The worst economic turmoil in 60 years is over, but the crisis has contributed to strengthening some fundamental trends that will shape the next decadein the telecom market. Wait a minute… am I crazy? Who wants to predict what’s going to take place in the next decade knowing how fluid things can be in our industry?
There will always be a new technology ordevice out there, so these are the types of predictions that are more difficult to make. I’m less anxious about Google’s next device, if cloud computing will become a trend in the near future or whether LTE will become the dominant technology for the next generation of mobilebroadband. Unpredictability is and will always be part of the essenceof the communications industry, and there will always be a new “nextbig thing.”
So here’s what’s not going to change: 2010 will denote the beginning of a decade of emerging markets-driven mobile Internet power. But first, let’s first talk about economic growth.
2010: Growth in Emerging Markets Will Outperform the Advanced Economies
In 2010, world growth will be led by emerging market consumers. Morgan Stanley forecasts 4 percent global GDP growth this year. However, this number conceals two very different states of affairs. One is a still rather moderate recovery for developed economies (2 percent average GDP growthin the advanced G10 economies this year). The U.S. will lead growth among this group (2.8 percent), the European Union is expected to growby less than half that rate (1.2 percent), while Japan should hardly grow at all (0.4 percent) and is forecast to actually fall back into a technical recession in the first half of this year. However, the outlook for emerging markets is a lot more positive, where Morgan Stanley forecasts “output to grow by 6.5 percent this year (China 10 percent, India 8 percent, Russia 5.3 percent, Brazil 4.8 percent*), up from 1.6 percent in 2009. A rebalancing towards domestic demand-led growth in EM [emerging markets] is well underway.”
Projections vary among analysts, but here’s what's important: growth in Emerging Economies has “staying power and has even been bolstered by the crisis.”
2010: The Global Communications Industry Continues to Expand, but EmergingMarkets Offset the Spending Deceleration in Advanced Economies
The communications sector will continue to grow this year despite unfavorable economic conditions. Growth of wireless services in emerging markets will compensate for the slowdown in the advanced economies. According to the analyst firm IDC, “more than half of IT industry growth will be fueled by emerging markets including Brazil, Russia, China and India. In contrast, more mature countries will see slow growth in the IT industry.”
At the same time, as I’ve stated in previous articles, the expansion of the mobile sector in emerging markets has been a key building block to economic growth, so they go hand in hand. The International Monetary Fund’s Finance & Development Magazine (September 2009) says, “Just a decade ago, there were still some countries with no mobile service at all. Since then, wireless telephone coverage has enveloped the globe. Mobile phone subscriptions have sky rocketed from 1 billion in 2002 to an estimated 4.1 billion by the end of 2008, covering more than half of the world’s population. The fastest growth rates have been in low-income countries. In Africa, mobile phone penetration has soared from just 1 in 50 people at the turn of the century to 28 percent.”
The analyst firm Analysys Mason predicted in October 2009 that 3G networks and mobile data services will prop up the world wide telecommunications market, prompting it to grow at a 6 percent CAGR to reach $2.4 trillion in revenues in 2013.The firm also reported that mobile data traffic will grow at a 131percent CAGR through 2013. The key cause for this growth is the expected 3G network deployments in many emerging markets, such as Chinaand India (in addition to LTE deployments in mature markets during the next few years).
Here’s what we know for sure. First, morepeople will use the Internet. The National Science Foundation predictsthat the Internet will have nearly 5 billion users by 2020 (compared to1.7 billion today). Second, most of the growth will come from emergingeconomies. Third, the Internet will be wireless. According to analystfirm Informa, the number of mobile broadband subscribers reached 257 million in the second quarter of 2009. This represents an amazing 85percent increase year-over-year for 3G, WiMAX and other higher speed data networking technologies. Asia has the most wireless broadbandsubscribers, but the growth is strongest in Latin America. By 2014, Informa predicts that 2.5 billion people worldwide will subscribe tomobile broadband, and I add, most of the growth will come from emerging markets.
In summary, more people will have access to the Internet in the next 10 years, the Internet will be wireless, and mostof the growth will come from emerging economies. Consequently, this brings me back to the title of this article – 2010 will be remembered as the beginning of an emerging markets-driven mobile Internet - and it’s not a prediction, just an irrefutable fact. Hopefully, the evolution of the mobile sector in emerging markets will continue to constitute a key building block to economic growth overall.
*The central bank in Brazil said Dec. 22 that the Brazilian economy will expand 5.8 percent this year. The government of Mexico forecasts 3 percent growth. Poland’s economy, the largest in the European Union’s eastern members, is entering a “sweet spot” and may grow a revised 2 percent next year (this expansion will out perform the European Union’s 1.2 percent growth figure).