Does 'emerging market' mean anything in global mobile anymore? — Baker

India
Postpaid, according to IDC's Telecom Services Tracker, now makes up a little less than one sixth of the world's subscriptions, leaving the great majority to prepaid. (Pixabay)
Industry Voices Simon Baker

In my most recent article I looked at how mobile communications is becoming a mature business globally in terms of its user base. It is only its soaring usage rates that are really dynamic. What then now is an "emerging" mobile market?

In economics there has long been a lot of confusion about which countries were or are the key emerging markets. A whole set of acronyms evolved to prioritize them; there were the Asian Tigers, then there was BRIC, which later became BRICS. We also had CIVETS; and not forgetting the PIIGS.

It was always pretty unclear — what exactly was an emerging market? And hadn't many of these countries moved beyond the description?

A quick summary of my earlier article: growth in mobile has slowed, not only at the level of total users, but also in the transition from feature phone to smartphone. 4G has been a great global leveler. The big differentiator is the cost of data, which is most expensive in some of the world's poorest countries. Nevertheless, overall, data use is increasing in most of the world, and the trend is for regional consumption, except in Sub Saharan Africa, to converge.

So how in the context of this can we define what is an emerging market in the mobile context?

Conventional approaches

If we looked just at the total number of mobile users, there would be few "emerging" markets at all. Most countries have a user base (in GSMA Unique Subscriber terms) which comes close to or beyond their adult population. Exceptions are focused on some countries in Africa and just a few other outliers.

We could focus more tightly on what proportion of the population had a smartphone. This would focus "emerging" on a larger group of countries across Africa. Although if we set the bar at 60% of the population India would fall outside it too.

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Another way would be to look at the type of smartphones in use. 4G accounts for at least three smartphones out of four worldwide. Areas with substantial proportions of 3G phones still in use would include Africa again, and more marginally parts of Latin America, South East Asia and Eastern Europe.

Lots of contradictions

The term "emerging" suggests a transition. But as I went over in my earlier article, the level of data consumption is growing fast pretty much everywhere, though less quickly in Sub Saharan Africa.

And what may be emerging in one sense, may be completely the opposite in another. A glaring example is India. If it is an emerging market in the proportion of its population that does not have a smartphone, it is absolutely not in terms of how much data is consumed by those who do, which is the world's highest level.

To make the most of these differing parameters, we would need to be much more precise, to talk of "an emerging market in the level of its phone penetration" or the "level of its data use."

I have very little confidence that such precision is going to catch on.

A less standard approach

Instead, we could switch to less conventional indicators within the mobile industry.

One useful but little used marker would be the proportion of a mobile market which is postpaid and prepaid. Postpaid represents the early, richer markets where mobile started off when handsets and tariffs were universally high.

Postpaid, according to IDC's Telecom Services Tracker, now makes up a little less than one sixth of the world's subscriptions, leaving the great majority to prepaid. This proportion hasn't changed much in recent years with most poorer countries overwhelmingly prepaid.

Lack of other communications alternatives

My overall choice however would be to look not at lack of smartphones bu" at a country's dependence on the mobile phone in general. In other words the more a country is dependent on the mobile handset, the higher its rating as "emerging."

This would at first sight seem counterintuitive (isn't everyone dependent on their mobile phone these days?) But I mean in the sense of lack of any other communication options.

One factor would be a lack of landlines, which grow in number slowly and are focused on richer developed economies. DR Congo, one of the world's poorest countries, has actually gone in the other direction – it closed its fixed line network in 2013.

A second factor would be lack of other devices to turn to, in particular a PC. There have been some memorable images in the press during the coronavirus crisis when schools and colleges closed under lockdowns, of students using smartphones in trees and alongside roads, turning to their only device where they can find a mobile signal, faced with no PC and no communications access at home.

The mobile revolution has been so big, and so fast, that even if a bit more than half the world does not yet have mobile broadband, the revolution has gone far ahead of many other indicators of what is an underdeveloped country.

The term "emerging" can still be meaningful

To define a meaningful definition of "emerging market," we need instead to refer back to ways in which the world has not changed.

There is not much sign that many countries will move away any time soon from their mobile phone dependence in terms of more landlines or PCs.

Nor are most economic indicators likely to change so quickly. A recent article in The Economist looked at how, after the success of some of the earliest Asian Tigers to pull beyond the emerging market moniker, the progress of many other countries to catch up on the developed world is slowing down.

In economics one reason the term "emerging market" hangs on is that these countries are generally ones which rely on commodities exports and whose currencies are therefore unstable – the fragility of emerging markets.

The term "emerging market" will also continue to have validity in mobile telecom, we should just look more broadly in our view of communications than mobile statistics to define how.

Simon Baker is program director for mobile phones and consumer devices at IDC EMEA and a coordinator of IDC global forecasting for the 5G smartphone market. He is a long-time analyst in the mobile phone arena. Please contact him at [email protected]

Industry Voices are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by FierceWireless staff. They do not represent the opinions of FierceWireless.

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