New Study Says Global Telecom Market Still Vast, Untouched
teledotcom.com
•March 4, 1999 •
By Jason P. McKay
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 US and
Western European hotspots, according to a new study released by
Deloitte Research (New York). The study noted that approximately half
of 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 currently on waiting lists for telephone services. This
lucrative opportunity is extremely appealing to a number of players,
including US incumbent carriers, as well as international supercarriers,
the study said. 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.
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"In terms of volume and
opportunity China presents just
huge opportunities for both
telecom equipment carriers and
telecom service operators," said
Dr. David Roddy, chief
telecommunications economist at
Deloitte Research.
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However, all that glitters is not gold. Global telecom supercarriers as
well as domestic carriers looking to vault into the fray for new
customers must take into account the current 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 US telecom firms
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 Dr. David
Roddy, chief telecommunications economist at Deloitte Research. "The
economic growth there will continually surpass the US's growth
certainly every year for the next ten years," said Roddy. However
China's growth will require patience and attention to rules and
regulations, he added.
In order 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. leveThe portfolio
model has been used by investors for years to determine the proper
balance of risk and return on investments, said 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, according to
Roddy.
Diversification for telecom carriers has bee 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 - telecommunications colonization - can prove to be
quite profitable, said Roddy.
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