Will Emerging Market Telecoms See Double-Digit Growth in 2010?

The telecom sector in the emerging markets has experienced high growth rates in the past few years. The introduction of cell phone services in many of these countries has contributed to the growth of this industry. Due to cut-throat competition, monthly subscription charges have dropped dramatically and are now cheaper than in developed countries.

Mobile service providers in emerging markets are now targeting the vastly untapped rural market where the potential for expansion is huge. Providers are also offering value-added services such as music, sports news, etc. to create additional revenue streams and in the process differentiate themselves from their rivals. Recently there was an article on Bloomberg BusinessWeek where a service provider in India is offering famous Bollywood tunes on cell phones for a small fee. Rural folks who do not have access to radio or tv, use this service to listen to their favorite songs.

From IMF’s Finance & Development magazine, September 2009 edition:

“Just a decade ago, there were still some countries with no mobile service at all. Since then, wireless telephone coverage has enveloped the globe. Mobile phone subscriptions have skyrocketed from 1 billion in 2002 to an estimated 4.1 billion by the end of 2008, covering more than half of the world’s population. The fastest growth rates have been in low-income countries. In Africa mobile phone penetration has soared from just 1 in 50 people at the turn of the century to 28 percent.

The World Bank (2009b) says this growth has been driven primarily by new wireless technologies and liberalization of telecommunications markets, which enabled faster and less costly network rollout. The total number of mobile phones in the world surpassed the number of fixed-line telephones in 2002; and mobile phones now represent the world’s largest distribution platform.”

The table below lists the Mobile Telecom ADR stocks with their current yields and 2009 performance:

Company Ticker Dividend Yield as of Dec 31,2009 Country 2009 Change in %
America Movil AMX 0.97% M?xico 51.60%
China Mobile CHL 3.74% China -8.69%
China Unicom (Hong Kong) Limited CHU 2.24% China 7.46%
Deutsche Telekom DT 7.05% Germany -3.92%
Hurray! HRAY n/a China 113.16%
Hutchison Telecommunications International HTX n/a Hong Kong -25.68%
Indosat IIT 3.41% Indonesia -2.86%
KongZhong KONG n/a China 269.85%
Linktone LTON n/a China 42.50%
Mobile TeleSystems MBT n/a Russia 83.25%
NTT DoCoMo DCM n/a Japan -28.75%
Partner Communications PTNR 10.07% Israel 23.45%
Philippine Long Distance Telephone PHI 5.72% Philippines 20.70%
SK Telecom SKM n/a Korea -10.56%
Telmex Internacional TII 1.44% Mexico 56.25%
Turkcell Iletisim Hizmetleri TKC 4.63% Turkey 19.96%
Vimpel Communications VIP 1.72% Russia 159.64%
Vivo VIV n/a Brazil 147.21%
Vodafone Group VOD 3.88% United Kingdom 12.96%

China’s KongZhong(KONG) was the best performer in 2009 with a return of 269%. Mexico’s America Movil(AMX) and TelMex(TII) returned over 50%. Philippine Long Distance Telephone(PHI), Deutsche Telekom(DT) and Partner Communications(PTNR) of Israel pay dividends above 5%.

In 2010, emerging markets will have higher growth in the number of subscribers. However carriers may have to aggressively market value-added services in order to generate higher revenue.

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