Telecom key driver of growth

Although the economic crisis has had a profound impact on people around the world in terms of their business and personal lives, the telecoms industry is uniquely positioned to be a key driver of growth out of dark financial times.

This is because productivity will drive the world out of the credit crunch, and the telecom industry is seen as a crucial driver of productivity. The industry brings continued investment of stimulus capital, additional jobs and further innovative ideas.

In the Mena region, telecoms may offer a route to economic recovery. It is therefore essential that policymakers and regulators strengthen the sector, by adjusting their strategies accordingly.

The current uncertainty presents an opportunity to broaden the boundaries of telecoms' domain and bolster other parts of the economy. "Organisations rely on telecoms for their daily operations as do individuals, and therefore operators may have an opportunity to enter into new spheres of activity," says Bahjat El Darwiche, a principal at Booz & Company.

Mena telecoms operators are facing a number of new challenges: approaching market maturity, changing customer needs and preferences, and continuous transformation in technology, business, and operating models. There is a danger that the economic downturn could delay the industry's ability to embrace these imperatives.

Policymakers and regulators must re-adjust their focus where needed and align telecoms sector strategies with changing economic objectives, while focusing on creating long-term resilience and sustainable growth. Governments may need to reverse old trends and consider re-intervening in areas in which they have been disengaging. Co-operation between sector stakeholders is essential, requiring regulators and policymakers to address inefficiencies in sector governance and regulation, and implement elements that will create sustainable value, he says.

In order to draw maximum benefit out of the telecoms sector, Booz & Company suggests that policymakers and regulators in the region should consider six strategies, such as reviewing the schedules for privatisation and liberalisation, reducing operators' direct financial obligations, investing in national broadband infrastructure, incentivising infrastructure sharing and traffic syndication, growing ICT literacy among users and the workforce, and accelerating sector governance and regulatory reform.

The telecoms sector's ability to act as a catalyst for economic recovery is dependent on three factors: the ability of regulators and policymakers to effectively fulfil their various functions, the level of integration between governance of the telecoms sector and governance of media and technology, and the level of maturity of regulatory practices, says Karim Sabbagh, head of the global communication, media and technology practice at Booz & Company.

Telecoms policy-making and sector development should be clearly distinguished from regulatory activities. Long-term strategic planning should be rapidly institutionalised to promote the sector as an economic enabler. "The capabilities for effectively driving high-impact sector development initiatives also need to be swiftly built to support government investment and public-private partnership initiatives," suggests Sabbagh.

In terms of regulatory reform, improving sector resilience and laying the groundwork for sustainable growth require transparency in regulatory practice. Publishing regulatory development plans and gaining public support for decisions should help build investor confidence and enable growth. Regulators should also rapidly step up their economic assessment capabilities and base decisions on thorough analyses that guarantee value creation and efficiency for sector stakeholders: customers, operators, investors and the government.

Regulators need to exercise increased vigilance and scrutiny when it comes to anti-competitive behaviour and market value destruction, or else the sector may be unable to attract investment, and operators may find it difficult to adopt new business models after the downturn.

Concentrating on reform now would focus resources on generating maximum returns from past initiatives and would create an encouraging environment for new initiatives. When previous growth avenues are less attractive, developing best practices in governance and regulatory reform will set the stage for world-class performance when the economic winter passes.

It may also be noted that despite the unsteady state of the global financial markets, the worldwide telecommunications industry is expected to continue expanding over the next five years as continuing growth of wireless services in emerging markets offsets the spending slowdown in the advanced economies. According to a new market analysis, overall telecommunications services revenues are expected to grow at a compounded rate of nearly 10.3 per cent over the next few years, reaching $2.7 trillion by 2013.

Telecommunications is a facilitator of socio-economic advancement and is a critical utility for economic development, much like water and energy.

Also, even in the current conditions, banks still viewed the telecoms industry as a safe haven.

Telecoms is still a good sector to be involved with because players in the industry still have access to capital markets in a way that many other industries do not.

Tough economic times mean that those who are strongly positioned, such as the telecoms industry, could become even stronger.