The season for predictions

To paraphrase US senator Adlai Stevenson: “Analysts do not live by their forecasts alone, but they are sometimes made to eat them.” This is especially true when the forecasts are not what the market or client would like to hear.

Predictions and forecasts are the product of a lengthy retrospective and future look at the market.

Richard Hurst, senior analyst emerging markets, Ovum

Forecasts and market predictions are often shrouded in mystery, hidden by complex formulas and gargantuan data sets, often regarded as the product of either a dark art or simple hit-or-miss game. However, the truth of the matter is that predictions and forecasts are the product of a lengthy retrospective and future look at the market, with analysts testing each other's assumptions.

Looking back at 2010, at the emerging markets, the telecoms sector had a good year, with subscriber and revenue growth continuing to hold momentum. 2011 looks set to be another positive year for the sector. However, slower mobile growth and increased competition will result in a more challenging environment for operators in 2011. Those mobile markets that have a market penetration of between 70% and 80% will see annual growth rates dip into single digits.

The more successful service providers will be those that shift away from the subscriber "land grab" mentality, and manage the conflicting pressures of offering innovative services while delivering greater operational efficiencies. However, declining ARPUs will place revenue growth under pressure for these operators. In the African context, network operators will ramp up their focus on cost-cutting initiatives as the race gets under way to begin connecting the next 200 million subscribers across the continent, while creating additional efficiencies in the network and other business lines.

Part and parcel of this will be the continued focus on service and product innovation involving non-voice services such as data, content and applications. Financial services over mobile devices and platforms will be regarded as the sweet spot for network operators.

During 2011, expect to see operators increasing their focus on investment in broadband, enterprise, and wholesale services. Previously, mobile dominated the attention of investors, vendors, and service providers, and it has introduced a huge number of users to mobile services. But as mobile markets mature, the provision of broadband services will become the primary focus for many operators, and as a result, investment in expanding national and international connectivity to backhaul the rapidly growing data traffic will become extremely important.

Growing broadband penetration will force more mobile players to consider their fixed-mobile convergence strategies, which has already begun to happen in SA.

M&A activity will continue to focus on the expansion into new geographies, but operators will also look to add complementary operations in their existing markets. Considerable M&A activity will continue to take place across all emerging markets in 2011, and three major factors will drive this trend. The strongest force will be the desire of regional mobile operators to boost organic growth rates in their existing markets.

Looking back at 2010, one may safely assume that perhaps William Shakespeare may have been correct in terms of market forecasts and predictions: “What is past is prologue.”