The term 'BRICs' has become a buzzword in financial markets and refers to the combination of the world's fastest growing economies: Brazil, Russia, India and China. The acronym was first coined in 2001 and prominently used in a report by Goldman Sachs to argue that the BRIC economies are rapidly developing and by 2050 will eclipse most of the current richest countries of the world.
The communications sector is a clear reflection of that shift in the global economy. Two of the top ten telecoms companies by market capitalization now have headquarters in emerging markets (China Mobile and AmîÂÆ’ica Mî£Å’il). Outside the top ten there are several fast-growing companies with headquarters in Africa, Asia and Russia that are threatening to become bigger than former industry superpowers, such as BT, France Telecom and Deutsche Telekom.
Global economic changes are here to stay. The opportunities are clear, but also the challenges and the timeframe for change are dramatically accelerating. Successful transformations are no longer measured in decades, but rather in months.
TM Forum's recent industry update report - 'Building on Success: Investment Opportunities in Changing Times' - provides a summary of some major market landscape factors, as well as key strategies identified for short-term and long-term growth for service providers.
Drivers and inhibitors
The report indentifies a number of key global factors that operators face:
- Economic conditions are changing sufficiently to alter spending and investment decisions in the developed, developing and emerging markets. This will alter the plans and actions of service providers, their suppliers and customers.
- Global market drivers and inhibitors combine to place a premium on organizational effectiveness and resource management skill (capital, technological and human resources).
- Globally business services are expected to grow 5% annual thru 2012. This market will be a key generator for revenue growth for CSPs.
- Highly profitable PSTN revenue is melting away - up to 55% may soon be gone. CSPs must target growth by investing in new service offerings that also decrease churn and improve ARPU to sustain revenue and growth.
- Bundled offerings threaten previous investment assumptions and are a key path to revenue retention.
Open and competitive markets involve changes in subscriber service preferences and demographics, which mean that CSPs must pay close attention to factors that lose customers. To expand revenue growth in mobile services by 15% annually Asian operators must continue to invest in new services for the current high ARPU subscriber base, move to more flexible billing approaches to address the market diversity and continue to broaden penetration into low infrastructure areas.
Short-term strategies to grow revenue in the face of a downtrend in global ARPU include pursuing changes in customer acquisition and retention, raising ARPU by using product and pricing bundles (especially data plans) and expanding service offerings for data.
Targeting operational spending to build customer satisfaction can both increase subscriber base sizes and reduce customer losses in the Asian market. Leading CSPs in the region can take advantage of innovative service offerings, high quality back-office systems and savvy marketing to reduce churn and increase revenues.
Regional CSPs can achieve long-term growth by nurturing core competencies in making investments and managing risk.