The shifting sands of the global mobile industry have made Egypt's Orascom Telecom the eighth-largest mobile network in the world by customer numbers, displacing some of the best established international operators. In a report released yesterday, the listing of the world's biggest mobile businesses shows how significantly emerging markets have altered the telecommunications landscape.
Previous top 10 operators such as America's Verizon Wireless, Italy's Telecom Italia and Japan's NTT DoCoMo have dropped from the rankings. In their place are emerging-market operators such as Orascom, South Africa's MTN and Norway's Telenor. Each has capitalised on the rapid growth of mobile usage in Asia and Africa. But the consultancy PRTM, which produced the report, says the companies will need to alter their business models dramatically to remain on the leader board in the coming decade.
"They have done an amazing job at reaching the billion new mobile users, but we're really now at the end of easy growth for these guys," said Ameet Shah, the head of PRTM's regional telecoms practice. "The race for new customers is almost over and you are now seeing the beginning of the endgame." That endgame, the report said, is capitalising on what is expected to be a decade-long boom in demand for mobile broadband and services. Hundreds of billions of dollars will need to be invested in upgrading the world's mobile networks to handle a future where the average mobile user will require similar levels of internet access as the average household does today.
The huge investments needed will force large-scale consolidation in the industry. And operators that master the art of providing mobile broadband customers with fast, cheap service will be in the driver's seat of that consolidation process. "What the operators have to solve is how to deliver 10 times the current bandwidth for the same cost," Mr Shah said. "It's not impossible, it's just radically different."
Etisalat, the UAE national telecoms company, has placed mobile broadband at the centre of its strategy at Mobily, its Saudi Arabian affiliate. Last year, Khalid al Kaf, the Mobily chief executive, said the company's mobile broadband network was "the busiest on the planet". More than a quarter of all new broadband internet connections in Saudi Arabia are made through Mobily, with the network adding almost 50,000 new mobile broadband subscribers each month.
"I think mobile broadband will thrive. It will grow so quickly that it will do to DSL [landline internet connections] what mobile did to fixed [phone] lines," Mr al Kaf said. Etisalat's Egyptian network has also used discount prices and aggressive promotion of mobile internet packages as a differentiator between it and the two other operators in one of the Arab world's most competitive markets. Operators also need to incorporate outsourcing the management of network infrastructure, simplifying tariff plans and offering digital services that can be delivered with a competitive advantage over companies like Apple and Google, the report said.
The operators that succeed in shifting their business models will be rewarded not just by their customers, Mr Shah said. Lenders and investors will focus their funds on the companies that they believe can be globally competitive. Those funds will let operators reach a scale that dwarfs those that remain fixated on extracting maximum short-term profits from their current business model. Even in the Middle East, where the market is largely dominated by government-owned national champions, he sees an industry destined for serious change. "The major operators there face no immediate challenges, but the structure is probably unsustainable over the five-year period. When we look back in five years, I'd be surprised if it looks the same way."
His thoughts are echoed in the conclusion of the report. "Mobile telecoms is the ultimate capitalist industry," it said. "Operators that create value can establish fortunes, attract billions in capital, acquire their peers and overthrow the old nobility. "Then, with one false move, they themselves can become part of the past." @Email:email@example.com