RECALL No 7 – High-Growth Markets
… to the 7th edition of Marketing RECALL, McKinsey’spublication for senior executives in the telecomsindustry. Our High-Growth CxO Roundtable in Parisduring October of last year was a great success andgenerated fascinating insights. In this special edition, we have consolidated some of these learnings withthe knowledge distilled from our daily interactions withCxOs with a special interest in high-growth markets.High-growth markets are enjoying dizzying performancecompared to mature markets. From 2006 to 2007, sub-scriber growth in emerging markets rose approximately 17 percent, while revenues shot up 26 percent. Additionally, these markets saw an enviable EBITDA increase of 44 percent. An average of 3.8 million new subscribers are added per month and capex investmentstotaled more than USD 16 billion in 2007. Industry growth is unmatched in these regions where leaders will be shaping the industry, especially in the areaof wireless applications. In fact, many of their innovative business models have caught the attention of operatorsin developed markets. We kick off this edition with a summary of our view onthetelecoms trends in high-growth markets. Then it’son to a look at how operators might position themselvesto capture maximum value from the imminentexplosion in broadband demand. Further keeping inmind the consumer realities of emerging markets, we examine the role of handset cost in market penetration as well as the unique opportunities that lie at theintersection of banking and mobile telecommunications.Next, we’ll walk through a perspective ontelecomsregulationand how emerging market characteristicsrequire more than merely importing the regulatory frame- works of developed markets. We covered the topic of pricing in Marketing RECALL No1, and in this edition, we offer further guiding principles on designingpriceplans for emerging markets, which focus on the balance between simplicity and customization. We then discusshow improvements in collectionscan yield a 15 to 30percent net loss reduction in high-growth markets by reducing exposure to high-risk and delinquent customersand increasing net recoveries from contractual write-offs. Our final article specifically addresses the currenteconomic situation. This global reality is top-of-mindfor nearly all telecoms leaders, but the implicationsof a downcycle for operators in emerging marketsareunique. Many high-growth telcos have remainedresilient due to their stronger cash positions and arestarting to seize M&A opportunities and experiment with bold marketing moves. We conclude this edition with an interview withZain Africa’s Chris Gabrielin which he shares his experience as chief executive of atelecoms giant and his perspective on the sociopoliticaland economic dynamics of high-growth markets.The editors would like to thank Daniel Boniecki, PauloFernandes, André Levisse, Stefan Schmitgen, and JohnTiefel for their leadership on McKinsey’s High Growthin Telecoms Initiative and their guidance on this specialissue on high-growth markets. We thank you for reading,and, as always, we welcome your thoughts and comments.
Leader of McKinsey’s EMEA Telecommunications Practice
Leader of European Telecoms MobilePricing, Marketing RECALL Editor
Leader of McKinsey’s Telecommunications Extranet
Leader of McKinsey’sMarketing in TelecommunicationsPractice