To start off the new year, we here at Developing Telecoms thought it would be interesting to take stock of the market and identify what the top telecom trends in emerging markets will be during 2012. We decided that the best way of doing this would be to ask the people who really know: top executives at network operators, services providers and equipment vendors who work in the market and are experiencing developments first hand.
Developing Telecoms contacted a selection of these individuals and organisations, asking for their impressions on key current trends. We also invited more general comments to give respondents an opportunity to tell us about the issues at the forefront of their minds, as well as trends that we might not have been aware of.
The response was truly amazing, with over 100 companies and organisations supplying us with detailed and considered comments. The sheer volume of replies exceeded our expectations, and we couldn’t help but feel pleased at this confirmation of the esteem in which our publication is held across the entire telecoms industry. It also clearly shows the very high level of commitment amongst the individuals and organisations working in the field to addressing the challenges of communications in emerging markets that exists.
As you would expect, around half the organisations that responded were network equipment suppliers. Companies at every level of the market and from every continent were represented, including major manufacturers based in emerging markets.
The services sector made up around a quarter with network operators and service providers, handset and enterprise services companies providing the balance of responses. Five leading associations in the sector provided input.
It was inevitable that mobile technologies were the predominant technology sector, but we received significant input from other sectors including incumbent fixed wire operators, equipment vendors, and cable & satellite companies.
The original intention of this article was to cover each of the main trends, but given the many valuable insights we have received we have decided to publish several articles over the coming weeks to enable us to go into greater depth on the issues which concerned respondents the most.
We asked whether the main focus for communications in emerging markets over the next 12 months would be urban or rural areas - and why. We wanted to know which services would drive growth the most and which factors which could restrict it. We asked specifically about the impact of increasing energy prices, as these are having such a huge impact on services in emerging markets.
We asked about key technologies such as LTE and Cloud to assess their potential over the coming year. Lastly we asked how competition will affect the development of the market.
The expansion of communications into rural areas remains a key issue and attracted a huge number of comments. There is a widespread expectation that 2012 will be a breakthrough year, when a combination of falling ARPU and increasing competition in urban areas, new public-private partnership business models, regulatory pressure, advances in technology and the development of new services will lead - according to Kim Hartlev of Synchronica - to “great strides in the widespread delivery of rural connectivity”.
Respondents almost universally agreed that increased network efficiency and better network management are leading to lower CAPEX costs, which will enable operators to improve coverage in existing areas and roll out services more rapidly in previously unserved areas. Strong demand for services such as mobile money, e-health, e-learning and e-commerce will be the positive drivers. In particular, “mLearning and mHealth will go mainstream across Africa in 2012” according to Tango Telecom.
Limitations to backhaul capacity will remain one of the key stumbling blocks to both rural and urban growth. However, even here there are high expectations in 2012 as a result of both the lower prices offered by increased satellite capacity and from increased deployment of fibre optic cable. “African shore countries are now very well connected with brand new undersea fibre. 2012 is the year to extend inland”, said David Noguer Bau of Juniper Networks. “The traditional barrier has been cost, but that is now being broken down rapidly” adds Mark Lambert of Advantech Wireless.
Another major issue affecting the expansion of rural communications is the cost and availability of energy. According to Vishal Sharma and Volker Held of Nokia Siemens Networks, energy costs make up 30 - 50% of an operator’s OPEX in markets with a high proportion of off-grid sites. Operators were unanimous in naming energy costs as the OPEX they most want to reduce.
The bad news is that energy costs will continue to rise. The good news is that - as ECI Telecom and several other respondents remarked - “it makes economic sense to be green”. Respondents expect a significant increase in the deployment of hybrid power solutions using combinations of wind, solar, bio-mass and hydrogen fuel cells in 2012.
However, a number of interesting new trends are likely to emerge in 2012. The first of these is that operators will take a more comprehensive approach to energy saving, looking not just at base station Gensets but at the overall energy footprint of their networks. This will result in a shift to lower power consumption technologies for towers and a focus on reducing the use of air-conditioning, as well as a greater trend towards contracting energy management out to specialist companies and infrastructure sharing business models. Additionally, according the green energy specialist Flexenclosure, 2012 could well be the year when Community Power schemes start to make an impact.
While many respondents believed that 2012 will show big gains in rural areas, there was also widespread agreement that urban services would continue to generate the most income for vendors and service provides alike. OneAccess’s Alexandre Benhamou states: “As growth of people and businesses and therefore investment continues to increase in the urban areas... service providers will continue to focus their attention here.”
According to Jean-Pierre Lartigue, Head of Corporate Strategy at Alcatel-Lucent, urbanisation will be a major challenge for CSPs in 2012. He sees an accelerating trend towards small cell technology as the most effective way of meeting this challenge – and other respondents agreed.
Voice is still profitable and will remain a core income generator in 2012. In handsets, entry level access devices in the $10 - $30 price range and $10 feature phones will be “key in creating a catalytic effect in adoption”, according to Malaysian WiMAX specialist Greenpacket. According to Synchronica, “the next generation of affordable feature phones, jam-packed with apps and solutions relevant to the market they serve” will make a big impact in 2012. Nokia believe that dual SIM handsets will show big gains in 2012 for their ability to enable customers to make the most of the tariffs available to them.
In the business sector, SMEs are expected to provide the biggest traffic growth and opportunities in 2012. According to Ilan Seidner of RAD “...broadband Ethernet for SMEs will be a real revenue driver”.
In the consumer sector, mobile internet (i.e. mobile broadband) services including messaging, entertainment, social networking and payment will be the biggest revenue generators, increasingly in collaboration with OTT service providers. “In 2012 mobile phones will become the dominant mode of payment enabled by cross-network and cross-border m-payments”, claim Tango Telecom. We also believe we are going to see growth in vertically integrated, operator and handset agnostic services.
That the “Cloud is a natural for emerging markets” (RAD) is a widely held view. “Cloud services offer users the ability to transfer high up-front costs to relatively low ongoing monthly service costs. That is incredibly attractive to emerging markets”, says Mark Lambert of Advantech Wireless.
Opinion was, however, divided as to the timing, but a majority feel that 2013-2105 will be the time for Cloud for most emerging markets, with take up being very fast when it finally takes place. In 2012 Cloud is likely to be of most value in the managed services sector.
If Cloud lies beyond 2012, so does LTE in the view of most observers. Typical of these was Dominic Smith of OSS/BSS provider Cerillion: “LTE has the potential to revolutionise access in emerging markets. However, it will take some time and considerable investment to achieve this goal...it is still very early days.”
Such activity as there is will be in the more developed areas, such as major cities in Brazil, Nigeria, Russia and in the Middle East. “LTE will only have a few percentage points of penetration by 2015” according to Karri Kuoppamaki of Nokia Siemens Networks. Nonetheless, he and many others still believe LTE investment represents a strong business case for emerging market operators.
Perhaps not surprisingly, many suppliers were reluctant to be forthcoming about the troubles of operators and service providers. That it will be tough - and will get worse - is not in doubt. The prevailing opinion was that the advantage might belong to service providers.
The overall agreement is that better regulation will be essential, and that collaboration is the only way out for everyone. However, will 2012 be the year that it happens? On balance, probably not.
From this survey, it is clear that the market for communications in emerging markets is robust and growing. Key issues are capacity - in both rural and urban areas - and energy cost; key services are data driven.
The term ‘leapfrogging’ was used in reference to the long established way that, unencumbered by legacy systems, emerging markets will move directly to the technology most suited to their unique requirements, often using this in ways not anticipated in the developed world.
It is a strongly held view that this will increasingly be the case in the future, and many examples of how this may occur were provided. We plan to go into this in future articles over the coming weeks which will examine some of the trends covered here in more depth.