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Emerging markets
Priscilla Awde takes a tour of the world’s hotspots and upcoming regions in the telecoms marketplace
Developing telecoms markets suffer similar problems – the differences between them being mainly of degree. Despite rapid economic growth in many countries, government owned monopoly carriers predominate; fixed infrastructure is typically underdeveloped and concentrated in major cities. Frustrated by long waits for fixed phones, people opt for mobiles, which they can get quickly.
Regulators are often not independent or strong enough to enforce change or create a level playing field – dominant monopoly carriers frustrate/delay competitive policies. Many telecommunications laws lack transparency and are unevenly applied.
Foreign investment is needed to fund network development but rigid government regulations, political and/or financial instability may be discouraging: China makes disclosure of technical details a pre-condition of some contracts whilst Russia does not recognise international test data. Foreign ownership is generally restricted and success dependent on the right local partner.
Most countries want access to state-of-the-art technologies to create the sophisticated communications infrastructure necessary for economic development. The biggest challenge is extending network penetration to rural areas and second tier cities.
Russia
Notwithstanding efforts to comply with WTO regulations/international guidelines and a new 2004 telecoms law, Russian licensing requirements/procedures, equipment certification and the overall legal situation remain opaque.
The long distance market was liberalised this year but ITT is the only one of 20 licensed carriers in business. Leading altnet Golden Telecom and Transtelecom plan to start this year and next, thereby reducing monopoly provider Rostelecom's market share to 60 per cent. Golden Telecom recently announced it will complete its long distance and international Federal Transit Network.
ITU figures for 2000-2005 put the CAGR for new telephone lines at 4.6 per cent; 105.6 per cent for mobile subscribers and 49.7 per cent for new Internet users. Cellular penetration is approaching saturation and 3G licences are due to be let this year.
State controlled holding company Svyazinvest has a majority stake in principle domestic and international long distance provider Rostelecom. Svyazinvest also supports seven major regional telcos plus the Leningrad region fixed line operator Lensvyaz; Moscow's data transmission service provider Central Telegraph and the largest fixed line operator, Moscow City Telephone Network.
India
India is liberalising its telecoms sector and the Government plans to increase network penetration and connect all villages to the PSTN. As the world's outsourcing capital, domestic demand for all connectivity is growing exponentially.
Vinod Kumar, president of VSNL International believes outsourcing is only one factor: “Companies want to expand into India to provide services and establish manufacturing facilities creating a huge growth in telecoms and they will need reliable international connectivity.
“Approximately five million domestic mobile connections are added monthly and the current 200,000 broadband subscribers are expected to reach 10-15 million in three years.”
India's high tech sector is burgeoning and its location as a gateway to Asia and Africa fuels demand for reliable, secure and diverse capacity to/from the country.
According to Paul Budde, MD at Budde Communications: “At almost 12 per cent, teledensity is amongst the lowest in the world with just four phones per 100 people. The government wants to achieve 15 per cent by 2010 – but they will need to invest $100 billion. Ninety per cent of people can't make ordinary phone calls let alone Internet calls. India will be the world's wireless broadband capital since it is the only way to catch up.”
Mobile subscribers grew from 10 million in 2002 to an estimated 80 million this year, increasing at a phenomenal 60 per cent in 2005. Second only to China in mobile handset sales, Budde expects India to add another 110 million new mobile subscribers by 2007.
China
Spurred by the 2008 Olympics China is continuing the rapid development already underway following entry into the WTO in 2001. Although tightly controlled by a government prone to interfering in company policies and leaking documents to gauge industry reactions, Budde believes China is an enormous success story: “In the early 1980s it had fewer than one million phones. This year fixed line subscribers will rise by 30 million and mobiles by 48 million boosting the total number of telephone subscribers to 820 million (746 million at the end of 2005). The estimated worth of the Chinese telecoms market is $80 billion and government wants to achieve a fixed line penetration of 34 per cent by 2010.”
China is the fastest growing Internet market and the biggest mobile phone market worldwide. 3G licences were let last year so telcos can be operational in time for the Olympics.
With partnerships in both China and India, Tom Werner, director, product service expansion for Global Crossing says: “Strong regional players need global access to sell on to their customers. There are foreign ownership restrictions in both countries where all high level executives must be locals.”
Latin America
The Latin American telecoms industry is booming although regional broadband penetration is less than five per cent. Most countries want to increase voice/data connections and VPNs and, despite resistance from monopoly carriers, there are opportunities for reselling and outsourcing. Metro rings are being developed and companies are exploiting existing capacity to provide value added services.
Brazil and Mexico are the biggest single markets followed by Argentina, Chile, Colombia, Venezuela and Equador.
Telefonica and Mexican operator TelMex have stakes in major regional carriers: together the two dominate the continent making life difficult for regulators.
The regulatory environment varies between tight control to open, liberal markets.
“El Salvador has a very flexible regime in terms of market entry while Costa Rica has always been a government monopoly. The restrictive Mexican market only opened to foreign owned companies following a WTO judgement,” explains Ivana Kriznic, senior regulatory counsel for BT Americas. “Brazil has been divided into regions and telephony licences granted to different companies conditional on significant network build out. More licences will be let this year without build requirements providing opportunities for bundled data and telephony services.”
Chile is an open market but in Argentina the regulatory framework is more restrictive although both countries encourage foreign investment. Telecom Argentina is improving efficiency, flexibility and reducing costs by implementing Microsoft's Customer Care Framework and the IT giant is running pay-as-you-go trials to make buying PCs easier in developing countries.
• Priscilla Awde is a freelance communications writer
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