BARCELONA, Spain – Emerging markets and the carriers that serve those areas took center stage, literally, during day two of this week’s Mobile World Congress event in Barcelona, Spain, as leaders from India’s Bharti Airtel, Telefonica’s Latin American operations and VimpelCom talked about the challenges and opportunities present in their respective markets during a keynote address.
The three leaders included Sunil Mittal, chairman and managing director at Bharti Airtel; Santiago Fernandez Valbuena, chairman and CEO of Telefonica Latin America; VimpelCom CEO Jo Lunder.
While all three provided insight into various emerging markets with minimal overlap, all seemed to indicate that while growth in those markets appears limitless, economic challenges remain.
All three indicated that while mobile broadband penetration is their focus for future growth, there was still trepidation in getting the devices needed to supply the demand. The biggest concern was device pricing, with Mittal calling for the GSMA, which operates the MWC event, to look into establishing an initiative to produce a sub-$50 smartphone or tablet device. That model would follow a similar successful initiative undertaken by the GSMA more than 5 years ago that produced a low-cost GSM-based handset that helped drive the voice market in developing countries.
Mittal noted that if the industry is able to crack the smartphone pricing model, there was a good chance that emerging markets could quickly catch up to their more established counterparts in mobile broadband penetration and perhaps shake the “emerging” description from their “markets.”
“Device side is where we are challenged,” said Mittal. “I think GSMA needs to help and maybe get vendors to work on getting price points down to $50 with large volumes, let one vendor get to market and let the best man win.”
That initiative received additional support from up high as later in the afternoon Google Executive Chairman Eric Schmidt noted during a separate keynote that he would like to see the price of Android-powered smartphones drop down to the $100 to $150 range in the near term.
Another concern for carriers in emerging markets was the current push by governments to rush new entrants to market in a move they think will help drive down consumer costs. Lunder noted that a concern of VimpelCom’s was that governments avoided introducing this “hyper competition” in the marketplace that would see margins squeezed for established operators.
“We need to avoid a hyper-competitive environment,” Lunder explained. “This market is very capital intensive and we need to ensure a return on capital.”
Lunder added that countries that realize this issue are likely to see a greater influx of investment from wireless carriers, a situation that should lead to sustainable economic improvements for those countries.
“We will always allocate capital to markets where we get a consistent return,” Lunder noted. “We need them to understand that hyper short-term competition is not the solution for their people.”
Valbuena echoed the point noting that the mobile telecom space was a very capital intensive market and that “If you are not in a top position it will be hard to make it.”
Bharti Airtel’s Mittal had probably the best quote from the session when he noted that in realizing the difficulty it faced in starting operations in the early 90s, including a decided lack of qualified employees and resources, noted that “Aspirations have to be better than resources.” An apt motto for carriers looking to crack emerging markets.
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