World Telecommunication Day 1999 |
For many telecommunications companies, the key to the future is diversity. That means offering customers a range of options - from Internet access to traditional long-distance service.
But in developing markets like those in Africa, Latin America, parts of Asia and other regions, covering all the bases is a very long-term goal. In the short term, telecommunications companies need to help develop the physical infrastructure to offer basic phone services. Once more of the population gets connected, experts say, they can focus on broadening their offerings. ''It's fair to say that in most developing countries, the telecommunications infrastructure is not as well developed as it is in developed countries,'' says Jim Kahan, senior vice president of corporate development for SBC Communications Inc. of San Antonio, Texas. ''They need to cover more of the population.''
In China, there are only 11 phone lines per 100 people, says Annabel Dodd, author of ''The Essential Guide to Telecommunications'' and an adjunct professor at Northeastern University in Boston, Massachusetts. The same is true for some East European countries and other emerging markets, according to Ms. Dodd.
As these governments liberalize and privatize phone markets, covering more of the population with phone networks is a primary concern. In South Africa, Mr. Kahan says: ''There are strong criteria about the infrastructure going into towns and villages with specific milestones that must be achieved [by investors like SBC].''
To build communications systems in emerging markets, many players in the telecommunications industry work through strategic business alliances. Senior telecommunications executives say such alliances are being used to conduct about 18 percent of their business - including the expansion of their global reach - according to a recent study conducted by the Economist Intelligence Unit in cooperation with Andersen Consulting.
These alliances, according to the study, can only grow in importance. Telecommunications executives predict that they will represent 42 percent of business by 2010. Companies that do not enter team relationships risk losing up to 30 percent of their customers, the report concludes.
''Alliances provide a level of sophistication and ease with the setup [of services] in overseas markets for important clients,'' says Robert Rosenberg, president of Insight Research Corp. of Parsippany, New Jersey.
Some of the best telecommunications partnership success stories in emerging markets are those written by large companies like Telefónica de España, for instance, which has expanded overseas as part of the deregulation of the global telecommunications industry. ''Telefónica has been very active,'' Mr. Rosenberg says.
A consortium led by Spain's Telefónica and Portugal Telecom was awarded a second GSM mobile license in Morocco in August. The group, known as Meditelecom, plans to roll out its network within six to seven months. It selected Ericsson as the prime contractor for the exchange systems and wireless network.
The network should reach 92 percent of the country's population, which now totals nearly 30 million people, within the first five years. The group hopes to have a customer base of 2 million within the first 10 years of service.
This award signals a major step in the Meditelecom group's internationalization strategy, which includes expansion into the North African region, according to Portugal Telecom. On the other side of the Atlantic, Telefónica - like other players - has been especially aggressive in pursuing alliances that raise its stake in the Brazilian telecommunications market, one of the largest in Latin America. In cooperation with Portugal Telecom, Japan's NTT and others, Telefónica won a majority stake in several state-owned phone companies. As a result, the Spanish telecommunications company participates in the management of four of 12 phone companies auctioned by the Brazilian government during the privatization process of 1998. It managed 18.5 million lines and had some 6 million cellular customers in Brazil at the end of last year.
Other global players active in the Brazilian market through alliances include MCI WorldCom Inc., Global One (Deutsche Telecom, France Telecom and Sprint), IBM Global Network, Unisys Corp. and Telecom Italia.
In Mexico's phone market, U.S. phone companies are entering partnerships with other overseas companies and taking stakes in local ventures to boost their presence. SBC Communications bought about 10 percent of Telefonos de Mexico (the former state-owned phone monopoly) ''since we share a long border and trade with Mexico,'' says SBC's Mr. Kahan. ''About 50 percent of all phone traffic to Mexico originates in California and Texas.''
SBC hooked up with Telmex in May, agreeing to buy Cellular Communications of Puerto Rico Inc. for $814 million. ''The experience we have with products and services in the United States we are trying to make available with our overseas partners,'' says Mr. Kahan.
Janet Purdy Levaux