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NewsGlobe: Financial
Emerging market companies leading the international pack
India’s Bharti Airtel and China Mobile lead report’s shareholder performance index
by Jim Barthold
Communications, media and technology (CMT) companies in
emerging markets are producing the best performance and
shareholder value with wireless players Bharti Airtel of India
and China Mobile leading the pack, according to the first
annual State of the Industry Report produced by
management consulting firm Oliver Wyman.
Reuben Chaudhury, senior partner at the firm, said there are
three basic reasons why emerging markets are outpacing
developed markets in both innovation and shareholder value.
“One of them is actually the fact that because the markets
are so big you automatically have an opportunity to serve a
lot of customers. That’s the obvious reason which accounts for
the performance of people like China Mobile and Bharti
Airtel,” he said.
A less obvious, but “a little more interesting” reason is that
the emerging markets need to be more innovative because
everything is basically a greenfield competitive opportunity.
That’s led Bharti Airtel to adopt a cost-efficient outsourced
network model—which is spreading to established markets—to
more efficiently run its business. It’s also led another
emerging player, Tencent, to combine gaming and mobile
services into one offering.
“You’re seeing what we call innovation in the business model
and the business design … and that’s a direct correlation to
the fact that the market in India, China, the emerging
markets are different and they offer the opportunity for
innovation,” Chaudhury said.
The third factor, he said, is also “somewhat obvious” but not
as important as the first two. “The lower cost structure
obviously helps. It is a reason, but it’s just that; a reason,”
he said.
While emerging market companies are doing better from a
business standpoint, they’re not necessarily taking that
acumen and success into the developed markets yet via
acquisitions or competition, said Chaudhury.
“You’re seeing that more on the technology side … where you
see companies already making investments to get their share
of the pie. We haven’t seen it as much in the operator side of
the world yet,” he said.
The trends, though, seem to indicate the international
business model is in a stage of reversal.
“The conventional view would have it that most of the
innovation happens in the mature markets and trickles down
into the emerging markets. I don’t think that’s the case
anymore,” he said. “These are justifiably standalone business
applications that have come from the emerging markets …
into the more mature markets. You’re seeing innovation
going both ways.”
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