Economic Overview of BRICS †Industry Analysis Essay Example

Economic Overview of BRICS – Industry Analysis Essay Example Economic Overview of BRICS – Industry Analysis Essay Economic Overview of BRICS – Industry Analysis Essay Economic Overview of BRICS – Industry Analysis Name: Course: Date: Economic Overview of BRICS – Industry Analysis Introduction One of the key industries in the growth of the global economy is the telecommunication industry that is growing at the fastest rate with advancement in technology. The total spending in the telecommunication technology is growing by 2.8%, which represents $1.84 trillion (Wansink, 2009). The whole world is now interconnected with telecommunication technology that comprises of telephones, mobile phones and internet linked to computers. Previously, the telecom industry was comprised of large national and regional companies owned by governments. The previous decade has seen a change in this where many organizations are privatized, and more players coming up to increase competition. This has also come with deregulations. Among the biggest growing countries that comprise of Brazil, Russia, India, China and South Africa, BRICS, telecommunication is the main contributor to growth. In each of the BRICS countries, there are key players, both local and multinational playing a crucial role in th eir development. Brazil The Brazilian telecom industry is expected to generate revenue of US$ 120 billion in 2012 (Wansink, 2009). Within its market, fixed line revenues continue to decrease while the mobile, internets and data, and pay television continue to gain prominence with their revenues growing rapidly. Just like the other BRICS countries, its growing economy and high population continue to fuel the growth. The spending power of Brazil is driving the growth, with more and more demand for telecommunication services. Additionally, the government has taken measures to reduce the cost of telecommunication services in order to push into the market. Additionally, with the expected growth of 3%-3.5% in 2012 and 4%-5% in 2013, growth within the telecommunication industry can be expected (Wansink, 2009). Some of the companies in Brazil include Telefonica Brasil, Sercomtel and Nextel Brasil. Telefonica Brasil is the second largest company in the Brazilian telecommunication industry. The company is currently focusing on an expansion of its network coverage and the increasing subscribers to its mobile broadband. To increase its mobile broadband revenues, it is expanding on 3G data network, and it is taking an advantage to take an early lead in the 4G network (Wansink, 2009). Sercomtel is yet another leading local telecommunication company in Brazil. It operates in voice services that include landline, mobile services and long distance telecommunication, as well as internet services through its broadband. Considering the stability of the market, Brazil is one of the best countries to invest in, since it might not be affected by the Euro recession. Russia The telecom market in Russia has been growing, in part due to liberalization in long-distance telecom and a new introduction of interconnection between operators (Russian-American Business, 2007). Some of the leading operators in Russia are VimpelCom, MegaFon and MTS. MegaFon is the second largest mobile operator and fourth largest telecom company in Russia. It operates in GSM and UMTS standards. As at June 2012, the company had a total of 62.1 million subscribers locally and another 1.6 million subscribers in other countries that include Osetia, Abkhazia and Tajikistan. The MTS is the largest mobile operator within Russia with more than 102.4 million subscribers at the end of 2009 (Russian-American Business, 2007). It is licensed to operate in 82 regions in Russia out of the total 83. It also serves other countries, Ukraine, Uzbekistan, Turkmenistan, Armenia, and Belarus. It provides GSM services. It also operates around 3300 retails chains for mobile phones (Russian-American Business, 2007). It also has MTS branded mobile handsets. The other key player in the Russian telecom market is the VimpelCom, which is among the largest integrated telecom companies worldwide. It provides both voice and data services using a range of traditional fixed technology and mobile broadband. It provides services to its customers under the Beeline, Mobilink, and Telecel among others. As at June 2012, the company had 208 million subscribers (Russian-American Business, 2007). Competition in Russia is increasing rapidly with many companies that are established in its market considering it is the biggest country. The development and growth of the telecommunication market in Russia has been pushed by support from the government with expenditure on information and communication, as well as the growing economy that grew by 6.8% in 2006 (Russian-American Business, 2007). India India is yet another rapidly growing country with the largest growth of mobile phone users. Its rapid growing economy due to manufacturing is one of the main contributors as well as its enormous population providing ready market. Some of the telecommunication companies in India include Bharti Airtel Limited and Bharat Sanchar Nigam Limited. Bharti Airtel Limited is commonly known as Airtel, operating in over 20 countries across south of Asia, Africa, as well as the Channel Islands. It currently ranks as the third largest mobile service provider company. Airtel provides voice services, data services including 2G, 3G and 4G internet services depending on the country (airtel.in, 2012). As at august 2012, the company had around 261 million subscribers within the 20 countries. Additionally, it provides television subscription in India and second largest in fixed telephone (Wansink, 2009). The other key player in the Indian telecommunication industry is the Bharat Sanchar Nigam Limited, B SNL. It is a state owned company. It is the largest fixed telephony service provider in India and ranks fourth in mobile service provision. It also provides broadband service. The company has recently incurred losses due to stiff competition from other telecommunication industries. However, it remains as one of the largest and oldest providers of telecommunication. Competition within India is increasing steadily with the entrant of new companies in the telecommunication industry. Additionally, the vast population cannot be served by one telecommunication industry considering the high demands of telecommunication especially mobile services and internet since India is the biggest outsourcing country. Additionally, its growing economy is contributing to the development in this industry with the government reducing regulation and allowing more companies to enter the market. China A brief overview of the Chinese telecommunication industry shows that it is among the fastest growing industries. In 2010 to 2012, the industry revenues grew by 4.1%. Some of the key players in the telecommunication industry in China include China Mobile, China Unicom and China Telecom (Simon, 2011). The Chinese telecom industry is dominated by the three companies and highly controlled by the government. Initially, they were six, but then reduced to three. China mobile is the biggest among them all, taking a market share of 67.5% in 2006 (Simon, 2011). It has taken over from several other companies towards the end of the last century such as Fujian mobile, Henan mobile, and among others. Through these takeovers, it has grown to become the biggest digital mobile company in the world serving the largest number of customers (Simon, 2011). The other key player is the China Unicom that is a state owned telecom company. In 2008, the company had 125 million GSM subscribers and 43 million CDMA subscribers Chinaunicom.com. (2012). However, it moved its CDMA services to China telecom and Universal Mobile Telecommunication System that has launched recently in China. China Telecom is the third player in the Chinese telecommunication market that is entering other markets part from China such as Australia. It has 149 million subscribers including 3G subscribers (chinatelecom-h.com 2012). It was voted the best managed company in Asia in 2011 that was awarded by Euromoney, FinanceAsia and among most honored companies by Institutional Investor. Currently, the telecom industry in china is highly controlled by the state considering it has a company owned by the government. However, competition is deemed to increase soon from the government plans to enhance other entrants. South Africa South Africa is the largest and most developed economy in Africa. Telecommunication industry is the fastest growing industry in South Africa that is driven by growth in mobile telephony and broadband connection. The network in South Africa is 99.9% digital, serving as the most developed telecommunication technology in Africa (southafrica.info, 2012). In terms of fixed line telephony, the country ranked 34th and 26th in terms of subscriber number in mobile telephony. All telecommunication sectors, including undersea connectivity and broadband, are growing at a rapid rate (southafrica.info, 2012). Some of the telecommunication companies in South Africa include Vodacom and Neotel Vodacom is mobile telecommunication company in pan-Africa that was the first cellular network introduced in South Africa. The company provides GSM services to more than 35 million subscribers across South Africa, Lesotho, Tanzania, Mozambique and the Democratic Republic of Congo. Neotel is yet another competitive company in South Africa’s telecommunication industry. It was previously known as SNO telecommunications. It was unveiled in 2006 and becomes the first company to offer direct competition to the current companies at the time. It provides mobile telephony and data services. In South Africa, competition is only increasing considering there are few competitors. However, the few companies available are able to serve the demand of the country as it increases. An opportunity for more telecommunication companies exists (southafrica.info, 2012). In Flight Broadband Services As telecommunication technology and services continue advancing, provision of broadband services to customers in flights has also been increasing with companies such as Gogo Air increasing its presence internationally. Gogo Air has been prominent in United States and Canada. Recently, it has moved to other countries with the intention of increasing its services (gogoair.com, 2012). Its services are dependent on the potential of growth in both broadband and air transport services considering it targets those in flight. The company depends on the airline companies to provide its services. One of the ideal countries among the BRIC where in flight broadband services is attaining rapid growth is Brazil. With its approximate 30 airlines, both domestic and international, as well as a rapidly growing demand for broadband telecommunication services in general, there is a tremendous opportunity for in-flight broadband services. India also has a considerable number of airlines, but there is potential for growth. Additionally, its growing telecommunication market provides an exceptional opportunity for in flight broadband services. Gogo Air remains the key player in Brazil, with a recent expansion to United Airlines having fitted its broadband in their airplanes. Other companies that offer competition include Row 44 that provides its services in the Transaero airlines (Sharkey, 2012). With a growth in the telecommunication industry in Brazil, there is a massive opportunity for growth of in flight broadband services. Gogo Air provides its services to other BRIC countries as well. The company has established its services in India. It serves several airlines, both Indian and from other countries that land in the country. It is currently expanding its business to the available airlines. The demand for in-flight broadband services in India continues to increase as more and more continue to demand internet services. However, other competitors are also establishing in India such as the Row 44 and Lufthansa. Row 44 provides services to some of the international fight going in n out of India. In-flight broadband allows a company providing the service to offer it in several countries as long as it provides the service to the airlines flying to the particular country (Sharkey, 2012). Lufthansa, on the other hand, provides the same services, and currently is expanding its route such as between India and Germany. It has already started providing wi-fi broadband services for internet through laptops and soon will extend to mobile phone services such a text messages and emails a well by the end of the year (Economic Times. 2012). Gogo Air has recently entered a deal with Air China to provide in flight broadband services to their customers. Trials have already been done, and services are underway as of last year. This means that services have already commenced, and travelers can access internet services in flight from United States to china as well as between local cities in china. The major competitor in China for Gogo Air remains as Row 44 that is looking forward to start operating in China. Gogo Air is also operating in Russia, but just like the other BRIC countries is faced by competition from Row 44 that provides the same services in Russia as well. This service is growing and gaining prominence in Russia just as the other BRIC countries considering the growing demand for internet services in these countries. However, South Africa does not have any company established to provide in flight services. Conclusion With such an analysis, it is possible to rank the countries in terms of which would be best to enter. The attractiveness of each market can be assessed to find out the level of competition and requirements of entering each of the market. Each of the BRICS countries has a potential for further growth. Thus, entering each of these markets would yield profits. However, entering some of them like China could prove quite hard since the government has substantial control of this industry. The most favorable for entering business would be Brazil, due to its risk factor and a fact that it might not be adversely affected by the Euro economic crisis. In terms of in flight broadband services, Brazil has the best opportunity due to it number of airlines as well as several telecommunication companies both international and domestic. On the other hand, India has immense potential due to its continuing growth in telecommunication as well as airlines. China is also growing as well as Russia in the in-flight services. On the other hand, South Africa is yet to provide such technology. References Airtel.in. (2012). Bharti Airtel. Retrieved from airtel.in/wps/wcm/connect/about+bharti+airtel/Bharti+Airtel/About+bharti+airtel/ Chinatelecom-h.com. (2012). Key Performance Indicators. Retrieved from chinatelecom-h.com/eng/company/company_overview.htm Chinaunicom.com. (2012). Products and Services. Retrieved from chinaunicom.com.hk/en/products/products_mobile.html Economic Times. (2012). Lufthansa to provide wi-fi as paid in-flight service on select routes. Retrieved from http://articles.economictimes.indiatimes.com/2012-10-08/news/34322881_1_wi-fi-hotspot-lufthansa-ground-network Gogoair.com. (2012). An Exclusive In-Air Experience. Retrieved from gogoair.com/gogo/cms/inAirService.do Russian-American Business. (2007). Russia‘s Telecom industry. Retrieved from russianamericanbusiness.org/web_CURRENT/articles/178/1/Russia%26%2339%3Bs-Telecom-industry Simon, J. P. (2011). The ICT Landscape in BRICS Countries: Brazil, India, China. European Commission. Sharkey, J. (2012). Offering in flight broadband service. Retrieved from deccanherald.com/content/165480/offering-inflight-broadband-service.html Southafrica.info. (2012). South Africa’s telecommunications. Retrieved from southafrica.info/business/economy/infrastructure/telecoms.htm Wansink, K. (2009). Global – Industry – The Telecoms Markets in the Emerging BRIC Economies. Retrieved from budde.com.au/Research/Global-Industry-The-Telecoms-Markets-in-the-Emerging-BRIC-Economies.html