Emerging markets -- are the good days over?

If we accept the newspaper reports that Telecom Italia plans to invest US$2 billion into a relatively minor mobile operator in India as true, this sort of move looks likely to be the last in the short to medium term.

While the ongoing wreckage within the financial community will undoubtedly have an effect, analysts are now downplaying the opportunity within emerging markets claiming that many of these are now reaching maturity. An increasing number of these new markets around the globe now resemble European mobile markets circa end 2000, with penetration now above 60 per cent, new entrants facing aggressive internal competition, regulatory scrutiny, licence costs and network deployment investments.

Credit Suisse Research recently stated in a new study that there are now significantly more sellers than buyers in the European market, with Vodafone appearing to have done most of its acquisitions, with the exception perhaps of Vodacom (South Africa). Deutsche Telekom remains focused on maintaining its current debt rating and integrating OTE -- at least for now, and France Telecom's CEO recently declared it was no longer looking for large acquisitions but instead would look for smaller opportunities most likely in Africa.

But this apparent decline in ambitions, given shareholders' expectations of financial growth, seems likely to force these larger operators to continue to roam the world looking for the next big opportunity. This could well be hastened for European-based firms given the accelerating slowdown in mobile data usage. Data as a percentage of ARPU fell for the first time in two years, with Vodafone slowing more sharply than the overall sector especially in Italy, UK and Spain.

So while analysts pour cold water on the likelihood of more Telecom Italia-like deals, shareholder pressure on the senior management within European operators may force them to make investments into new and underdeveloped regions -ventures that will require an experienced eye and a steady hand.--Paul