages that come with it.”
The communications industry is progressing in emerging markets, but is also going mostly mobile. In about two years, mobile is forecast to eclipse fixed broadband as the way most people use the Internet. The reason the use of mobile phones for Internet access is booming in emerging markets is simple: A large segment of mobile users don’t have a PC background or access. Poor fixed-line communications infrastructure has become an important driver of growth for mobile-technology companies.
Several industry analysts have already expressed the idea that for a lot of people in emerging markets, the mobile phone will be the primary way of accessing the Internet. According to Tony Cripps, wireless-software analyst at Ovum, Asia is already leading the way in mobile data. Morgan Stanley says China Mobile made 25% of total revenues from mobile data two years ago, compared to AT&T, where the share was 18%.
In India, one of the fastest growing communications markets in the world, approximately 9.3 million people used their mobile phones to access the Internet in the quarter ending June. Mobile Internet access over mobile phones is still in its infancy in India, but without a doubt, it will continue to grow. In Russia, the third biggest market for mobile telephony after China and India, mobile Internet is still little used (around 2% of subscribers in 2008), but it is also due to grow, with mobile payments as one of the key areas of growth.
There’s no other option for one of the markets with the highest mobile penetration rates worldwide. In Latin America, according to IDC, mobile Internet penetration in Brazil reached 9% of the 8.1 million subscribers. But just like in India and Russia, mobile Internet is also expected to take off in the country where the 2016 Olympic Games will take place.
Pyramid's third quarter 2009 Latin America mobile data concluded that significant opportunities for network operators clearly lie in mobile Internet services. "The increasing importance of mobile Internet in the data revenue pie is a clear trend in every single market, growing the fastest in Brazil, Chile, Argentina, Venezuela and Mexico,” concluded Cesar Jimenez, an author of the Pyramid report “LA Mobile Operators Turn a Deaf Ear to Ringtones.”
In five years, “mobile Internet access in Latin America will account for $16.5 billion, or almost 79% of all non-messaging mobile data revenue, whereas ringtones will make up 4%.”
What about Africa? Even there, mobile Internet is an opportunity for service providers.
Opportunities and challenges
There are clear variations across emerging markets, but an area that may well span all emerging markets is mobile banking. For example, 1 billion users worldwide have phones but no bank accounts. Juniper Research has already forecast that average revenue opportunity for operators will exceed $5 billion by 2013. “Unlike developed markets, where mobile players must often force their way into a well-established value chain, emerging nations are fertile ground for m-banking services.”
As market penetration rates for mobile services continue to increase in emerging markets, the advertising industry will also benefit. According to Pyramid Research, “the emerging markets where mobile advertising is gaining ground will account for more than 35% of mobile subscriptions globally by 2013. South Africa and Indonesia stand out as markets where the mobile sector's share of overall advertising spending will surpass that of the Internet medium as early as 2009.”
According to IDC's worldwide mobile outlook, the fact that many emerging markets are “forced to address their domestic social, political and economic challenges — ranging from the absence of many critical infrastructures, like banking and electricity, to low literacy rates and low purchasing power that translates into low ARPUs — are also fast emerging as crucibles of innovation in such areas as mobile banking, mobile money transfer and mobile education and medicine, not to mention green initiatives.”
For operators in emerging markets where ARPU is low, the need to gradually test “new and innovative business models that beg emulation by their counterparts in developed economies” is also a matter of business survival. The ground for operators in developing countries appears to be very fertile, but clearly profitability will ultimately come out of a brand new way of thinking. A fresh way of doing business is the only way to stay alive in today’s tough economic climate.
Monica Zlotogorski is Editor of TM Forum’s Inside Latin America and Vice Chair of TM Forum’s Latin America Advisory Board