Generation

Next
Five pathways to
TMT growth in
emerging markets

www.tmtgenerationnext.com
2 Linklaters / Generation Next: Five pathways to TMT growth in emerging markets / Contents 3

1 3
2
Introduction
Conclusion

Contents

Key trends 2.1

Generation Next:
Five pathways to TMT growth Next 2.5
2.3
in emerging markets generation
Mobile
broadband
health
About the report
Mobile

2.2
This report is for TMT leaders and
investors, their trusted advisers, money
in-house counsel and anyone doing
business with TMT and related
companies to help navigate pathways Content and

2.4
to TMT growth in emerging markets. applications
The Generation Next study is based
on Linklaters specialist legal and TMT
insights, Ovums market and forecast The Cloud
data and qualitative interviews with
business leaders from 30 multi-billion
dollar TMT power players, including
mobile network operators, technology
vendors, content providers and banks.
4 Linklaters / Generation Next: Five pathways to TMT growth in emerging markets / Key trends 5

Generation Next: Content and

applications
Five pathways to TMT growth in emerging markets
This report highlights five routes to growth in emerging markets
TMT players cant afford to ignore in their search for the next
billion consumers, the obstacles they may face along the way
84% 2017 - $30bn forecast revenue
and the countries where we believe most of the growth will take increase in content and
applications revenue in 2012 - $16.3bn revenue
place. The emerging countries featured in this report are: Brazil,
emerging markets
Russia, India, China, Indonesia, Malaysia, Mexico, South Africa,
Nigeria and Kenya.

Mobile VAS revenue

Obstacles
Licensing structures, political represents $1bn
Mobile music revenue existing revenue
uncertainty, local infrastructure,
represents $1bn
skills forecast revenue growth

Mobile gaming revenue

Next generation
broadband
Obstacles

174%
increase in broadband
Regulation, piracy,
privacy rights

NEXT NEXT
connections in $10bn existing $10bn forecast
emerging markets revenue (2012) revenue growth (2017)

BILLION BILLION Obstacles

$8.8bn
forecast
revenue Connectivity, interoperability,
(2017) infrastructure, IP rights protection,
Mobile operational risks, censorship
health

184%
The
Obstacles Obstacles Cloud 2012

382%
2017
increase in mobile health
revenue in emerging Mobile penetration, literacy Operational execution, $10.4bn
markets
levels, affordability, regulatory restrictive regulation, complex
forecast revenue
$3.1bn framework, bureaucracy, $2.2bn
revenue taxation, service quality, increase in Cloud ICT revenue
taxation service spend in
(2012) interoperability emerging markets

Mobile
money
2012 $858m revenue

3376% 2017
$29.8bn
forecast
predicted increase in
mobile money revenue
transactions by 2017
 6 Linklaters / Generation Next: Five pathways to TMT growth in emerging markets / Introduction
Introduction
Emerging markets represent
the greatest revenue
opportunity for a telecoms,
media and technology
(TMT) industry facing
stagnant revenue growth,
market saturation and
declining profitability, a far
cry from the double-digit
growth which companies and
their investors had become
accustomed to. Todays TMT
power players are shifting
their focus to the promise
of high growth offered by
emerging economies.
But with this great opportunity comes great
risk. Having connected the next billion
consumers with the low hanging fruit of
voice and SMS services, the rules of the
game for TMT players in emerging markets
are changing fast. Emerging markets
present a new set of challenges, as
companies face a need for new business
models. Winners and losers will be
determined by their agility in overcoming
challenges of geography and technology, but
more importantly by how they remake their
organisations and ways of working and
partnering to meet the demands of this
radically different landscape.
Emerging markets
present a unique set
of challenges which
defy the rules of
developed market
business models.
The TMT markets in the emerging
economies of Africa, Asia, Eastern
Europe, the Middle East and Latin America
have changed beyond recognition in the
last decade. The growth of mobile networks
and services in particular has enabled
established global players such as Vodafone
and Orange to enter new markets while also
creating opportunities for new regional
powerhouses such as Airtel, Amrica Mvil
and MTN to emerge. In the process, TMT
players have transformed the way people
communicate, work, live and play in these
rapidly changing economies.
As the initial land grab for new connections
begins to subside, traditional forms of TMT
revenue growth are beginning to slow down
in these markets, competition is increasing,
tariffs for basic voice and SMS services are
declining, and margins are beginning to
come under pressure. These factors pose
a number of fundamental questions for
TMT leaders, namely: Where geographically
will future growth come from and how can
companies localise effectively to capture it?
What are the product and service segments
that will drive profitable growth? What
strategies and business models should
TMT players adopt to tap into these growth
opportunities? How can companies align
effectively with diverse government TMT
strategies and navigate complex regulatory
frameworks? And what are the most
significant risk factors associated with
these opportunities?
7
This report is for TMT leaders and investors,
their trusted advisers, in-house counsel and
anyone doing business with TMT and related
companies to help navigate pathways to TMT players
TMT growth in emerging markets. We have
combined Linklaters specialist TMT insights, have transformed
Ovums market and forecast data, and
qualitative interviews with business leaders the way people
from emerging market TMT power players
to forecast market growth, identify key
communicate,
go-to-market strategies and signpost the
critical success factors that will shape the
work, live and play
future of TMT in emerging markets. in these rapidly
We examine in detail five big bets for changing economies.
TMT players in emerging markets and their
implications for the future of the industry:
1. Next generation broadband
2. Content and applications
3. Mobile money
4. The Cloud
5. Mobile health
Our report concludes with an examination of
five critical success factors for TMT players
in emerging markets.
We hope you enjoy our report, which can
be reviewed as a whole or by diving into
the five sections described above. This study
is part of Linklaters TMT Sector Programme.
If youd like to find out more, please get
in touch.
Roger Barron and Julian Cunningham-Day
Telecommunications, Media and Technology
Global Sector Co-leaders
For an interactive version
of this report go to:
tmtgenerationnext.com
 8 Linklaters / Generation Next: Five pathways to TMT growth in emerging markets / Next generation broadband
Next generation
broadband:
getting on the
broad-bandwagon
Broadband presents the
greatest TMT revenue
growth opportunity in
emerging markets for
the next five years.
Demand for bigger-capacity Internet
connections in order to attain faster
speeds and richer data services,
plus the increasing availability of lower-
cost, smarter devices, are leading to
double-digit broadband growth in both
connections and revenue.
Increased domestic and international cable
capacity and more sophisticated wireless
networks will provide rapid, cost-effective
broadband network coverage for billions
of users for the first time, and will act as
the innovation platform for a multitude of
content and applications services.
Next generation broadband (NGB) projects
are widely supported by governments in
emerging markets which acknowledge that
their citizens and businesses need access
to high-speed broadband services in order
to be economically competitive in global
markets. However, TMT companies will
need to align their strategies with each
local government broadband policy in
order to benefit from the incentives and
resources made available, as well as to
ensure that their supply of new network
infrastructure tracks local demand for
Internet connections. This will help ensure
that shareholders achieve an appropriate
return on their investment.
$193bn
Next generation
broadband revenues
from emerging
markets will double
to $193bn by 2017.
Introduction
The market for communications services
is evolving rapidly across emerging markets.
Larger, higher-definition screens, faster
processing power and the declining price
of mobile devices are raising consumer
awareness and appetite for content, data
and social networking services. This is
creating a surge in demand for the faster
broadband and data connectivity required
to make the experience of these services
truly compelling.
Broadband infrastructure and Internet
access are also critical for economic
development, with much of an emerging
nations future competitiveness reliant on the
robustness of its technology infrastructure,
a factor which can be magnified in countries
where technology can offset some of the
challenges of poor physical and transport
infrastructure. Indeed, the International
Telecommunication Union 2012 report
suggests that a 10% growth in broadband
penetration can yield about 1% incremental
growth in GDP. As a result, many governments
are actively promoting policies to boost
broadband penetration, which in many
cases is accelerating market development,
but this may also distort the competitive
landscape. For example, the Russian
governments decision to award its 4G
spectrum on a fee-free basis, but exclusively
to domestic players, has forced European
player Tele2 to exit the market.
While the broadband opportunity for TMT
players in emerging markets is significant,
tapping into it profitably will pose
considerable challenges for service
providers and their vendors, who will need
to scale up their broadband access services
with the right local mix of technologies,
commercial packages and partners in
order to maximise adoption.
9
Figure 1: Next generation broadband in emerging
markets: TMT market growth forecast
4.0
3.698
3.5
3.0
2.5
2.0
1.5 1.348
Country focus:
China
1.0
0.5
0
Broadband connections in 2012 (bn)
Forecast broadband connections in 2017 (bn) Broadband in China among the three state-owned giants
In 2012, China overtook the US as will dominate the competitive
the country with the most broadband landscape over the next five years.
connections in the world. China
200 193
therefore presents by far the biggest The key to the future success of these
broadband opportunity in the emerging domestic players will be their ability
markets. As a senior leader from to integrate and coordinate their mobile
150
a leading global vendor told us: and fixed broadband roll-out plans.
Opportunities abound in China and This will require the alignment of LTE
we expect the country to be our key and fibre plans and the development
102
100
growth driver in the next 1224 of partnerships to address distinct
months. By 2017, China will have opportunities in regional markets and
close to 900 million fixed and mobile in the enterprise space. Both of Chinas
50
broadband connections, with almost two major domestic equipment vendors
three-quarters of these over mobile Huawei and ZTE have benefitted
(3G or 4G) broadband. from the boom in the market and have
0 solutions to cater for the integrated
Broadband revenues in 2012 ($bn) However, the unique nature of the approach of the telecoms operators.
Forecast broadband revenues in 2017 ($bn) Chinese telecoms market means this But there are also opportunities for
broadband opportunity is only open foreign equipment-makers to grab
to a few select players. The market is a slice of the market in the country.
mainly dominated by the three
Market size and growth
government-owned domestic players Despite opportunities in the market,
The opportunity presented by new
China Mobile, China Unicom and uncertainties remain, especially
broadband infrastructure is unsurprisingly
China Telecom whose activities are about the evolution of the 4G (LTE)
the number one focus area for most
expected to align with government landscape. Two major concerns
telecoms operators and equipment vendors
plans for the countrys broadband are relevant here. First, the future
who participated in this study. As a strategy
future. The 2008 restructuring of the policy approach of the national
director of a leading mobile network operator
industry has further entrenched the telecommunications authority in
told us: Data access is the key strategic
position of these three players, albeit relation to LTE licence and spectrum
growth area for us. Indeed, emerging
while making them more competitive auctions is unclear. Secondly, as with
market broadband connections will grow
against each other. For example, the Chinese 3G variant (TD-SCDMA),
from 1.3 billion in 2012 to 3.7 billion by the
although China Mobile remains a there are concerns about the technical
end of 2017, a sizeable 22% compounded
behemoth in the mobile market, maturity of the TDD-based LTE
annual growth rate (CAGR), while total retail
controlling about 65% of the market technology that is favoured by China,
revenues for broadband services are set to
in 2012, its fixed division (China but which has little adoption elsewhere.
grow to $193bn over the same period, as
Tietong) has not dented the dominance Industry executives expect the
outlined in Figure 1.
of China Unicom and China Telecom, TDD-LTE device ecosystem to be ready
which controlled more than 90% of the by 20142015 but worry that they may
The pent-up demand for broadband
retail fixed broadband market in 2012. struggle to support the commercial
services in emerging markets is a reflection
Accordingly, jostling for market share pickup of LTE in the market.
of the under-development of the market and
the strong desire for Internet connectivity
by their populations. While connection
growth will outstrip revenue growth as the
revenue per customer is generally lower in
these markets, the broadband revenue
opportunity is still immense due
to the sheer scale of the growth.
 10 Linklaters / Generation Next: Five pathways to TMT growth in emerging markets / Next generation broadband 11

Active network sharing provides

great opportunities to increase cost- Next generation broadband: top five emerging markets
efficiencies and minimise the cost Source: Ovum/Linklaters. All figures projected for 2017.

of future network expansion and

upgrades. However, operators need
Next generation to consider the robustness of their
5
partners infrastructure and put in
broadband: place a framework with appropriate Low risk High risk
service levels and a well thought-out Russia
getting on the exit strategy.
broad-bandwagon 1
Julian Cunningham-Day 225m
Broadband connections
Telecommunications, Media and Technology
Global Sector Co-leader
(87% mobile) China
$10bn
Broadband revenues 894m
(57% mobile) Broadband connections
(72% mobile)
Table 1: 4
Risk forecast for foreign investors Next generation broadband: top five emerging markets
Mobile broadband will be the most effective $53bn
Market Key risks Risk outline Risk
and affordable means of providing Internet
access across many emerging markets. In
Brazil Broadband revenues
(50% mobile)
forecast
geographies where there is no fixed access 2
Regulation Regulation: Uncertainties over licensing of LTE spectrum and the Cloudy infrastructure in place, it is usually not
China Political
mandate forcing some players to accept the locally-supported TD-LTE
economical to build one now. For many 247m
India
standard could derail NGB developments in the next 24 months.
Finance Broadband connections
Political: Government intervention in the telecoms sector is common low income, low population areas, mobile
(85% mobile)
and access for international players is very restricted. is the only economical solution. In places
Medium risk like Myanmar, which are just opening up
$31bn
Finance: The pegging of the yuan necessitates more complex
financing structures for inbound/outbound Chinese investment.
their telecoms markets, the new entrants
Broadband revenues
425m
Regulation Regulation: The regional licensing structure, coupled with the recent Rainy are well positioned to build a next generation Broadband connections
India spectrum licence scandals and threats of widespread regulatory
(38% mobile)
Tax broadband mobile network from the start, (91% mobile)
reform provide significant concerns for potential investors.
Infrastructure in addition to meeting the huge demand
$17bn
Tax: The governments attempts to extract significant taxes out of
Skills Vodafone have concerned potential investors. for voice services. As a result, 3.2 billion
Infrastructure: India remains plagued by infrastructure problems, High risk connections, or 87% of all emerging Broadband revenues
especially in the transportation and energy sectors. market broadband connections, will be over (21% mobile) 3
Skills: India recognises its skills gap in the industry, especially the wireless technology. Today, 3G technologies
manufacturing of telecoms equipment.
account for most of the mobile broadband
Indonesia
Regulation Regulation: The government is the largest shareholder of the market
leader, potentially leading to concerns about the independence of
Cloudy connections across emerging markets. Indonesia
Economic
the regulator. While 4G technologies will grow, 3G will
Infrastructure
Economic: Average monthly revenue per user for mobile telecoms remain the dominant mobile technology
Skills services is very low (below $3), giving very little cushion to telecoms
players in a downturn. Medium risk
across the emerging markets in the 259m
medium term. Broadband connections
Infrastructure: Indonesias multitude of islands poses a gigantic
(97% mobile)
challenge to transportation and logistics infrastructure in the country.
Skills: Indonesia faces a skills shortage as it is failing to train enough The greatest mobile broadband
technical graduates. opportunities are to be found in the largest $4bn
Economic Economic: Since 2008, lax fiscal targets, growing public debt, rising Cloudy
emerging markets. China will account for Broadband revenues
Brazil Finance
inflation and government intervention in investment decisions have 14% of all mobile broadband connections by as well as Internet-delivered TV services, will The five largest broadband revenue (46% mobile)
become major concerns for investors in Brazil.
Infrastructure 2017. As data traffic grows, LTEs capability continue to provide a strong business case opportunities in emerging markets
Finance: Fluctuations in exchange rates and taxes on capital inflows
Skills and foreign products may constrain international TMT investment.
to support an even more efficient, and for the roll-out of fixed broadband are presented by China, India, Russia,
Infrastructure: The forthcoming World Cup and Olympics should Medium risk cost-effective, data traffic infrastructure will infrastructure, particularly in fibre. By 2017, Brazil and Mexico. These markets,
improve Brazils infrastructure, but the level of investment is leading to encourage many emerging market players to fixed broadband connections across and in particular Russia and India, pose
civil unrest. This may impact the national NGB roll-out. launch more advanced LTE networks. This emerging markets will reach 520 million considerable regulatory and policy risks.
Skills: The lack of a skilled and globally mobile workforce fluent in
will drive rapid growth in emerging market connections. This will represent a small but Given the volume of lower-income
Portuguese is a source of concern.
LTE connections, reaching 352 million important share of the total, accounting for customers in these markets, operators
connections by 2017, or approximately 14% of total connections by 2017, yet will also be forced to price their services
Regulation Regulation: The lack of effective separation between executive and Rainy
Russia regulator has raised concerns about politically motivated decisions, one-tenth of all mobile broadband generating 56% of the total revenue. This to ensure affordability for customers
Finance
such as recent Russian-only spectrum auctions. connections in the emerging markets. reflects the fact that fixed broadband while trying to maintain margins to
Skills
Finance: Reliance on commodities prices and fluctuations in exchange connections will tend to serve the highest- deliver appropriate return on investment
rates represent a major risk for players in the market requiring finance.
Despite the dominance of mobile income, trend-setting users at the top of the risk. Indeed, our research consistently
Skills: Continued emigration of skilled personnel and decline in the High risk
overall population pose a concern for recruiting skilled staff.
broadband, fixed broadband will also socio-economic pyramid. In contrast, mobile shows that attempts to charge a price
continue to grow across emerging markets. broadband connections are often the only premium for FTTx and LTE usually
The explosion in video traffic from websites option for the poorer sections of the dampen demand and adoption in both
Source: Ovum/Linklaters.
such as YouTube, Youku and PPTV in China, population in emerging markets. mature and emerging markets.
 12 Linklaters / Generation Next: Five pathways to TMT growth in emerging markets / Next generation broadband
Next generation
broadband:
getting on the
broad-bandwagon
Go-to-market strategies:
multi-stakeholder engagement
holds the key to success
Capitalising on the opportunities
presented by the broadband market will
require a multi-stakeholder approach in
order to deliver the required geographical
coverage and economies of scale.
Our research has identified six key
go-to-market strategies for next
generation broadband:
1. Align broadband roll-out with
government development strategies:
With governments eager to drive investment
in broadband infrastructure, telecoms
operators and vendors can benefit from the
resources and incentives that emerging
market governments can make available.
Example inducements include amenable
spectrum policies (e.g. the fee-free LTE
spectrum awarded by Russia); subsidising
network roll-out to economically unviable
customers (e.g. the Colombian governments
plan to use funds from the ICT Fund to
provide broadband access to 69,000
underprivileged households); or direct
investment by governments in broadband-
related assets (e.g. South Africas April 2013
National Broadband Plan which calls for the
government to provide necessary
funding for broadband initiatives).
2. Embrace a wireless-first network
strategy: TMT players in most emerging
markets should assume that they will need
to provide comprehensive wireless-first
broadband access by default, and add
wired access incrementally in areas of high
demand and where it is economic to do
so. Kenyas proposed plan for a single LTE
network is a key example of government
support for a holistic, wireless-first strategy.
3. Leverage network sharing partnerships:
Given the level of resources required to
achieve nationwide coverage, operators
should consider entering into bilateral and
multilateral network sharing agreements to
share their costs. This method is already well
developed for wireless technologies, where
sharing of masts, ducts and power supplies
is widespread. Bigger gains, however, will
come from active network sharing, where
operators share their radio access networks
and spectrum. Ovum forecasts that by 2017
at least 50% of all LTE networks in the world
will involve some form of active network
sharing, and this figure is likely to be
significantly higher in emerging markets.
4. Roll-out innovative data pricing
strategies: For data consumption to reach
its full potential, telecoms operators need to
develop new tariffs to make data access
affordable to the bulk of their customers.
A tariff that includes complimentary access
to regularly used content (e.g. access to
social networking sites) is a simple strategy
to improve the appeal of data access. For
example, Google, Facebook and Twitter
have signed deals with numerous emerging
market operators to offer such plans.
The continued fall in smartphone prices
has reduced barriers to entry for many
bottom-of-pyramid consumers, but
operators will need to shift to higher volume/
lower-margin plans in order to reach out to
these customers.
13
Many emerging market governments
are prepared to offer incentives to
those who participate in national Operators will also
broadband plans. Telecoms operators need to develop
and vendors should carefully assess
infrastructure, strategy
evolving government policy in
and pricing with an
target markets in order to position
themselves to benefit from the eye on the future for
resources that governments are the next big bet: M2M
making available, and avoid the local the much vaunted
protectionism that has harmed Internet of Things.
new entrants in some emerging
broadband markets.
Sophie Mathur
Partner Corporate
5. Drive data consumption with content: 6. Future-proof your infrastructure for
TMT players in emerging markets are well the Internet of Things: While todays
positioned to spur creation of local content focus is on connecting people, operators
in their markets in order to drive data and vendors and other TMT players must
consumption on their networks. Offering position themselves to capitalise on
such content may help the operators machine-to-machine (M2M) connections.
enhance customer loyalty and defend The hotly anticipated Internet of Things
against becoming a dumb pipe for other will enable us to connect gadgets from TVs
companies content and services, and it can and fridges to cars and houses. A senior
also generate new revenue streams and executive at a leading global ICT vendor
increase appetite. told us: 99% of the things that can be
connected are not connected. Between
While a business model based on a limited now and 2020, this represents a business
walled-garden of available content is less opportunity of more than $14trn. Given
secure in todays open Internet ecosystem, that most emerging markets do not have
many operators can still benefit from an extensive fixed telecoms infrastructure,
providing their customers with access to M2M mobile connections will represent the
exclusive curated content. Strategies range first opportunity to connect many gadgets
from full vertical integration (e.g. DTACs across emerging markets.
Farmers Information Gateway in Thailand)
to simple sponsorship deals (e.g. Tigos TMT players need to lay the groundwork for
service which uses a series of SMS M2M now, future-proofing their strategy,
questionnaires to help customers recognise infrastructure and pricing models to ensure
the onset of kidney diseases in Tanzania). that partnerships with M2M providers can
be industrialised to capture value from new
With a fully integrated service, operators opportunities quickly.
gain assets and capabilities that can enable
them to compete in other areas of the TMT
ecosystem. Sport and entertainment content
is often a major attraction. As a former
executive at a successful media company
told us: The most profitable genre is sport,
especially football. Globacom, for example,
has a deal with Manchester United granting
it exclusive rights to video highlights, match
images and footage in Nigeria, Ghana and
the Republic of Benin.
Beyond sport, operators are also offering
other types of content such as hosting app
stores (e.g. Maxis in Malaysia) and websites
(e.g. Safaricom Kenyas classified website).
These additional content propositions serve
to enhance the operators core next
generation broadband offering.
 14 Linklaters / Generation Next: Five pathways to TMT growth in emerging markets / Content and applications
Content and
applications:
the big emerging
appetite for data
As consumers continue to
seek out smart experiences
in the most affordable and
immediate ways, the biggest
opportunities in content and
applications in emerging
markets over the next few
years will come from
value-added services (VAS)
such as mobile money,
with gaming, music and
video playing an
increasingly key role.
This increase in demand will propel the
mobile content market to revenues of
$30bn by 2017, almost double its current
size. To realise these opportunities, TMT
players must orientate their strategies to
take advantage of a mobile-led culture in
emerging markets.
Introduction
Digital content in emerging markets has
long been the near exclusive preserve of
the wealthiest consumers who have access
to the same smart devices, broadband
connections, purchasing power and
payment methods used by consumers in
mature markets to enjoy digital content.
The growth of mobile data access combined
with the decreasing cost of larger-screen
smart devices in emerging markets is driving
mass access to content and applications for
billions of new users.
As growth in the number of mobile users
decelerates, mobile operators are looking
beyond basic VAS such as ringtones and
logos, to increasing investment in content
and applications to drive mobile data
revenue. New 3G and LTE networks and
the rising ownership of smart devices are
together boosting data revenues in the form
of increased usage of mobile broadband.
The shift to mobile broadband is coming
largely at the expense of VAS, as consumers
with smart devices are increasingly finding
ways to bypass the traditional operator-led
content model.
The industry must focus more closely on
the affordability of smartphones and
broadband data plans, the growing
fragmentation of smartphone platforms,
and the fine-tuning of monetisation models.
Addressing these challenges will require
customer-led innovation, as well as strong
and equitable partnerships with a mix of
local and global content partners.
Monetising and paying for content remains
a key challenge for the industry, which is
fuelling the growth of ad-sponsored and
freemium business models. While operator
billing is an expensive but effective option
for reaching unbanked users, the growth
of mobile payment services is changing not
only the way users pay for content, but the
broader mobile financial services landscape.
Market size and growth
Mobile will represent 49% of all global
Internet traffic by 2017 and, with the vast
majority of emerging market broadband
connections over wireless technology,
mobile Internet traffic is increasing rapidly
in emerging markets, providing an
opportunity for content creators to access
new consumers like never before.
In China, search giant Baidu, microblogging
player Sina Weibo and online video player
Youku Tudou, are all reporting that between
15% and 20% of their traffic comes from
mobile devices. In India, online travel
booking company Cleartrip reports that
nearly 28% of its traffic is already coming
from mobile, much of it over its Android app.
More interestingly, mobile also accounts for
nearly 8% of its transactions.
The adoption of cloud-accelerated (proxy)
browsers is opening mobile browsers to the
mass market segment, with more devices
featuring browsers at increasingly more
affordable prices. These lower prices will
contribute to persuading the long tail of
basic phone users to switch to smart phones
and to access the Internet via their mobiles.
The potential market is enormous when one
measures rising browser usage data from
major vendors. Opera Mini claims over
200 million users globally; UC Browser over
400 million; and Nokia announced it has
over 80 million users of its Xpress Browser.
In the short term, the greatest traction
comes from messaging apps, particularly
in the social category. This is because the
future of messaging will be centred on
IP-based messaging and social messaging
apps. This is particularly true in Asia, where
messaging apps are very popular. The
stickiness of social messaging services
for customers makes them the ideal platform
from which to launch complementary,
more monetisable services. For example,
Country focus:
India
Late starter rising fast
India is a great example of an emerging
market in terms of its opportunities for
revenues from mobile content and
apps. Much smaller than China, it has
also lagged behind Brazil in its overall
pace of development, particularly with
respect to the deployment of mobile
broadband. This slow adoption of
mobile broadband has been
particularly striking given the negligible
fixed Internet penetration in the
country. However, a number of factors
are converging at the right time to
Figure 2: Content and applications in emerging position India as the next big growth
story in content and apps.
markets: TMT market growth forecast
20.0
While basic mobile connection growth
is slowing down, many users are adding
18.169
mobile broadband plans to their voice
17.5 and SMS services. As a result, mobile
broadband users are projected to grow
rapidly, rising from around 60 million
15.0 connections today to more than 350
million by 2017. In parallel, there is
rapid growth in smartphone shipments,
12.5
12.927
which are projected to rise rapidly from
barely 20 million in 2012 to more than
160 million in 2016. This rapid pace of
smartphone adoption will swell the
9.822
installed base to nearly 500 million
10.0
devices in the country, representing a
tremendous addressable market for the
consumption of digital content and
7.5
apps over mobile devices. The single
biggest driver of this growth is the
availability of the affordable, feature-
5.0
rich Android smartphones that are
being imported from China.
2.684
2.5 1.929 Among all the content categories in
India, the most popular are messaging
0.65 apps and mobile video. Like most other
Asian countries, messaging, especially
0
Mobile VAS Mobile music Mobile gaming social messaging, is very popular in
revenues revenues revenues
India. There is no single dominant
player in India and usage is currently
Content and app revenues in 2012 ($bn)
spread over several apps, including
Forecast content and app revenues in 2017 ($bn)
home grown apps from the likes of
15
GupShup, Hike and Nimbuzz. Mobile
video is also gaining in popularity, with
services from the likes of VuClip gaining
significant traction. Mobile operators
have also developed their own
proprietary or white label services, and
are marketing these services heavily.
For example, Bharti Airtel has launched
a new One Rupee plan for mobile
videos. Priced at 1 Indian Rupee
(around 2 US cents), prepaid users
can dial a short code to gain access to
Airtels portal, from which they can
choose their video clips. Alternatively,
they can go straight to the page from a
mobile browser.
India has an overwhelming proportion
of prepaid users, accounting for nearly
97% of the total base of connections,
making it difficult for operators to
profitably market mobile data. However,
the launch of 3G networks and the
impending launch of LTE are providing
a much-needed bandwidth boost to
new owners of smartphones. Today,
mobile operators are offering very
attractive data packages to their
prepaid user base and are gaining
increasing traction as they replicate the
strategies that were successful in the
voice market. Until recently, a lack of
adequate payment mechanisms was
also holding back market development.
Now, the availability of app stores like
the Nokia Store, with its extensive
operator billing arrangements, has
made payment for content and apps
much easier for the mass market. This
reduced friction is manifesting in
increased downloads, even from lower
income segments. For the small but
high-spending postpaid user base in
India, app stores like iTunes and
Google Play have all rolled out local
versions for the Indian market allowing
these subscribers to pay for content
and apps with their credit and/or
debit cards.
 16 Linklaters / Generation Next: Five pathways to TMT growth in emerging markets / Content and applications 17

Content and applications: top five emerging markets

Source: Ovum/Linklaters. All figures projected for 2017.

Content and
applications: Low risk High risk

the big emerging

appetite for data

$30bn
Content and apps 5 2
1

China
revenues from
emerging markets Mexico India
$11.2bn
will almost double to Content and apps revenues

$30bn by 2017. $635m $2.29bn

Content and apps revenues
Content and apps revenues

Table 2:
Risk forecast for foreign investors Content and applications: top five emerging markets 3 4
app developer LINE generated approximately
Market Key risks Risk outline Risk
$30m in 2012 from the sale of premium South
forecast
emoticons alone. As services like LINE Brazil Africa
Piracy Piracy: Continues to be a major issue in China. However, the Sunny expand to emerging markets, there are
China government is taking steps to combat piracy under its commitments
Privacy numerous opportunities to monetise
$2.21bn $2.18bn
to the WTO.
Regulation
Privacy: Service providers and content publishers required to comply social messaging.
with the governments censorship and monitoring requirements. Content and apps revenues Content and apps revenues
Regulation: Potentially significant changes in relation to the licensing of Low risk Mobile gaming is growing in nearly every
MVNOs and the restrictions on foreign investment.
emerging market, notably in Indonesia,
Regulation Regulation: There has been significant turmoil on the regulatory front Cloudy
Brazil, China and Nigeria. These are
India Piracy
in the wake of the 2G licensing scandal, the delay to the New Telecom relatively high-growth markets both in terms
Policy (NTP) and uncertainty over foreign investment rules.
Privacy of data and device penetration. However,
Piracy: Piracy of music and video content is common, but less so
in gaming.
they are also low-income markets, which
Privacy: Government surveillance is an increasing concern, with Medium risk makes the free-to-play (F2P) gaming model
requirements to establish local offices and servers. (games are free, and revenue is generated new mobile music platforms and services, This is due to gaps in the infrastructure globally and more regionally popular
by the purchase of virtual goods) key to the but the overall market for digital music will in terms of network capacity, device platforms has fuelled the movement towards
Piracy Piracy: Despite increasing availability of legitimate content services, Cloudy development of mobile gaming. F2P and the not be as big as China. A lot of this has to capability and a lack of consumer a larger audience consuming video over
Brazil piracy is a big issue. Copyright laws in Brazil are not currently strong
Privacy
enough to curb this problem. in-game purchase of virtual goods and do with the lack of market control in terms understanding of the services available. mobile devices. All of this is gradually
Privacy: There is no specific law governing digital privacy rights in services is fast becoming the business of piracy. India is also highly mobile-centric, The current market is based on video encouraging the uptake of mobile TV
Brazil, but there are stringent data rights for employees which can limit model of choice for digital game platforms. which means consumers will lean towards clips that can be downloaded through and video services in emerging markets.
enterprise services. Medium risk The F2P model is lowering barriers for entry single track downloads or streaming music, content providers and MMS. Regional
Piracy Piracy: An underdeveloped retail sector contributes to higher prices, Cloudy
for new users and increasing the user base thereby putting it on a lower growth movie clips, songs, and sporting video China, India, Brazil, South Africa and
South Africa Privacy exacerbating the sales of pirated content enforcement is low. in the region. trajectory than China. Indias prospects for clips are the most popular types of video Mexico are the countries where mobile
Privacy: The Protection of Personal Information Bill will import an mobile music can be attributed to growing content consumed. content and applications are most likely
EU-style privacy law which may prove difficult to implement and
restrict certain services.
Mobile music will grow rapidly both in terms mobile penetration, easy availability of song to see the largest growth in emerging
Medium risk of digital downloads and retail revenue in downloads via mobile, and a large amount Device manufacturers such as Nokia and markets. However, these markets, and
most emerging markets. China, in particular, of locally available content. RIM are already fuelling the video market in particular China and Mexico, pose
Regulation Regulation: Recent high-profile money laundering cases have Cloudy is ahead of the pack, with revenue from by offering users capability to upload and considerable piracy risks, as well as
Mexico damaged the credibility of the regulatory regime and may lead to
Piracy
more assertive regulation. digital music reaching $704m in 2017, Mobile video and TV, currently restricted share content on social networks and being subject to the constraints of
Piracy: Piracy is prevalent in Mexico and enforcement has been low. with more than half of that coming from to a small proportion of users, will evolve messenger groups as soon as it has been extensive privacy regulation.
However, the government has upped its penalties and fines. mobile downloads. China will better leverage rapidly towards video streaming. Today, captured. Social networks in particular are
Medium risk its already large and growing broadband most emerging markets are simply not ready encouraging the consumption of video
subscriber base. India will perform well with for mobile TV, or even mobile video. clips. The growth in the usage of YouTube
Source: Ovum/Linklaters.
 18 Linklaters / Generation Next: Five pathways to TMT growth in emerging markets / Content and applications 19

Content and
applications:
the big emerging
appetite for data

Go-to-market strategies:
towards a smarter future
Service and content providers will focus
their strategies on effective models to
facilitate consumers progression from
basic communications services, such
as voice and SMS, all the way through to
smart experiences on the mobile Internet,
as outlined in Figure 3. Consumers in
emerging markets care even less than
their mature-market peers about the
underlying technology, and are focused
on the experiences and benefits of different
services. While many consumers would
undoubtedly like to experiment and browse
casually, they are currently more inclined to
seek out customised app-like experiences
on their mobiles due to time and disposable
income constraints.
Figure 3: Emerging market consumers progression to smart experiences
High
Productivity
Device IQ and cost
Our research has identified six key go-to-
market strategies with the first three
strategies based on the need for mobile
network operators to deliver affordability
and work in tandem with content partners.
The next three are based on the need for
content providers to develop more innovative
business models.
Mobile network operators need to
broaden affordability and partnerships
Mobile operators faced with the strategic
imperative to monetise large investments
in data networks need to improve the
affordability and attractiveness of their data
services in a bid to seed the market and
spur adoption. The three key strategies to
achieve this are:
VoIP
E-books/ Video
magazines streaming
Internet Mobile
Email
radio gaming
1. Simplify data access pricing:
Consumers need simplicity and look for
unlimited, time-based and content-based
packages. This greatly reduces entry
barriers such as affordability and bill
shock, but the extra complexity of plans
may turn off potential mobile Internet users.
2. Embrace the prepaid user base:
Operators must also embrace the prepaid
segment for mobile broadband, shifting to
high-volume, low-margin data plans that
will drive mobile Internet usage at the mass
market level. Sachet pricing, similar to that
adopted for voice services, is now critical
for data. This process has already begun.
Airtel in India is offering shared data plans
and mobile videos for 1 Indian Rupee and
Smart in the Philippines is experimenting
with unlimited plans that allow free surfing
but have a cap (15 MB) on daily downloads.
3. Partner with over the top (OTT) players:
Telcos looking to respond to the onslaught
Sharing Mobile of OTT services should increasingly look to
apps wallet
partner with OTT service providers. Such
E- partnerships are contractually based, with
commerce
some mutual marketing and/or commercial
benefit to the parties involved. There is
increasing evidence of such win-win
Content providers must develop more
innovative monetisation models
While business models and success
rates will vary across markets and content
categories, the following three universal
strategies can be adopted to drive growth
for content providers:
4. Go freemium: The stark reality of the
mobile Internet is that encouraging people
to pay for content and services is difficult.
This has led to a growing dominance of the
freemium model, where ad-supported
free services are offered to drive adoption
and traffic, while in-app purchases for more
advanced services drive additional revenue.
Ad-supported services are encouraging new
consumers to download apps and content.
The best example of this is the Google
Play app store for Android. Rising sales
of smartphones and app downloads mask
the fact that most of these downloads are
ad-supported and free.
5. Focus resources on the app stores with
highest ROI: The mobile Internet offers a
wealth of distribution mechanisms, primarily
over numerous app stores and, to a lesser
extent, browsers. Too many options have
arisen due to the lack of a standardised
6. Drive monetisation by supporting
operator billing: While app stores and
browsers will remain the fastest growing
distribution mechanisms for content and
app developers, the dominant prepaid user
base is also typically inversely correlated
with credit and debit card penetration in
emerging markets. In the absence of
alternative payment mechanisms, cash is
still king. While some markets are having
success with or experimenting with mobile
money, operator billing is a very effective
and high conversion method of driving
monetisation. Operator billing typically
involves a high commission paid to the telco
(up to 1525% in some cases); however,
this high commission can be worth it, as the
addressable market is greatly increased.

Interact partnerships being struck. For example, framework for the mobile Internet. The result
Photo Location Social
apps apps messaging Reliance Communications in India is is increasing fragmentation among app
partnering with WhatsApp and Facebook for stores, especially for the Android platform
Search,
Proxy
browser
News
Web
apps
unlimited packages. Operators are also which is driving most smartphone growth.
discover and working with major OTT and content players For developers and content providers, the
consume Google Video/ to offer zero-rate plans, which typically offer high degree of fragmentation means that
search music
free access to content with a minimalistic they must focus limited resources on those
user experience. More than the corporate app stores that generate the best return
Voice SMS MMS
social responsibility benefits, these zero-rate on investment.
The basics plans are essentially a downstream
Ring back FM
Ringtones tones radio investment in that the people who get to
access digital content early are more likely
Low High to pay when they can afford it.
Utility of the device
 20 Linklaters / Generation Next: Five pathways to TMT growth in emerging markets / Mobile money
Mobile money:
banking on partnership
Explosive growth in mobile
ownership over the last
decade, combined with
limited access to financial
services, is fuelling rapid
growth in mobile financial
services (MFS) across
emerging markets.
In many emerging markets today there
are more connected than banked people.
As a result, mobile network operators
(MNOs), payment processors, device
vendors, independent players and financial
institutions are increasingly playing a key
role in the provision of basic financial
services but this is only the start.
By 2017, we estimate that the 876 million
MFS users in the emerging markets will
account for 86% of all MFS users globally,
making this market worth $29.8bn to
service providers.
As no single player can successfully offer
a full suite of mobile financial services on
their own, strong partnerships are essential
to establish an effective MFS ecosystem
in each market. Equitable incentives and
revenue sharing contracts for each MFS
ecosystem player, including MNOs, banks
and retailers are critical to the success of
mobile money.
Introduction
Very limited access to bank branch and
ATM networks means that the majority of
emerging market consumers operate purely
in the cash economy. The unbanked bear
a huge cost and time burden in managing
their finances. For many people in rural
areas, paying their electricity bill or receiving
a remittance from a relative working abroad
requires a full day, including a return trip
to the nearest towns bank branch, which
can be 2050km away. Sending cash is
expensive and unreliable: bus or taxi
drivers are the only option for many, and
they often demand 1020% commission
on the amount, with few guarantees that
the cash will reach its intended destination.
By comparison, mobile transfers command
a commission of approximately 5%.
The mechanics of emerging market MFS are
designed to be simple at a basic level: a
user registers with a service provider for
their mobile money service, and a simple
SIM-based application is downloaded to
their device that contains their account,
which works even with most basic phones.
Then they can go to an agent with cash to
credit their mobile money account. From
there, should a user decide to send money
to someone or pay their electricity bill, they
simply select an option on their phone
menu. The recipient of the funds receives
an SMS to advise them of the funds arrival
in their account, which they can then
withdraw from their local agent. The MFS
provider, in partnership with a bank, does
the clearing and settlement of transactions
for the accounts of both end-users and
individual agents.
21
$29.8bn
Revenues from mobile
financial services in
emerging markets will
Country focus:
be worth $29.8bn to
service providers
by 2017.
Indonesia
Interoperability in action
After market leader Kenya, Indonesia
Due to the lack of an existing has one of the most vibrant mobile
money markets in the world, with
Figure 4: Mobile financial services in emerging
markets: TMT market growth forecast
payments value chain, some services in operation since 2007, when
29.837
mobile operators with sufficient Telkomsel launched Tcash. Since then
30 market share have been able Indosat launched Dompetku, and XL
(Axiata) launched XL Tunai services.
to create effective payment
More importantly, non-telco players have
25
networks in emerging markets entered the market, led by Bank
with comparatively little Andaras AndaraLink service, which is
20
partnering. As these operators a B2B service aimed at micro-finance
institutions (MFIs). Bank Andaras aim
15 diversify into new products, is to provide mobile payment services
regulation catches up, and new
to the countrys 50,000 credit union
10 entrants try to gain a foothold co-operatives and around 2,000 rural
in these markets, cooperation community banks. In February 2013, Interoperability arrangements are set
BlackBerry, in partnership with Monitise to give a massive boost to an already
5
among competitors, banks and and Bank Permata, launched a vibrant supply side, and tap into the huge
0.858
retailers will be key to secure commercial pilot of BlackBerry latent demand from a population where
0
continued growth. Messenger Money (BBM). BBM is just one in five adults has a bank account.
popular in Indonesia, and BBM aims In addition, a facilitating regulatory regime
MFS revenues in 2012 ($bn)
Forecast MFS revenues in 2017 ($bn) Julian Cunningham-Day to facilitate peer-to-peer payments led by Bank Indonesia, which brokered
Telecommunications, Media and between BBM users who often trade the interoperability agreement, is another
Technology Global Sector Co-leader goods using its messaging platform. positive factor for future market
developments. This fertile context will
In the context of the under-development
Indonesia has more than 1 million lead to a rapid growth of mobile money
of the banking and payments value chains
active mobile money users currently, adoption in the next five years, with
in emerging economies, there is an
the majority on Telkomsels Tcash users reaching 52 million and transaction
opportunity for non-banking players to take
platform. Although each player has a volumes reaching $42bn, generating
a prominent role in the MFS market. MNOs
much larger number of registered users, service revenues of almost $2bn by 2017.
are key new entrants, with strong brand
activity has been low. Telkomsels CEO
awareness, network infrastructure and
recently indicated that only 6% of the With the major factors that are holding
distribution capability.
12 million customers registered for the back other markets addressed effectively,
Tcash service are active users. Lack operational execution is the key risk for
However, there are significant challenges
of interoperability, combined with a Indonesia in the future. While Telkomsel,
to realising these opportunities for both
fragmented mobile market, has been Indosat, XL, BlackBerry and others now
MNOs and financial institutions. Some are
a key reason behind the low activity in have many of the pieces necessary for
risks applicable to entering new geographic
the user base. In this context, the May success in place, they still need
or product markets, and others are specific
2013 announcement that Telkomsel, disciplined execution to ensure this
to mobile payments, as financial institutions
Indosat and XL are moving to offer fledgling market evolves to its full potential.
need to up-skill to understand the mobile
interoperability, so that users of individual
space and MNOs need to understand the
services can send and receive money to
payment infrastructure and prudential
any service, is hugely significant.
regulatory frameworks. Other players,
such as handset manufacturers with
extensive retail and distribution networks,
have also looked to slot into the MFS value
chain, with mixed success.
 22 Linklaters / Generation Next: Five pathways to TMT growth in emerging markets / Mobile money 23

Mobile money: Mobile money: top five emerging markets

Source: Ovum/Linklaters. All figures projected for 2017.
banking on partnership

57%
of the worlds MFS
Low risk High risk

2 China
1

users in 2017 will

India 151.3m
come from emerging Mobile money users

Asia-Pacific regions. 148.8m

4
Market size and growth
Mobile money users
$5.82bn
We forecast explosive growth in MFS over Mobile money revenues
the next five years, with MFS transaction
values reaching $623bn by 2017. With
Brazil $5.72bn
Mobile money revenues
typical MFS commissions of up to 5% of
transaction value, the market will be worth
$30bn to TMT service providers by 2017. 42.2m
Mobile money users

57% of the worlds MFS users in 2017 will

5
come from emerging Asia-Pacific, led by
Table 3:
Risk forecast for foreign investors Mobile money: top five emerging markets China, India and Indonesia. This will be $981m 3
Mobile money revenues
followed by Africa with 20% of MFS users,
Kenya
Market Key risks Risk outline Risk
forecast
where we expect Kenya to be joined by
Nigeria, South Africa and Tanzania as major
Indonesia
MFS markets. Led by Brazil, Latin America
China
Interoperability Interoperability: Without a dominant bank or MNO, market share Cloudy
will be the next largest region with 11% of 28.6m
Operational
execution
is fragmented and uptake is limited.
Operational execution: Managing the network of mobile money mobile money users, followed by Eastern
Mobile money users 51.8m
agents requires a new skill set for operators. Mobile money users
Europe with 7%, and the Middle East with
5% of the total MFS users. Operational
Medium risk
execution presents a significant risk across $880m
Regulation Regulation: Restrictive regulatory regimes that constrain non-banking Moderately all markets, with Indias financial services
Mobile money revenues $1.99bn
India models by requiring partnerships with banks and restricting service rainy Mobile money revenues
Interoperability
offering. regulatory framework proving challenging
Operational
Interoperability: Without a dominant bank or MNO, market share as well as general interoperability issues
execution
is fragmented and uptake is limited. across India, China and Brazil.
Operational execution: Managing the network of mobile money Medium to
agents requires a new skill set for operators. high risk
There are currently 167 live mobile competition from services led by banks years. However, the margins on mobile Financial services providers ambitions
Operational Operational execution: Managing the network of mobile money Sunny money services in the emerging markets, (e.g. Bank Andarra in Indonesia), device money services are currently thin, and will are less defined in financial and more in
Indonesia execution agents requires a new skill set for operators.
with another 107 announced and set to vendors (RIM and, until recently, Nokia) and remain lower than core telecoms services strategic terms. Their objective is to ensure
launch this year. However, we are at an independent players (e.g. Wizzit in South for some time. lower cost expansion into the currently
embryonic stage of adoption, with only a Africa). Vendors such as Comviva, Ericsson, unbanked segment, as well as removing
Low risk handful of countries that can be considered Fundamo, Monitise and Obopay are key This is a result of current low transaction the threat of being disintermediated from
Interoperability Interoperability: Without a dominant bank or MNO, market share Sunny
established successes for mobile money providers of mobile money platform solutions volumes, as well as the fact that the bulk the newly emerging mobile money
Brazil Operational
is fragmented and uptake is limited. services, including Kenya, Madagascar, to these groups. Retailers will be a critical of the revenues on payments and transfers ecosystem. Indeed, as one financial
execution Operational execution: Managing the network of mobile money Uganda, Paraguay, Philippines, Tanzania supply-side constituent going forward, and in are paid to agents as commissions. Margins services leader revealed: There is no
agents requires a new skill set for operators.
and Thailand. We estimate that there were emerging markets many will take on the dual will grow as transaction volumes grow, and money in payments for us but we need
Low risk only 70m active mobile money users role of both mobile money agent (performing players layer additional payment, savings, them in order to sell other higher-margin
in the emerging markets at the end of cash in/out and banking transactions) and loans and insurance products on top of savings and loans products.
Service quality Service quality: Significant service outages have impacted Cloudy/sunny 2012. Of those, Kenya accounted for accepting payments for their goods and basic services. The biggest jump in margins
Kenya customer confidence.
more than a fifth. services from end-users. will come from the reduction in cash in/cash
out activity (i.e. lower agent commissions),
MNOs dominate the supply-side field, Senior TMT leaders who participated in when users become accustomed to receiving
Low to accounting for more than two-thirds of the this study expect mobile money to account funds directly into their mobile money
medium risk
current deployments, with growing for 512% of their total revenues in five account, as well as paying retailers directly.
Source: Ovum/Linklaters.
 24 Linklaters / Generation Next: Five pathways to TMT growth in emerging markets / Mobile money
Mobile money:
banking on partnership
Go-to-market strategies:
monetising mobile money
Despite tremendous untapped demand
from the mass unbanked, success for
service providers is far from a given.
Only a small fraction of the mobile money
services available today are achieving
meaningful adoption. We have identified
three key elements for TMT players to
consider, which we believe are the keys to
successful market entry and service growth:
1. Use partnerships to bridge expertise
gaps: All market entrants lack the ability
to offer a comprehensive mobile money
service on their own. The emergence of
mobile financial services has forced key
players into unfamiliar waters. Telcos are
learning about financial services; banks
have a lot to learn about mobile devices
and services; and both players are being
drawn deeper into retail services. Strong
collaborative partnerships are therefore
essential to the success of every player.
To address their inevitable expertise gaps,
as well as gain critical local knowledge,
telcos need the banks to provide the
financial services expertise, payment
clearing and settlement services and,
as the service evolves, bring higher-
margin savings, loans and insurance
product expertise. Banks need telcos
communication and distribution
networks, particularly in rural areas.
Partnerships, however, do not come
naturally to either telcos or banks, with
both sectors accustomed to dominating
their respective communications and
banking value chains. As a global MNO
leader told us: Partnership mentality is not
in our DNA, and we have lots to learn in this
respect. Hence there have been a number
of African and Asian telco-bank partnerships
that have come under pressure over issues
such as customer control, revenue share
and future service evolution.
2. Get localisation right and keep it
simple: A key criterion when choosing
a partner is whether they can bring local
knowledge. This not only helps with
navigating the local regulatory space but
also with bringing appropriate products
to market and gaining essential information
on critical issues such as: local income
distribution, major remittance corridors,
bank network reach and effectiveness,
and retail market dynamics.
There is growing market acceptance that
initial mobile money services have to be
simple to understand. Only once users
get comfortable with these foundation
features, are they ready to consider more
advanced payment and banking features,
as illustrated in Figure 5.
25
$623bn For financial institutions and
payment processors, the
is the predicted penetration of mobile phone use
provides an opportunity to access
value of mobile markets which would have been
financial services uneconomic to address, but it
also means that these players are
transactions facing competition in products
by 2017. which they would traditionally be
able to dominate.
Sarah Parkhouse
Partner Financial Regulation
3. Balance competitive customer fees Figure 5: Mobile money product evolution strategies
with appropriate agent commission:
An effective network of mobile money Evolution Foundation Maturity
agents able to process cash in/out functions features features features
and other mobile money transactions is
emerging as one of the key elements of
players go-to-market strategies. Building,
> Merchant payments > M-cash account > Credit/loan origination
incentivising and managing a network of
> Bank account access > Cash in/out > Savings
motivated agents is the foundation of & transfers > Airtime top-up > Insurance
customer growth until the services mature
> International money & transfer > Proximity (NFC)
and all transactions are done with few or no transfers > Domestic P2P payments
cash in/out transactions, which is currently > Salary transfers money transfers
the most expensive element of the mobile > Government transfers > Bill payments
money value chain. This point is still some
time away for many services, and until
then, as one MNO told us: Its essential to
consider how you keep both the end-users
and the agents happy at the same time.
Customer confidence and trust
Only a small
Setting the right level of customer fees, fraction of
and the resulting cut for agent commissions,
is a critical balancing act for mobile money the mobile
players. Low commissions are great for
users, but offer little incentive for agents,
money services
and the flipside is true for consumers,
as some mobile money pioneers have
available today
discovered to their cost. For example,
this lack of commission incentive led to
are achieving
fading interest in promoting Smart Money meaningful
by agents, and Smarts service adoption
began to stagnate. In late 2012 Smart adoption.
Money raised its commissions in order
to redress this issue. Meanwhile, Orange
Ivory Coast found that fees of up to 8%
kept agents very happy with potential
commissions (in addition to offering healthy
margins to Orange) but users considered
them too high, and ultimately demand
was muted until it reduced its fees.
 26 Linklaters / Generation Next: Five pathways to TMT growth in emerging markets / The Cloud
The Cloud:
building castles
in the air
Cloud services, with their
promise of always-on,
cheaper, more flexible and
highly standardised ICT
services, will have a profound
impact on emerging markets
over the next five years.
Rapidly growing demand for new ICT
capacity, combined with the under-
development of current ICT infrastructure,
will drive dramatic cloud service adoption
across the emerging markets. While cloud
is revolutionising IT service delivery in
developed markets, emerging markets
expect to bypass traditional IT infrastructure
by adopting straight-to-cloud strategies
and accessing world-class ICT services
on a level playing field with their developed
market counterparts.
Initial TMT revenue growth will come
from Infrastructure as a Service (IaaS),
but as broadband infrastructure improves,
the Software as a Service (SaaS) market will
increase significantly.
Achieving this growth will require a
supportive policy and regulatory context,
but also significant TMT player solutions,
contract and execution innovation to
address local market complexities.
Compliance with data protection regulations is key
to the widespread adoption of Cloud services.
Third-country law enforcement presents a risk to
Cloud service providers who must give access
to user data, which may potentially be at odds
with local data protection requirements. As
data protection enforcement is determined on
a jurisdiction-by-jurisdiction basis, players need
to make sure the local legal regime provides the
necessary protection. This is particularly important
when data is stored across many countries as it
is likely to add to the complexity of contracts and
compliance requirements.
Tanguy Van Overstraeten
Telecommunications, Media and Technology Global Sector Co-leader
Introduction system management technologies to
The rise of enterprise cloud ICT services deliver significant economies of scale
in mature markets over the last decade and consequently lower costs. They also
has been a game-changer for technology enable vendors to centrally evolve the
providers as well as enterprises. Cloud service and upgrade all users based on
services, which foster the transformation customer feedback, as well as actual user
of the Internet from a content delivery behaviour data.
platform to a software and service delivery
platform, are now set to do the same for Cloud services open opportunities for
emerging markets. telco networks, together with IT systems
integrators and software vendors, to provide
The first iteration of cloud ICT has been in the full range of infrastructure, middleware
IaaS: the virtualisation, consolidation, and platforms and software applications that
centralisation of servers and IT operating are required for on-demand cloud ICT
systems in data centres. This has enabled services. Enterprises in turn are able to
organisations in emerging markets to access take advantage of best practice technologies
a range of on-demand ICT in cloud hubs previously unavailable to them and capitalise
like Hong Kong, Johannesburg, Rio and on local or regional vertical developments,
Singapore, provided they have good for example media technologies in South
network access. Africa or social network applications
development in Turkey.
Platform as a Service (PaaS) adds a new
layer of software services on top of IaaS to Market size and growth
make it easier for enterprises and web Cloud ICT services spend by enterprises
players to develop and/or run applications. in emerging markets was $2.2bn in 2012,
As local content development communities and is set to grow to $10.4bn by 2017.
grow, demand for PaaS in emerging markets This will represent a significant
will accelerate. SaaS best exemplified by transformation in the way companies buy
Salesforce.coms delivery of customer and use ICT in these regions, with much
relationship management software via the of this comprising new revenue streams,
cloud combines the delivery of application rather than cannibalising existing spend.
functionality via a web browser with data
access, encryption, transmission and Both telco and IT service providers are
storage services. well positioned to tap into this market.
To do so, they need to ensure they identify
The innate characteristics of IaaS, PaaS and and address the requirements of new
SaaS make these services highly attractive business customers looking for ICT services
in an emerging market context. They do many for the first time.
not require ownership or management of
hardware or software, other than the access Cloud ICT will be supplementary to existing
device. They offer standardised, always-on legacy enterprise IT and communications
services from centralised large data centres services, as the migration to cloud ICT
that employ virtualisation and automated services requires a strategic rethink and
Figure 6: Cloud ICT services spend in emerging
markets: TMT market growth forecast
8.0
7.0
6.0
5.0
4.0
3.0
2.1
2.0 1.877
1.322
1.0
0.199
0.089
0
IaaS PaaS
Cloud ICT services spend in 2012 ($bn)
Cloud ICT services spend in 2017 ($bn)
adoption of different approaches in
procurement, operations and user
management for enterprises. This is a
major reason why enterprises will move
their budgets into cloud ICT, and in the
meantime adopt cloud ICT services on an
ad hoc basis where there is a business case.
In the near future, cloud ICT will become
a set of managed services. Above all,
businesses want standardisation in order
to simplify operations and manage costs.
For emerging enterprises and multinational
companies building supply chains into
adjacent and developed markets, this is best
done in a managed services arrangement.
Nonetheless, the rates of growth in cloud
ICT in emerging regions will far outstrip
those for existing managed services.
The compound annual growth rate (CAGR)
for emerging markets for Cloud ICT between
2012 and 2017 will be 37%, compared with
typically single-digit CAGR for established
managed network and IT services.
Country focus:
South Africa
Reaching for the Clouds
Despite being behind the curve in
cloud adoption in a global context,
South Africa represents one of the
biggest market opportunities for cloud
7.017
ICT providers in the Middle East and
Africa regions. Software as a Service
(SaaS) is the biggest cloud ICT segment
in South Africa today. Enterprise spend
in customer data analytics (i.e. Big
Data) has passed the early-adopter
phase among large Internet and media
companies in South Africa, and in 2013
it will enter the early-adopter phase for
mainstream enterprises.
The CIOs of large enterprises require
more bandwidth, but they are already
looking to extend cloud ICT into business
intelligence and knowledge management,
which therefore means significant
opportunities for services providers.
Sectors such as mining and banking
are fast moving to enterprise resource
planning in the cloud, to support
operations management in adjacent
markets in Asia and Latin America,
as well as to voice-over IP. SMEs have
SaaS crossed the chasm with public SaaS
cloud adoption, and will continue to
lead migration into the cloud at SaaS
and Platform as a Service (PaaS)
levels. As a CEO of a start-up company
in South Africa told us: The cloud
enables us to get operational quickly
and cost-effectively without incurring
significant capex or operational
expenses. Pay-as-you-grow is the
way to go.
Enterprise CIOs are mostly still
exploring hosting and/or Infrastructure
as a Service, but cloud ICT service
providers need to provision PaaS and
Unified Communications as a Service
for these growth industries.
One reason for South Africas slow
adoption of Cloud ICT Services to date
is the generally poor level of cloud
provision in the public sector, which
27
has not updated its Information
Society Programme, that set out the
countrys ICT strategy. However, this
is changing, and there are some
world-class exemplars in government
departments that could help to inspire
demand for cloud services. South Africa
Revenue Services (SARS), which
encourages online filing of tax returns,
has automated the assessment of
citizens returns and responds to users
within a few hours with the amount
owed by the citizen or the state.
Completing a tax return takes less
than 15 minutes. The service is also
usable on mobile devices. As a result,
SARS receives more than 90% of its
returns electronically.
South Africa has the potential to be a
top-five cloud ICT emerging market with
a CAGR of 35%. This will take the cloud
ICT market to at least $215m by 2017,
with the healthy economic backdrop
providing support to enterprise IT
budget growth and cloud adoption.
There are risks, however. While South
African legislation with respect to data
location, backup requirements and
archiving is favourable, the Protection
of Personal Information (POPI) bill,
requiring information belonging to an
individual to be encrypted and confined
within the borders of South Africa, could
hamper the strategies of global players
and increase costs by requiring them to
invest in local data centres.
 28 Linklaters / Generation Next: Five pathways to TMT growth in emerging markets / The Cloud 29

$10.4bn The Cloud: top five emerging markets

Source: Ovum/Linklaters. All figures projected for 2017.

Enterprise adoption
The Cloud: of cloud ICT services
building castles
will create a market Low risk High risk

in the air worth $10.4bn to TMT

4
players by 2017.
Russia 1

$390m China
Cloud ICT revenues

$2.06bn
Cloud ICT revenues

3 2
Cloud services will enable technology
vendors like Amazon, Google, IBM and Brazil India
Unisys to quickly reach potential customers
in emerging markets with services that offer 5
Table 4: simplicity and lower cost. However, data $623m $1.14bn
Risk forecast for foreign investors The Cloud: top five emerging markets governance is a universal concern, with data Cloud ICT revenues Cloud ICT revenues Malaysia
sovereignty becoming a significant issue in
Market Key risks Risk outline Risk
many countries, which threatens to hamper
forecast
the adoption of global solutions. In this
China
Infrastructure Infrastructure: Under-investment in required technology infrastructure,
adherence to home-grown technical standards and incentives that
Rainy context, local telco-based data management $225m
Regulation
favour local firms may isolate Chinas cloud providers. and security services can be positioned as Cloud ICT revenues
Censorship a strong solution to protect revenues and
Regulation: Investment rules limit foreign owner participation
in infrastructure. grow new ones.
Censorship: Censorship and interception fears are likely to impact High risk
cloud adoption.
Currently, more than 90% of cloud ICT
Infrastructure Infrastructure: Low internet adoption and unreliable supply of power Cloudy
spend is on SaaS by companies taking
India Regulation and other utilities are likely to delay adoption of cloud services. advantage of public cloud service offers During this phase, telcos and their partners and Thailand (Emerging Asia) as increasingly same time, VPN connections in Africa are
Regulation: Uncertainty on mobile licensing, where 2G licenses have that mainly use the Internet to allow in IT software and systems design and important markets for global and regional increasingly important parts of multinational
been cancelled and 3G license coverage rights are poorly defined, is
multiple customers to access a common integration are in a stronger position to enterprises and multinational companies. companies global networks. Were now
acting as a brake on investment.
Medium risk resource and establish new channels for demonstrate the effectiveness of their seeing as many as 68% of IP VPN endpoints
their customers such as social media combination of network service delivery, Ovums recent CIO research1 shows that in Africa being provisioned as satellite
Connectivity Connectivity: Network provisioning times are slowly improving, thanks Cloudy marketing. Public IaaS resources that can hosting and data management, together CIOs in multinational companies expect to markets for European companies. It is not
Brazil to licensing of foreign telcos and IT providers, but local partners are in
Regulation
short supply. host IT operating systems are currently with account support and professional be increasing their ICT spending fastest in unusual for an enterprise to want to network
Regulation: The regulatory environment for cloud is not defined in limited mainly to test and development services. This ecosystem approach will Asia-Pacific and Latin America over the next 20 countries in Africa today, or 3040
detail outside VoIP services, and net neutrality rules should applications, but as private secure IaaS enable vendors to drive the greater two years, followed by the Middle East. More countries across MEA.
be clarified. Medium risk offers mature, these will be used more to innovation in solutions, delivery and than 50% of multinational CIOs say they will
Operational Risks Operational Risks: Concerns remain about security of Rainy
host whole IT production systems for pricing that will be required to profitably give priority to cloud ICT investments in To address such a diverse context, global
Russia Interoperability infrastructure and assets, with perceived risks of interception business operations. meet the cloud service needs of smaller Asia-Pacific throughout 201315. vendors and service providers need to
and government intervention.
enterprises sitting below the tier of large have a product roll-out plan and a services
Interoperability: The restriction of LTE licences to local operators
By 2017, SaaS will have been reduced established national champions and large Africa is fast becoming a market where organisation that can support locally
is likely to delay innovation and prevent the roll-out of a national
LTE plan. High risk proportionately to two-thirds of cloud government departments. main buyers of ICT reside and therefore emergent business customers as well
ICT by spending volumes, as vendor the communications and IT requirements as existing western business customers
Piracy Piracy: Intellectual property rights protection. Sunny offers in IaaS and PaaS mature, service Economic growth will be the key driver are the greatest. This is particularly true expanding into emerging markets. This
Malaysia Connectivity Connectivity: Weak international connectivity may hamper providers develop end-to-end service level behind enterprise activity and the of South African and West African-based will require accelerating recruitment of
Malaysias ambitions to provide international cloud services.
agreements, and enterprises adopt a more geographic scope of demand for cloud companies requiring connectivity across skilled local staff in sales and marketing,
hybrid approach, incorporating more private service delivery. In this context, China and sub-Saharan Africa. South Africa houses as well as service centres at regional and
Low risk cloud as well as public cloud provisioning in India will be joined by Indonesia, Malaysia 70% of Africas major companies. At the national levels.
their overall ICT strategies.
Source: Ovum/Linklaters.
1
Ovum CIO 2012 Study based on interviews with CIOs from 120 multinational corporations.
 30 Linklaters / Generation Next: Five pathways to TMT growth in emerging markets / The Cloud
The Cloud:
building castles
in the air
Go-to-market strategies: the only
way is up
Service providers have made a series of
investments in new infrastructures which
represent the first stage in the development
of future cloud ICT services. But the
development of cloud ICT will depend even
more on how well telcos and technology
vendors can help develop the service offers
that enterprises will require. To grow the
market, meet enterprise business
requirements and build a successful
revenue model, TMT players will need to
address five key strategic priorities:
1. Make infrastructure investments with
future cloud ICT services in mind: Cloud
services can only work with robust data
network connectivity in place. Global telcos
including BT, France Telecom and Vodafone
have announced regional investments for
Africa and the Middle East, Latin America,
and Asia-Pacific. These have included
MPLS (multiprotocol label switching)
network and Ethernet access, data and
services centres, as well as local IP
technology and professional services.
These networks can be leveraged into
cloud ICT services. Therefore while
connectivity is still the main priority, both
service providers and users need to think
ahead to cloud ICT services, including
multichannel contact centre solutions and
virtual data centre requirements.
2. Develop new types of contracts: Cloud
services offer the prospect that enterprises
can pay only for the ICT they consume,
under a set-period agreement. Services
providers are offering pay-as-you-go
contracts, but these might not guarantee
income from new capital investments in
data centres or service centres. Some
service providers are testing the market
with contracts that commit the customer
to use their services but still benefit from
usage-based rates. For example, T-Systems
has signed a 21-year contract with a
health management agency operating
in southeast Asia.
New types of contracts will also need to
include the required provisions to address
cross-border data flows cloud systems
disperse data and compromise governance,
the number one concern for CIOs and TMT
players alike. Successful service providers
will offer contracts that acknowledge national
sovereignty requirements affecting a cloud
operation, as well as provision options to
meet them.
3. Implement robust service level
agreements: Cloud ecosystems do not easily
permit full management controls, making
service levels harder to guarantee. Private
cloud systems are more secure, but the
successful telco will negotiate with public
cloud vendors to improve SLAs across the
cloud. Emerging multinational companies
like Brazils Vale (mining) and Chinas Ping
An (insurance) are already major buyers of
the new telecoms and IT services. These
customers will often go to their local supplier
first, but will also need global service
support, network performance, account
management and product expertise that
few local providers can offer.
37%
The CAGR for emerging
markets cloud ICT
between 2012 and
2017 will be 37%.
Emerging operators need to move quickly
towards processes for consistent service
delivery excellence an area where
developed market players have much to
offer. Some local players can deliver great
network quality, some can deliver value for
money, but none is consistent across all the
criteria. Nevertheless, there are a number of
success stories. Tata Communications was a
stand-out among the emerging markets
operators in a recent multinational company
study by Ovum, with good ratings across
key performance criteria. Other regional
providers like Telstra and SingTel also score
well in enterprise sourcing experience.
4. Partner with regional players: Theres an
outstanding opportunity for regional
operators in emerging markets to take
advantage of the services being demanded
by new regional companies and large
enterprises. Five years ago there were no
more than 10 major network operators that
were players in regional-to-global services.
Today there are 20 operators that can claim
a credible offer, with half of new entrants
coming from the emerging markets
themselves. Within five years this number
will double, as more emerging market
operators build multinational and cloud ICT
service capability including service providers
like Citic Telecom CPC in China, Embratel in
Brazil, and Telkom SA.
Regional telcos in emerging markets already
have cloud ICT systems of their own, and
established B2B telco providers should
consider partnering with them, as well as
following their examples for establishing
cloud ICT sources in-region. Telstra, for
example, has developed its network
computing service (NCS) and network
applications service (NAS) with Accenture
and Microsoft over five years.
5. Develop a software and technology
roadmap: If they are to develop a full cloud
ICT offer, TMT service providers need to
have a roadmap to develop true SaaS.
This will require agreements with vendors
like Oracle and SAP for applications,
database management interface, dedicated
security, applications management and
modernisation, and systems integration.
Service providers that partner with these
and other vendors like Cisco and Microsoft
in the US and T-systems in Europe are
extending these arrangements to MEA
and Asia-Pac. They also need to combine
their services with vendors investing
directly in their own regional or municipal
cloud data centres, as Microsoft has done
recently in Shanghai. For example, NTT
Communications has acquired global
systems integrator Dimension Data so that it
can support Cisco and other cloud ICT from
Dimension Datas service centres worldwide.
The key strategic position of the telco puts
them in an excellent position to manage the
commercial and technical partnerships
needed for sustained development of cloud
ICT revenues. Telco operators may be
working in a complex stakeholder
environment, but their longevity and track
record in serving enterprises with network
services gives them the trust of the CIO
the trump card they need to win against
SaaS players, many of which are new
entrants in this market.
31
There are many territories
where it is extremely
difficult for service providers
to invest due to lack of
infrastructure, geographic
or political challenges, local
competition, complex infra-
structure planning and
licence regulations. But key
investments in fixed and
mobile broadband, VPN and
subsea cables are generating
hotspots which are leading
to further investment in
territories from Asia-Pacific
(cloud services centres)
to sub-Saharan Africa
(ICT operations centres,
multimedia contact centres).
Where infrastructure starts,
investment follows, and
we expect to see more
specialist investment
clusters as emerging markets
develop their cloud ICT
services strategies.
Niranjan Arasaratnam
Partner at Allens
Telecommunications,
Media and Technology
 32 Linklaters / Generation Next: Five pathways to TMT growth in emerging markets / Mobile health
Mobile health:
scaling the value chain
Mobile health is set to
generate around $8.8bn
of annual revenues for
TMT providers in emerging
markets by 2017, as
governments in emerging
economies seek to address
poor health outcomes and
limited healthcare resources.
Services based on the simplest and most
commonly used mobile phone features,
such as SMS-based medication compliance
services or health information call centres,
hold the greatest commercial opportunities
for telcos in the near term. As governments
continue to invest in health systems, more
advanced services like remote monitoring
will start to gain more traction.
Introduction
Emerging markets must address the
significant health inequalities that act as a
major barrier to economic development and
the welfare of their populations. There are
unacceptably high levels of communicable
diseases in a number of countries, with
particularly acute challenges in the lower-
income countries of Africa and Asia. Despite
significant government and NGO aid,
healthcare infrastructure and resources
remain inadequate, as systems have
developed from a very low base.
33
$8.8bn
Mobile health is set
to generate around
$8.8bn of annual
revenues for TMT
providers by 2017.
While healthcare spend in the vast majority
Figure 7: Mobile health in emerging markets:
of emerging markets has grown substantially
TMT market growth forecast Country focus:
in recent years, this growth in expenditure is
Nigeria
10.0
not sustainable. Healthcare funding and 8.786
financing mechanisms are changing
significantly and often more rapidly than in 8.0
developed markets, particularly in more
Aligning market opportunity, Million Lives programme (which aims
stable and advanced emerging economies
like China and Brazil. This is important for
6.0 government support and to improve access to primary health
consumer demand services and commodities by 2015)
those involved in mobile health, as
Nigeria is a good example of the is incorporating mobile channels and
preventative care early diagnosis,
medication compliance, regular doctor
4.0
3.148
key role governments can play in technologies as a key mechanism to
supporting mobile health development achieving this. In December 2012,
consultation is a major selling point for
with an intelligent partnership-led the mHealth Alliance announced a
mobile health adoption. This is one reason 2.0
strategy. Mobile penetration in Nigeria new partnership with the Nigerian
why the emerging markets that have the
was 64% at the end of 2012 and is Federal Ministry of Health, GSMA
infrastructure in place are increasingly
0 forecast to grow to 73% by 2017. and Intel to leverage mobile computing
turning to technology, both to improve
Healthcare spend was around and telecommunications technologies
healthcare access and to help moderate
$1.6bn at the end of 2009, a to support the initiative.
overall healthcare spend.
seven-fold increase from 2000.
Mobile health revenues in 2012 ($bn)
This has opened up opportunities
However, despite evident demand, players Forecast mobile health revenues in 2017 ($bn)
The Nigerian government has taken for the countrys telcos. For example,
within the mobile health ecosystem, ranging
an active role in the Commodities MTN is playing an important role in
from mobile network operators (MNOs) to
Commission, which was created in developing services in the three main
device vendors and systems integrators, face
response to the UN Secretary Generals categories of mobile health services
significant challenges in scaling up mobile
call to increase access to medicines, outlined by the government: prevention,
health services to a level where they will
devices and supplies that address health system strengthening and health
start to significantly impact health outcomes
avoidable causes of death during worker empowerment. Etisalat is also
and generate substantial revenue. The GSM
pregnancy, childbirth and childhood. active in developing innovative health
Association (a trade group that represents
The government has set up the services. For example its Mobile Baby
network operators that use GSM) indicates
National Primary Healthcare application has trained more than 500
that there are around 950 mobile health
Development Agency to help birth attendants and midwives and
initiatives among its members, ranging
reform and improve healthcare. registered more than 10,000 pregnant
from wellness and prevention initiatives to
women in the programme. Sproxils
those targeting various elements of health
The significance of this for TMT SMS-based drug verification system,
systems. However, the vast majority of
players is that the government views launched in 2010, has also benefited
these are at pilot stage, demonstrating
mobile health as key to transforming from government support.
the uncertainty and immaturity of
healthcare. The countrys Saving One
commercialising and transitioning
mobile health into the mainstream.
 34 Linklaters / Generation Next: Five pathways to TMT growth in emerging markets / Mobile health 35

Mobile health: top five emerging markets

Source: Ovum/Linklaters. All figures projected for 2017.

Mobile health: Low risk High risk

scaling the value chain

5

Russia 1

$162m China
Mobile health revenues

4
$3.86bn
Table 5: Market size and growth Mobile health revenues
Risk forecast for foreign investors Mobile health: top five emerging markets The long-term prospects for mobile health
are bright. Many emerging markets are
Nigeria
Market Key risks Risk outline Risk 2 3
embarking on substantial healthcare
forecast infrastructure projects. Green-field
$185m
China
Regulation
Literacy
Regulation: A lack of policy framework and facilitating regulation may
hinder information sharing and public/private partnerships and prolong
Sunny investment in hospitals and wider healthcare
system re-design increasingly involves the
Brazil Mobile health revenues
India
fragmentation in m-health.
Affordability deployment of mobile health services as a
Literacy: Mass market growth will be hampered by low literacy and
standard component of healthcare delivery.
health awareness levels.
Affordability: Governments with healthcare budgets strained by Low risk However, growth prospects vary substantially $734m $602m
Mobile health revenues
existing problems may not manage to direct sufficient resources to between markets and service categories Mobile health revenues
mobile opportunities.
and, overall, mobile health development is
Regulation Regulation: A lack of policy framework and facilitating regulation may Sunny
Brazil hinder information sharing and public/private partnerships and prolong
slow in coming.
Tax
fragmentation in m-health.
Privacy
Tax: High tax on mobile operators and their customers stifles Mobile health encompasses a broad range
adoption of mobile health tax incentives may be required. of services, which break down into three
Privacy: Legal constraints on the sharing of medical data may Low risk main categories. The most ubiquitous mobile
hamper innovation.
health services in emerging markets which
Regulation Regulation: A lack of policy framework and facilitating regulation may Sunny
India hinder information sharing and public/private partnerships and prolong
leverage basic functionality (i.e. voice or
Literacy
fragmentation in m-health. SMS) are available to all mobile phone users
Affordability
Literacy: Mass market growth will be hampered by low literacy and (not just smartphone owners) and are often
health awareness levels.
paid for directly by consumers. For example,
Affordability: Governments with healthcare budgets strained by Low risk
existing problems may not manage to direct sufficient resources to
Mexicos Medical Home health information Nigerias Economic and Social Research Fifty percent of the 950 mobile health It will take some time for this initiative
mobile opportunities. phone service has more than 1 million Institute. This is the most embryonic services tracked by the GSMA have to show concrete results, but this kind
Infrastructure Infrastructure: As mobile penetration is not predicted to rise materially Cloudy subscribers paying a fixed fee of $5 per category, although in larger and wealthier been launched in Africa. We believe of collaborative working across the mobile
Nigeria
Literacy
during the next five years, this will limit the potential reach of certain month (charged via their mobile phone bill). emerging economies like India and Brazil there are significant opportunities in health ecosystem is a prerequisite to
mobile health services.
Affordability this category of services is growing faster in the longer term, particularly as the use overcoming the barriers to mobile health
Literacy: Mass market growth will be hampered by low literacy and
health awareness levels.
The second group consists of more green-field healthcare system deployments. of mobile health is seen as intrinsic adoption, particularly in markets with weak
Affordability: Governments with healthcare budgets strained by Medium risk advanced services such as remote to African countries achieving their healthcare systems.
existing problems may not manage to direct sufficient resources to monitoring services, which generally There are two key revenue streams health Millennium Development
mobile opportunities.
involve a medical professional and are to consider in evaluating the growth Goals (MDGs). Challenges include proving the value of
Bureaucracy Bureaucracy: High levels of bureaucracy and a lack of transparency Cloudy often delivered in partnership with prospects for mobile health. One is mobile health itself, for example achieving
Russia can hinder mobile technology from getting integrated into care
pathways.
healthcare providers, vendors and spend by healthcare organisations However, according to a 2010 World a sufficiently robust evidence base to
medical institutions. Vivacell in Armenia (public providers, private hospitals, Health Organization assessment, convince health providers and governments
is a player that offers this type of service. health insurers and other primary and it is African countries which have to prioritise mobile health over other
Medium risk secondary care organisations) and the made the least progress towards investments. Other barriers to growth
The final category is made up of services other is direct spend by consumers. meeting the MDGs. As a result, include punitive tax systems or the lack of
Source: Ovum/Linklaters.
which leverage sophisticated functionalities In emerging markets, consumers will the GSMA recently launched the effective payment models to reimburse and/
such as advanced analytics, for example be an important revenue stream for Pan-African mobile health initiative, or incentivise the use of mobile health
the use of Android-based geographic service providers, particularly in markets which aims to help develop a technologies and services.
applications to map polio risk areas and where progress in building mobile health sustainable business framework,
track the routes covered by polio into mainstream care is slow and reduce fragmentation, align health
immunisation teams in Nigeria, a service consumer demand and ability to pay and mobile industry goals and support
provided by Etisalat in partnership with for better healthcare is higher. the implementation of scalable services.
 36 Linklaters / Generation Next: Five pathways to TMT growth in emerging markets / Mobile health 37

50% Mobile health is growing

rapidly. It has huge potential,
of the 950 mobile economically and in terms
of improved health. But that
health services potential will be realised only if
Mobile health: tracked by the GSMA effective scaling can be achieved
in moving from simple to complex
have been launched services and engaging with
scaling the value chain
in Africa. governments and regulators.

Nigel Jones
Healthcare Global Sector Co-leader

Go-to-market strategies: addressing 3. Leverage the identity and security

the integration challenge capabilities of the SIM: One of the major
The major challenge facing TMT players in cards telcos hold is their control of the SIM
mobile health is integrating services into and their expertise in leveraging SIM
mainstream care delivery to gain scale. capabilities for identity, privacy, billing and
Four key strategies to achieving this are storage. Some telcos have made a good
as follows: start down this road. Orange has been a
leader in the use of SIM card authentication
1. Develop simple and affordable services: for healthcare applications and its integration
The majority of mobile health services are into mobile devices and solutions. For
based on information, advice and simple example, it has created an SMS-based
reminders, which cater to local health service to battle counterfeit drugs in Africa.
needs. This is the quickest win for telcos, as
services can be developed and priced as 4. Consider strategic acquisition of
value-adds for existing subscribers and/or adjacent healthcare organisations: It makes
co-marketed with partners to the wider sense for TMT players to acquire expertise in
population. In Kenya, Safaricom has areas that are aligned to their capabilities,
partnered with Call a Doc to launch such as using the mobile channel for the
Daktari, a hotline number providing provision of information, advice and
medical advice on topics such as first-aid tele-monitoring services. Telefnicas recent
and medication guidance. This 247 service investment in chronic care management firm
is charged at $0.22 per minute. Axismed (which handles 180,000 patients)
is a good example of the kind of strategic
2. Roll-out risk/revenue-sharing business investment in providers by operators we can
models: Partnerships and effective business expect to see on a more frequent basis.
models between MNOs and healthcare
providers are crucial to building momentum
for mobile health. This is key to achieving
scale and in starting to ramp up service
sophistication. For example, Indias Apollo
Hospitals Group has partnered with Aircel
for its triaged health information and advice
service from its medical contact centres.
SUGAR, Apollos diabetes management
programme, enables patients to send their
blood sugar count to the clinician through
SMS and mobile applications. An SMS text
will then be delivered back to the patient
explaining the readings and advising whether
further action is required.
38 Linklaters / Generation Next: Five pathways to TMT growth in emerging markets / Pathways to growth
Pathways to
growth:
Critical success factors
for TMT growth in
emerging markets
Emerging markets hold the
key to elusive growth for the
embattled TMT industry.
Next generation broadband,
content and applications,
mobile money, cloud ICT
services and mobile health
all promise substantial new
revenue streams for the
industry across a range
of products, services
and geographies.
What is common to all of these opportunities
is the need for a new ecosystem-led
approach the days when the whole value
chain was managed by one or two dominant
players are long gone. Each of these new
opportunities requires MNOs and vendors to
collaborate with partners in the content,
media, financial services, and technology
sectors. This will require creating equitable
partnership frameworks, via either a
contract, JV, or in some cases an M&A
framework that will work for all parties.
Our study also reveals that, now that the
low-hanging fruit represented by the delivery
of basic services to the most accessible
consumers has been exhausted, innovation
not just in technology but in business model,
pricing and customer service will grow in
importance. As many of the examples
cited in this study illustrate, the most
successful innovation will usually start
from the emerging market customer,
their environment and their needs,
and then work backwards to consider
the available technologies to deliver that
experience. Service providers and vendors
are well-versed in the inside-out innovation
of creating new technologies and products.
To succeed in emerging markets they will
need to balance this with the outside-in
innovation that starts with the customer
experience first, before considering product
elements, core and partner competencies
and the broader ecosystem that supports it.
Finally, if players could simply add the
contribution from all of these new revenue
streams to their existing revenue mix, the
future would be straightforward. However,
this study underlines the fact that every
player will have to perform a delicate
balancing act of defending existing revenues
from core services such as voice, SMS and
basic content services, while investing in the
future growth led by these five core growth
areas. The most successful players will be
those that minimise revenue erosion from
legacy services and maximise growth in
new-wave services while retaining or
growing their existing margins.
Delivering this new wave of services
requires radical go-to-market strategies
and a reshaping of business models. Our
study of the five big bets for TMT growth in
emerging markets and TMT power players
market strategies revealed a set of five
critical success factors common across
all emerging economies:
1. Build profitable and sustainable
partnerships: From broadband network
sharing to the alliance of operators and
financial services providers required
to deliver mobile money to the mass
unbanked, serious strategic collaboration
is needed to maximise the chances of
success in emerging markets. Developing
strong partnerships, supported by effective
revenue-sharing models, is critical.
Partnering can solve problems of scale
and resources, while also bringing essential
local, sector or product knowledge. Even
the Goliaths of TMT will find it challenging
to succeed alone in emerging markets.
Choose the right partners, make sure its
worth their while to collaborate with you
over the long term, and ensure you have
in place appropriate safeguards to protect
you if the relationship sours or on exit.
Partnerships are key to the success of
TMT players in emerging markets. While
M&A remains an attractive option to scale
up quickly where players are underweight,
revenue-sharing commercial arrangements
and JVs provide local knowledge and in
some highly-regulated markets, are the only
option for market entry. These structures
can also help bridge the buyer-seller
valuation gap by allowing the local partner
to benefit from future upside and reducing
the other partys capital commitments.
Roger Barron
Telecommunications, Media and Technology
Global Sector Co-leader
2. Adapt to regulation: Immature regulatory
regimes are a characteristic of almost all
emerging markets (to a lesser or greater
extent). One certainty is that regulation will
develop and could, in some cases, seriously
impact on the margins of emerging market
TMT players, which are already under
pressure. There is a regulatory lag effect
as regulators seek to catch up with new
products and services, and governments
often see these as a potential source of tax
revenue, especially when budgets come
under pressure. Understanding key local
and regional regulatory trends is vital for any
TMT player analysing the risk profile of an
emerging market and planning on how to
ensure compliance.
3. Align with government strategies: Many
emerging market governments are actively
promoting policies with the effect of boosting
TMT markets from national broadband
policies to investment in mobile health
initiatives. Telecoms operators and vendors
should assess carefully evolving government
policy in target markets in order to position
themselves to benefit from the resources
that governments are making available, and
avoid the local protectionism that has
harmed new entrants in some emerging
broadband markets.
4. De-risk diversification: Diversification
offers TMT players tremendous
opportunities to access higher-growth,
higher-margin revenue opportunities.
However, diversification at speed and with
scale without sufficient expert knowledge of
a new product, service or industry presents
huge operational risks. Effective partnering
(for example, with financial services
39
Key contacts
Linklaters Telecommunications, Media
providers to develop mobile money services)
and Technology Global Sector Leadership
or strategic acquisitions (for example, of
healthcare providers to support the provision
Roger Barron
Partner
of mobile health) can bring much-needed Tel: (+44) 20 7456 3665
Mob: (+44) 77 9977 2174
expertise in unfamiliar products or
services, and in how the industry operates
roger.barron@linklaters.com
and its attendant opportunities, risks and Julian Cunningham-Day
regulatory frameworks. Partner
Tel: (+44) 20 7456 4048
Mob: (+44) 79 0040 7884
5. Start with the customer: Customer- julian.cunningham-day@linklaters.com
centricity understanding how local
customs and culture influence how people Scott Campbell
interact with technology and content
Partner
Tel: (+9) 714 369 5811
is critical to business decision-making,
market strategy and product and service
Mob: (+9) 715 0552 6206
scott.campbell@linklaters.com
development. Its not enough to understand
Florian Drinhausen
the dynamics of a market. In order to place
big bets, TMT players need to understand
Partner
Tel: (+49) 697 1003 264
the diversity of the customers and their basic Mob: (+49) 172 6748 514
needs across emerging markets. florian.drinhausen@linklaters.com
Elisabet Lundgren
In placing its bets on these five pathways Partner
to growth, the TMT industry will shape all Tel: (+46) 8665 6777
our futures. Mob: (+46) 70326 6777
elisabet.lundgren@linklaters.com
We hope you enjoyed our report. This study Samantha Thompson
is part of Linklaters TMT Sector Programme. Partner
If youd like to find out more please get Tel: (+852) 2901 5269
samantha.thompson@linklaters.com
in touch.
Tanguy Van Overstraeten
Partner
Tel: (+32) 2501 9405
Mob: (+32) 4784 01569
tanguy.van_overstraeten@linklaters.com
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linklaters.com
Linklaters LLP is a limited liability partnership registered in England and Wales
with registered number OC326345. It is a law firm authorised and regulated by
the Solicitors Regulation Authority.
The term partner in relation to Linklaters LLP is used to refer to a member
of Linklaters LLP or an employee or consultant of Linklaters LLP or any of its
affiliated firms or entities with equivalent standing and qualifications.
A list of the names of the members of Linklaters LLP together with a list of those
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for important information on our regulatory position.
This report is intended merely to highlight issues and not to be comprehensive,
nor to provide legal advice. Should you have any questions on issues reported here
6316_F/07.13
or on other areas of law, please contact one of the contacts listed in the report.
Linklaters LLP 2013