Nigeria Leads as World Inches to 7Bn Mobile Users

The world is inching towards the milestone seven billion mobile subscription mark by December 2013, with emerging markets as major drivers of the growth engine, according to a new study by Pyramid Research.

The study noted that Middle East & Africa (MEA) region has already surpassed the one billion mobile subscription mark in March 2013, making it only the second region (after Asia-Pacific) to reach this milestone.

Specifically, four countries in the MEA market - Nigeria, Egypt, South Africa and Turkey - account for 35 per cent of the region’s total subscriptions.

Pyramid Research projects that by 2022, MEA will be home to more mobile subscriptions than all developed regions combined.

“This projected growth will help raise the global profile of the region’s largest players on the global stage, specifically MTN and Etisalat, and help Western European players heavily invested in the region, such as Vodafone and France Telecom.”

Significantly, the reports states that total revenue from emerging markets could be up to $720 Billion this year, an improvement of over seven per cent from 2012, whereas revenue from the developed markets are expected experience a marginal increase of 1.4 per cent reaching $1.1 Trillion.

A good sign following the 2012 slump that saw revenues contrast to 0.2per cent.

“Over the next five years, total telecommunications service revenue in emerging markets will expand at a CAGR of 6.4 per cent, nearly three-and-a-half times the rate of growth we expect to see in developed markets (1.9per cent CAGR). Leading the charge will be Emerging Asia, specifically India, China, Indonesia and Thailand.

“In 2015, mobile service revenue generated in emerging markets will exceed mobile service revenue generated in developed markets for the first time. In 2026, total telecommunications service revenue generated in emerging markets (mobile, fixed and pay-TV) will be higher than total telecommunications service revenue generated in the developed world. Operators eager to observe sustained organic growth will have no choice but to deepen their footprints in emerging markets to capture this opportunity.”

The big beneficiaries in new emerging trend are the major operators in the MEA region like MTN Group, Airtel and Etisalat who have invested heavily in infrastructure.

China which invests heavily in the region is also expected to look at the market as a significant honey pot for telecommunications business.

Already, Huawei is doing good business in the infrastructure development and deployment with a number of key operators in the region.

“Consolidation has progressed most quickly in recent years in markets where subscriber growth has slowed, competitive pressures are squeezing margins and upcoming capital requirements are high. We believe that the same forces driving consolidation in developed markets will now force the hand of players in emerging markets.

“In Africa we see potential for consolidation in markets such as Cote d’Ivoire, Ghana, Nigeria, Tanzania and Uganda, each of which is home to five operators or more. In Asia-Pacific, markets that are ripe for M&A activity include Hong Kong, India, Indonesia, Malaysia, Pakistan, Taiwan, Thailand and Vietnam.

The drivers for consolidation may be strongest in Central & Eastern Europe, where growth rates now mirror those of developed markets. Russia, Poland, Romania and Ukraine are each home to five or more players, making these ripe for consolidation.

Although historically we have seen more developed market players take advantage of these M&A opportunities, in 2013 we expect to see a greater number of emerging market players take advantage of these consolidation opportunities, not only in emerging markets but in developed markets, as well.”

As the markets continue to witness poor performances by smaller operators, the new trend will experience more mergers and acquisitions as big operators try to establish their market dominance.

“Governments will continue to float and privatize incumbents to raise funds for social programmes. International groups will look to refocus on their core business (Orascom has divested from North Africa, and Vivendi seems set to exit Maroc Telecom).

Regional operators will look for efficiencies. MTN and Airtel, for example, will seriously consider rationalizing their current footprint and potential for partnerships, while France Telecom will focus on countries with a larger subscriber base and market share leadership. Middle Eastern operators will continue to expand, while Chinese operators will seem to limit their involvement in the region.

We will likely see some of the first significant domestic consolidations with a potential merger of CDMA operators in Nigeria, as well as multiple configurations for consolidations in South Africa and the East African region.”