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Top Five Emerging Markets to Watch for Digital Potential

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Emerging market consumers are driving uptake of the new-age digital services, from superfast mobile broadband to digital commerce. Some markets are performing better than others due to higher degree of sophistication in the telecom landscape, greater network investments and young, tech-savvy consumers. Governments have recognised the need to facilitate a stronger digital environment and improve connectivity in order to better living standards. The result has been fast growth in fixed-broadband penetration and nearly ubiquitous coverage of 3G networks.

Based on a variety of digital landscape indicators, below is a list of the top five emerging markets that Euromonitor International forecasts to have the greatest digital potential in the coming 15 years:

Households with Fixed-broadband and Penetration of 3G networks in Select Markets: 2015/2030

fixed broadband and 3g network penetration

Source: Euromonitor International from International Telecommunications Union (ITU) and national statistics

Note: Figures from 2016-2030 are forecast

1. India: Favourable demographics and technology investments will secure digital future

Among emerging markets, India offers considerable potential in terms of digital connectivity. Over half the population had access to 3G networks as of 2015 with nationwide coverage expected by 2030. Rapidly growing data demand by the tech-savvy, urban youth has made wider 4G LTE rollout imminent with the government commencing with spectrum auctions in July 2016. The authorities recognise the need to connect the large rural consumer base with broadband internet given their economic potential. BharatNet, a national fibre-optics public project, aims to provide broadband to a large number of village councils, schools and centres by December 2018, thereby driving fixed-broadband penetration.

Challenges: While India is an exceedingly promising market, project implementation remains a key challenge. BharatNet has witnessed a number of project deadline extensions as well as cost overruns. High-income inequality and low-rural purchasing power present important challenges at present, but can be offset by robust economic growth over 2015-2030.

2. Iran: Reformist government focuses on technology development

Iran, which for years was limited by western economic sanctions, is now a promising digital market due to the young and educated population, large consumer base and a technology-friendly government. The reformist Hassan Rouhani government has singled out technology as one of the top three five-year priorities, thereby attracting interest from several western tech majors. Iran is a regional leader in terms of broadband subscribers as of 2015 though Internet speed is slow and services expensive. However, in 2014, the government allowed operators to increase speeds of residential Internet connections and granted 3G and 4G LTE licenses to the two largest mobile operators, Hamrah Aval and MTN Irancell. In April 2016, MTN Irancell announced plans to launch fibre-broadband services though no deadline was given. These initiatives are expected to drive future growth in both fixed broadband and mobile Internet.

Challenges: Online censorship remains the chief threat. The conflict between hardliners and reformists within the establishment surfaced when the former spoke against mobile Internet connectivity following the grant of these licenses. Any possible future conflict against western nations could also derail development.

3. Mexico: Anti-monopoly reforms to boost telecom growth

A key emerging market, Mexico has been known for entrenched monopolies in a variety of sectors, including telecom, which has stunted economic development. The government dismantled America Movil’s market dominance by passing a law in July 2014 that would increase competition and require the operator to share infrastructure with competitors. This will lower costs and increase penetration of mobile and broadband services moving forward. High-speed mobile broadband is already available in many cities with mobile operator AT&T Mexico expanding its 4G LTE network to 42 cities by April 2016. The government is also implementing the Mexico Conectado project, which aims to provide free Internet to 250,000 public areas by 2018.

Challenges: The biggest challenge is the gaping income inequality and unequal access to most telecom services for the poorer households, which is due to the lack of competition, high tariffs and underinvestment in rural areas. However, penetration rates of mobile and fixed-broadband are expected to post healthy growth going ahead due to reforms.

4. South Africa: Rural broadband access key to improved digital connectivity

South Africa is the most advanced telecom market in Africa helped by a competitive mobile segment and cellular broadband investments. The mobile segment has been the dominant contributor to telecom development and operators have continued to invest in 4G LTE to meet fast rising data demand in large cities. This is expected to continue. The government has sought to address the existing rural-urban digital divide through the South Africa Connect initiative, started in 2013. This project aims to provide fixed-broadband to 90.0% of the population by 2020, with nationwide coverage by 2030. While the targets are ambitious, effective implementation will boost broadband connectivity among poor rural households and drive wider uptake of digital commerce and other services.

Challenges: South Africa suffers from one of the most unequal income distribution globally and persistent income inequality could derail the government’s well-intentioned plans. Weak economic growth, political instability, corruption and bureaucratic hurdles can affect effective implementation of broadband projects and service delivery.

5. Ukraine: Digital landscape looks promising despite economic turmoil

Ukraine is making gradual recovery after plunging to the depths of turmoil following the military conflict with Russia over 2014-2015. The telecom sector is expected to benefit from the easing of war in the eastern region of the country and will be supported by introduction of new technologies. Mobile operators launched 3G services in 2015 after years of delay and have continued to expand their networks, which will increase 3G network penetration from just 14.0% in 2015 to 100% by 2030. The regulator has reserved spectrum for 4G LTE auctions with commercial launch expected by 2017. Incumbent fixed-line monopoly Ukrtelecom is also collaborating with Chinese network equipment vendor Huawei on a three-year network modernisation project to introduce more advanced technologies such as fibre-optics.

Challenges: High corruption and concentration of economic power are key challenges. Moreover, the country’s strategic location makes it vulnerable to interference by foreign nations and thereby the possibility of conflicts, which can affect telecom growth.

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