Going global

In its latest earnings report, Verizon Wireless achieved a retail, post-paid average revenue per account (ARPA) of nearly $160 per month. How much higher can this number go now that most of Verizon’s wireless customers are on 4G LTE post-paid contracts? And in a regulated market like the United States, how many subscribers can Verizon legitimately expect to service? It is very likely that price wars, like we’ve seen in Europe, are on the horizon in the United States, and companies like Verizon must broaden their addressable market to maintain revenue growth.

There are numerous strategies that enable CSPs to become global service providers. The first is to establish or invest in operations in developing regions, like Telefonica has done in LATAM and Orange has done in Africa. Telenor, a service provider that began life in Norway, far from steamy Southeast Asia, has actively pursued business in EMAP, and owns a position in DTAC, Thailand and DiGi, Malaysia. Telenor also operates its own brand in MENA.

A second strategy it to focus on offering basic services that are most needed in developing regions, such as mobile money and mHealth, which can be accessed and managed from feature phones. Orange’s mobile money service uses SMS to process transactions, and competes with M-Pesa from Vodafone. Orange says Orange Money is a hit in Africa, and now has more than 10 million customers in Africa and the Middle East. These services are service provider agnostic, and function like an app.

A third option is to leverage global networks, such as those from Tata Communications, in order to offer enterprise customers global flat-rate pricing and establish a presence in emerging markets. According to the Economist, western multi-national corporations expect that 70 percent of their future growth will come from the developing world. By partnering with a company like Tata Communications, service providers never have to say “no” when asked by corporate customers if they can handle an enterprise’s telecom needs in less-developed markets.

A fourth option is to partner with companies like Facebook, who are working with local governments to bring basic services to emerging markets. During his keynote at Mobile World Congress in February, Mark Zuckerberg urged service providers to join him in bringing connectivity to the next billion customers. “In the US we have 911 to get basic services. Similarly, we want to create a basic dial tone for the Internet,” he said. “Basic messaging, basic Web information, basic social networking.” 

While some question the nobility of Zuckerberg’s pursuit, and see it more as a land-grab than a refrain from “We are the World,” connecting the developing world is clearly the next major move in telecommunications.

Rightsizing the business

The business dynamics in emerging markets are very different from those in the developed world. Margins are very slim, and the push is for basic connectivity and services, not ultra-high speed broadband and streaming 1020p video. Network systems must be designed with peak efficiency and lowest cost in mind. These are perfect cases for: next-gen, highly efficient, converged OSS/BSS offerings from companies like Huawei, Amdocs, Comverse, and NetCracker; advanced network management tools from Nokia, Ericsson, Cisco, and Alcatel-Lucent; and network equipment that relies on renewable energy. In many ways, emerging markets can be test beds for the latest and greatest, because there is little to no legacy hardware/software to replace.  

Another key difference is in the design of services and their use. Apps designed for use in emerging markets must exhibit three key traits: localization (as in language and customs), lightweight (consume as little mobile data as possible), and feature-phone based. Similarly, communications services must be as efficient as possible.

In some very remote regions, companies are exploring radically new ways to connect customers, such as drones, satellites, and lasers. Google’s Project Loon, for instance, relies on high-flying, solar-powered balloons to beam Internet to the ground at 3G speeds.