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Digital Transformation Will Propel Growth in Emerging Markets

Roz Roseboro
3/19/2018
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Digital transformation will drive change across the telecom sector around the world. Increased agility with lower costs and more satisfied customers are benefits that will be welcomed everywhere. The impact of digital transformation in emerging markets could be even more profound than in mature markets, due to the multiplier effect it can have on economic growth.

While the exact amounts can be debated, it is widely accepted that increased broadband penetration leads to faster economic growth. Given that emerging markets have the lowest penetration rates in the world, it stands to reason that they would see the most benefit from increased broadband growth. As shown in Figure 1 below, Ovum Forecaster shows that emerging markets in 2017 had mobile penetration rates much lower than those in mature markets. (Mobile penetration is the best measure of broadband availability in emerging markets given that there is very little fixed broadband in those markets.)

Figure 1: Mobile Subscriptions Penetration Rate by Region, December 2017
Source: Ovum
Source: Ovum

Indeed, the IMF projects that the GDP of emerging and developing markets will be twice as fast in emerging and developing markets than in mature markets. In 2018, it expects advanced economies’ GDP will grow by 2.3%, while emerging markets and developing economies will grow by 4.9%. The same holds true for next year, with 2.2% and 5% growth rates respectively.

There are many components to digital transformation, and everyone describes it a bit differently. Some of the more common components are Automation, open source, analytics, cloud and DevOps/agile. Operators around the world are embracing some combination of these components to achieve tangible benefits. Automation offers the promise of dramatically reduced cycle times for network configuration and service creation, allowing operators to lower their opex and achieve faster time to market for new services. Leveraging open source can potentially lower their capex and allow operators to more quickly benefit from innovations coming from a broad base of developers. Analytics can give operators critical insight into network and customer behavior, giving them the ability to better optimize their networks and deliver more targeted, relevant offers to their customers. The cloud, which incorporates many of the other components, provides a more cost effective platform to deliver services and potentially open up new avenues for third parties to participate in the telecom ecosystem. Lastly, DevOps/agile development can help operators move with greater agility and flexibility, also with an eye towards lower costs and more rapid service deployment.

All of these benefits are certainly welcome in any market. However, in emerging markets, where price sensitivity is pronounced, digital transformation can have an even greater impact on operators’ ability to offer services profitably. By being able to leverage new technologies, operators may be able to accelerate the many National Broadband Plans and other efforts to bring telecom/ICT services to underserved populations. Bringing these groups into the digital world can lead not only to more revenues for operators, but also more effective delivery of government services -- not to mention the possibility of increased productivity and new business opportunities. Digital transformation can and should drive growth across the value chain to help emerging markets reach their full potential.

– Roz Roseboro, Senior Analyst, Heavy Reading

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