The Economist Intelligence Unit (EIU) has released the findings of its new Competitor Intelligence service. While many global companies have had developing-market strategies in place for several years, there has been a steady increase in the number of smaller companies entering these markets over the past five years.
- The EIU expects global trade growth to decelerate to 3.7% in 2019, from 5.3% in 2017. Yet Latin America, the Middle East and Africa, and Sub-Saharan Africa will register strong gains, while Asia will continue its robust growth.
- The EIU’s data indicates that real growth in consumer expenditure in non-OECD countries will average 4.8% a year in 2018-22, compared with 1.8% a year for OECD countries. These countries will also account for over 80% of the global population by 2022. The opportunities on offer will benefit all six industry sectors in this report.
- These companies have been selected largely because of their ambitious strategies, which have seen them expand in both domestic and international markets.
- Non-OECD countries will account for nearly three-quarters of global mobile subscribers, drawing in telecoms operators such as Qatar-based Ooredoo.
Telecoms case studies
Dial O for Ooredoo
Operating in the small Middle Eastern country of Qatar (population: 2.6m), Ooredoo realized early on that its domestic growth opportunities were limited. The telecoms operator, which is majority owned by the Qatari government, reported a customer base of 164m in 2017, only about 14% of which was made up of customers from the Middle East.
In 2007 the company, still known as Qtel, laid out plans to become one of the top 20 telecommunications companies in the world by 2020. Since renaming itself as Ooredoo in order to unite its international operations under one brand, the company has expanded into ten countries across Africa, the Middle East and Asia. Like its rivals in these markets, Ooredoo has also recently been hurt by political instability and weak local currencies.
However, the company is determined to mitigate these challenges with a focus on 5G LTE and internet services. In Indonesia, its largest international market, Ooredoo has been picking up additional spectrum to boost wireless coverage. In the first half of 2018 it noted a strong uptake of mobile data services in Oman, Kuwait, Tunisia and Myanmar.
Ooredoo is also looking to launch broadband internet in several markets. In July 2018 it borrowed US$200m to fund its expansion plans. The next two years are going to be crucial for the company in its ambitious plan to move up the list of the world’s top telecoms companies.
Algar Telecom: A dark horse
Algar Telecom, a Brazilian telecoms company, has only about 1.2m mobile subscribers in a country with over 37m mobile users. However, it grabbed headlines in August 2018 when it tied up with American Tower, an infrastructure giant, to take over the broadband network of Cemig, a Brazilian utility company. While Algar Telecom’s contribution to the deal was only R78m (US$19m)—the acquisition is noteworthy in an otherwise stagnant telecoms industry in Brazil.
We expect Brazil’s mobile market—the fourth-largest in the world by subscribers—to recover gradually to be worth above US$25bn by 2022. Algar Telecom, despite its current humble standing, is well poised to make the most of the market opportunity.
Currently accounting for about 3% of the Brazilian market, Algar Telecom is a likely dark-horse. In a market dominated by the local units of international giants Telefónica, America Movil and Telecom Italia, it stands apart from the other smaller operators (Oi filed for bankruptcy protection in 2016, and Nextel was put up for sale in mid-2018). Algar Telecom has a healthy balance sheet, with cash flow from operating activities up by 20% in the first half of 2018, and a rating of “brAAA” from S&P, indicating a stable credit outlook.
Algar Telecom has been consistently boosting investment in network infrastructure. In January 2018 it scrapped IPO plans after Archy LLC, an affiliate of GIC Special Investments, Singapore’s sovereign wealth fund, injected about R360m in exchange for a 25% stake. The capital infusion came at an appropriate time, as Brazil plans to auction 5G licences in 2019.
In the report, the EIU ignores the industry behemoths in order to look at the expansion plans of 12 lesser-known companies in non-OECD markets, chosen from the 1,500-odd companies covered by the Competitor Intelligence service. The industry sectors covered in this report include automotive, consumer goods, energy, financial services, healthcare and telecommunications.