Jumping on the Band Wagon …
…or has it long since left for telecommunications in emerging markets?
OK, let’s be honest: anyone still asking this question must have been asleep for the last few years. Seeking to maintain their growth rates, telecommunications operators have been busy investing in emerging markets in South America, Eastern Europe, Asia, and the Middle East. Now the band wagon is rolling on to Africa. But are any opportunities left for a late entry into the emerging markets? And if so, how can they be exploited?
In the Middle East and Africa, a number of companies specialized in emerging markets such as Orsacom, Zain and Etisalat are using systematic internationalization strategies to achieve impressive growth rates in both profits and market capitalization. In the period from 1/2004 to 1/2008, Orascom’s share value increased twelvefold, while their operational profit grew by a factor of more than seven. Zain and Etisalat each enjoyed a twofold to threefold increase in their share value and profit growth over the same period.
In Asia, successful emerging market players include Singtel and Telekom Malaysia, and on the American continent America Movil is a major player. In addition to these regional players, there are also global players participating in the market’s growth through acquisitions and a refocusing of their portfolios. Vodafone, for example, has invested more than €15 billion in Turkey, Egypt, South Africa, the Czech Republic, Romania, and India since 2005 and has most recently won the second mobile license in Qatar, for a recently announced price of USD 2.12 billion. These investments have been partially financed through a restructuring of the company’s shareholding portfolio and the sale of shares in mobile operators in saturated markets such as Sweden, Belgium, Switzerland, and Japan. Telefonica is another example of a global player which has significantly strengthened its presence in emerging markets – ten Latin American countries – by taking over the Bellsouth Holding in 2004/2005.
Where revenues and profits are still growing
In economic terms, the emerging markets are of similar relevance to borderline industrialized nations. BRIC is the term on the tip of everyone’s tongues – an abbreviation for Brazil, Russia, India, and China – emerging markets which grew three times as fast as the G7 countries in 2006 and 2007. From the investor and expert’s point of view, however, BRIC is already old hat. Goldman Sachs has extended the BRIC list to include additional growth candidates – the so-called “Next Eleven (see Figure 1).
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