As a former investment analyst, I remember the feeling when stock market screens turn deep red. Such days turn one’s stomach upside down on a dealing floor. But even from the outside, such days are unnerving. The big question in the telecoms markets making the rounds at present is how the current market turmoil will affect the telcos. The 2008 financial crisis might provide some clues to what we could expect in 2011 and 2012, albeit in a less-pronounced fashion:
Consumer spending on communications will remain pretty stable. During the last financial crisis, spending on communications remained largely untouched by the consumer. We do expect a slight migration towards flat rates for customers with the desire for greater cost certainties and towards prepaid by customers with the desire to lower their communication expenditure. One obvious danger in times of turmoil are price wars between service providers. They can offer only short-term growth relief, but at a high cost. Resulting poor margins will be felt for a long time.
Businesses will put nonessential IT projects on hold or water them down. We have not yet seen evidence that COOs and IT departments have tapped the brakes on their tech buying, but they certainly have become more cautious. If the economies of the US or Europe go into recession — a possibility, but not our baseline forecast — that will hit IT budgets, as happened in 2008 and 2009. I am hearing from telecoms providers that their enterprise sales pipelines are already under pressure as customers slow their IT investments and look for ways to reduce their telecom services spending. Projects that support end-users with their sales efforts, e.g., sales force automation projects, are likely to be less affected than others.
There seems to be a renewed interest in Africa. Is it that those who follow emerging markets have tired of China and India? Is it the recent events in North Africa that have sparked interest and hope for the region? Or could it be that, as McKinsey Global Institute put it, at least some African countries “have turned a corner and are now on the path to sustainable growth and poverty alleviation?”
From a technology perspective, it is also likely that finally with recent developments in both undersea cable and satellite links, the Internet has arrived in a way that makes Africa a viable market for ICT. And by that I mean not just for low-cost, bottom-of-the-pyramid solutions and not just South Africa, both of which have long been on the radar of some technology vendors for some time.
I’ve been studying Africa on-and-off for over 20 years now. In 1989 I took a one-way ticket to Bujumbura, Burundi (yes, I did have to look it up on a map first), traveled to Bukavu, Zaire (now Democratic Republic of the Congo), where I spent the summer, and eventually settled in Bossangoa, Central African Republic, where I was a high school math teacher for two years. At that time there were no telephones in my city although it was the largest in the region, and only limited lines into and out of Bangui, the capital. I spoke to my parents three times in two years, which is very hard to imagine in these days of Skype and Facebook. Needless to say much has changed in Africa as well.