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Technology News
Study Says Global Telecom
Market Still Vast
(03/04/99, 1:47 p.m. ET)
By Jason P. McKay , tele.com
The worldwide demand for telephone
service will grow in leaps and bounds along
with most long-term economic expansion
over the next decade, but most of the
growth will occur outside current U.S. and
Western European hot spots, according to a
new study released by Deloitte Research, in
New York).
The study says approximately half the world's
population has never made a telephone call, and that
population is in developing nations.
According to Deloitte Research, internationally, there
are about 150 million individuals on waiting lists for
telephone services. This lucrative opportunity is
extremely appealing to a number of players, including
U.S. incumbent carriers, as well as international
supercarriers, the study says. That appeal is driven by
declining costs fueled by competition, as well as ample
room for international carriers that want to expand their
global presence.
However, all that glitters is not gold. Global
telecommunications supercarriers as well as domestic
carriers looking to vault into the fray for new customers
must take into account the financial instability of many of
these countries such as Japan, Russia, Brazil, the
Southeast Asia region, and other developing areas.
Additionally, Deloitte said wireless communications are
likely to pull ahead of wireline communications on a
global scale. Only a handful of U.S. telecom companies
have extensive experience with wireless, said the
research company.
While some countries may be financial quagmires for
some carriers, others are blossoming with possibilities.
"In terms of volume and opportunity, China presents
just huge opportunities for both telecom equipment
carriers and telecom service operators," said David
Roddy, chief telecommunications economist at Deloitte
Research. "The economic growth there will continually
surpass the U.S.'s growth certainly every year for the
next 10 years." However, China's growth will require
patience and attention to rules and regulations, he
added.
To assist carriers in assessing the risks and possible
profit gains, Deloitte has developed a strategy, akin to
portfolio analysis methods of traditional stock and bond
mutual funds. According to Deloitte, a telecom carrier's
portfolio should contain multiple countries that have
different risks and returns with a goal of balancing the
entire package, while keeping risk is at a satisfactory
level. The portfolio model has been used by investors
for years to determine the proper balance of risk and
return on investments, according to Roddy. Deloitte has
taken this model one step further to adapt it to the
international telecom industry, giving supercarriers a
method to evaluate their global expansion strategies and
maximize shareholder value, Roddy said.
Diversification for telecom carriers has been on the
increase recently for a number of reasons. For instance,
incumbent carriers subject to new domestic competition
look to joint venture with foreign carriers. Additionally,
countries continue to privatize government-owned
facilities in many parts of the world. With opportunities
abounding, this new push for diversification -- telecom
colonization -- can prove to be quite profitable, Roddy
said.
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