Emerging Markets Communications Strategies

Analyzes the issues facing existing and new players who are looking for a share of growing mobile markets in over 30 developing countries, including the developing regions of Asia and Africa.

December 13, 2009 19:12 telliott
An end may be in sight to the long-running battle between partners Orascom and France Telecom over control of jointly owned Mobinil, the number one carrier in Egypt. But then, we’ve said that before. The dispute, which arose out of an arbitration claim filed by Orascom in 2007, seemed to have frozen into the status of trench warfare c. 1915, with France Telecom periodically upping its offer for the 49% shareholding not covered by the arbitrator’s ruling, and the Egyptian Financial Supervisory Authority slapping it down as inadequate. However, France Telecom's most recent offer of EGP 245 (US$ 44.71) per share seems to have broken the stalemate. The regulator has approved the offer, which represents about a 19% premium over Mobinil’s 10 December 2009 closing price. Orascom has not yet indicated what course of action it will pursue, but it seems likely that it will formally object. In losing its interest in Mobinil, it would suffer more than just the indignity of being tossed out of its home market. It would lose its second largest EBITDA contributor (after Djezzy in Algeria), and its presence in one of the faster growth markets in the region, particularly with 3G services just beginning to be rolled out.  Mobile Subscriptions With its investment in Canadian operator Globalive (Wind Mobile) at risk due to an adverse ruling by the Canadian regulator on foreign ownership, and its other operating companies requiring cash for expansion, Orascom could certainly use the money if it were forced to sell all its Mobinil holdings. However, our thinking is that Orascom would view the cash as decidedly a second-best outcome, and will probably vigorously pursue whatever legal options it finds. -Tom Elliott UPDATE: According to news reports today (14 December 2009), the Canadian authorities have decided that Globalive is Canadian enough to be granted an operating license, so that uncertainty is removed. However, Orascom still could use the money.

December 13, 2009 19:12 telliott

December 4, 2009 15:12 David Kerr

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As we rapidly close the cover on one of the toughest years the telecommunications, content and internet industries have ever seen, SA takes a look ahead beyond the recession to detail the key megatrends for the mobile industry in 2010.

We see a tough but positive mobile ecosystem outlook with devices recovering stronger than services. More consolidation is likely among network operators, while profits for device vendors will continue to flow away from handset only vendors in favor of device/services integration specialists. Emerging markets will continue to dominate volume with strong 3G rollout competition expected. The global market for services, applications, devices and infrastructure will post modest growth of approximately 3% in 2010.

The total mobile industry revenue including services, infrastructure and devices was flat in 2009. We expect a modest growth of 2.8% in 2010 to $1140B.

· In 2009, only strong growth in data spends by users ensured that total industry revenues did not decline. Data revenues grew 9.5% in 2009 and are expected to grow at a 13% rate in 2010 reaching over $200B.

· Handset market sell through revenue will rebound well in 2010, posting growth of 4% while the infrastructure market will continue to struggle and will decline slightly.

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Key issues shaping the 2010 landscape include:

  • Operators needing to balance the the strong rise in Capex requirements driven by the data traffic explosion against slow revenue growth. The likely outcome being significant M&A, network sharing and even applications development.
  • Handset OEMs will be forced will put the early stake in the ground for new device categories. Traditional OEMS will continue to struggle to match the Apple & Google vertical integration strategy which has proven so successful.
  • As the big five vendors focus on smart phones and content/services in the open markets, a race develops to get services/apps onto feature phone products or other operator customized devices
  • On-portal traffic continues to grow but is outpaced by off portal session growth. Contextualization and personalization of the user experience will determine winners and losers.
  • The rapid diffusion of Flash and HTML 5 on handsets could negate much of the need for mediacos to use open platforms/app stores in mature markets.
  • In the business sector we see SMEs and Manage Mobility as key battlegrounds. We see growth in hosted services for SMEs (e.g. Unified Communications infrastructure-one phone mobile and fixed, one voicemail etc.  Personal v corporate liable devices (iPhone v BlackBerry) becomes a major issue.
  • In the Emerging Markets area we see consolidation & 3G expansion in urban areas as key battlegrounds. With improved financing prospects, there will be significant consolidation among regional operators and rationalization of holdings.