ICT and the Financial Crisis Phillippa Biggs, Economist, International Telecommunication Union 11...
Transcript of ICT and the Financial Crisis Phillippa Biggs, Economist, International Telecommunication Union 11...
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ICT and the Financial Crisis
Phillippa Biggs, Economist, International Telecommunication Union11 March 2009
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Agenda
• Origins of the Crisis
• Is this Crisis any Different?
• Firm outlook in high-income economies
• Firm outlook in emerging markets
• Telco strategy
• Impact of the crisis on MENA
• Impact of the crisis on Egypt
Agenda
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Origins of the Crisis
• Niche origins in US housing market and expansion of high-risk Alt-A& sub-prime mortgages.
• Sub-prime mortgages rose from <10% in 2002 to 21% of all mortgages in 2006.%
Distribution of US Dollar Mortgages,US Housing Association
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Risk Pooled Around the World
Investment banks became exposed through holdings of derivatives mortgage-backed securities (MBS)
Source: Bank for International Settlements.
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Crash, Crunch and Crisis
•US housing bubble crashed in 2006, making mortgage-backed securities ‘toxic assets’.
•HSBC announced write-downs of $10.5 bn in Feb 2007, leading to a ‘credit crunch’ & massive decline in inter-bank lending.
•Financial crisis erupted in mid-Sept 2008 in failure of Lehman Bros & sale of Merrill Lynch.
•Situation triggered a global economic slowdown - US, EU & Japan now in recession.
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Is this Crisis Any Different?
• Origins in credit market,rather than an asset bubble.• Crisis originated & spread through systemic failures in financial regulation & banking system.• Originated in high-income countries, but its impact is spreading fast.• Unprecedented coordination to date in intergovernmental response.
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But what is the impact ofthe financial crisis on
ICT firms in Egypt and MENA?
Source: Sequoia.
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Firm outlook is bleak…in high-income countries• Telcos paying 3-4% more for financing
• Uncertain consumer demand not yet tested in recession – consumers are wary
• Need proven business model & cashflows & established credentials to access VC.
• But return of State funding? Government intervening with investment in broadband in Australia, Italy, Greece, USA and EU.
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Outlook in emerging markets
• Demand for mobile largely unaffected, despite softening in some markets
• Mobile phone services still widely viewed as a necessity.
• Growth in mobile broadband and Internet looks set to continue
• BUT… what about the economic backdrop & consumer demand, if emerging markets slide into recession?
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Telco Strategy
• Capex, not opex – focus on controlling costs;
• Consider network-sharing to cut costs;
• Continue to invest in QoS for the future;
• Focus on flat-rate & prepaid packages likely to grow, as popular with consumers (impact on profit margins?);
• Mobile operators more flexible re capex than fixed;
• Cut debt where possible & focus on refinancing.
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What implications for What implications for MENA?MENA?
• MENA benefits from own sources of finance, including SWFs and homegrown investors• Prospects for South-South investment• Strong growth potential in mobile & Internet• Investment in ICTs could offer a way out of the crisis, but needs to be prioritized.• Delays in licenses: Bahrain, Jordan & Lebanon• Still a strong potential role as a regional hub - Outsourcing Destination of the Year 2008
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Growth in Egyptian Growth in Egyptian mobilemobile
Growth of mobile market, 2005-2008
12.6
17.7
30.6
43.8
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
2005 2006 2007 2008
Mill
ion
s
Vodafone Egypt
Etisalat Misr
ECMS
43.8%
40.2%
16.0%
Source: ITU.
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Slowing in growth?Slowing in growth?
Source: Informa.
Year-on-year growth, Q1-Q4 2008
67.1%
55.5%50.2%
43.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
Q1 2008 Q2 2008 Q3 2008 Q4 2008
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Impact on Egypt’s telecom Impact on Egypt’s telecom sectorsector
• Strong growth in mobile projected to continue from 58% in 2008 to 74% penetration in 2009, despite crisis • But slowdown in net additions in Q408 (Informa)• Most analysts foresee limited impact on mobile usage and revenues.• Early signs of a slowdown in fixed-line (BMI)• Second fixed-line licence postponed• Egyptian mobile in transition - penetration in cities high – how to grow rural market?
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MobiNil
• Expecting slower revenue growth in 2009,due to slowing economy;
• Mobile BB: 200,000 subscribers Oct 2008
• Mobinil is forecasting year-on-year revenue growth of about 10% in FY2009, compared with over 21% in FY2008.
•Mobinil has also stated it will cut its CAPEX in 2009 to US$450-550m, from $580m in 2008.
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Vodafone Group
•Cost cutting – 1 billion GBP cost reduction programme, including cuts in headcount
•Asia-Pacific and Middle East growing strongly – ‘Egypt is doing well’’, with growth in 3G and advanced services
•Strengthening its liquidity with bond issuance and effective refinancing
•Emphasizing customer value, mobile data and broadband services.
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Fixed Telephony
• Award of second fixed line licence delayed
• Telecom Egypt continues to build market share
• Meanwhile, mobile broadband offers are coming into their own.
• Impact on the value of the second licence?
• Timing?
• Uncertain investment climate?
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Read more about the impact on the global ICT industry in
Confronting the Crisis: Its Impact on the ICT Industry
www.itu.int/crisis2009/
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