ict in emerging markets: a usd 200 bln opportunity that cannot be ignored

8/6/2019 ICT IN EMERGING MARKETS: A USD 200 BLN OPPORTUNITY THAT CANNOT BE IGNORED

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May 2011

The Delta Perspective

ICT in emerging markets:a USD 200 Bln opportunity thatcannot be ignored

Authors Jacobo Garcia-Palencia - Partner Juan Jose Rio - Associate Partner Dimitris Lioulias - Manager

OVERVIEW

ICT is a global market worth more than USD 3 trillion and it becomes increasinglyrelevant for telecoms players, both as an offensive and as a defensive playThe ICT offering can be broken down into six different categories of services, frommore network centric (and hence more synergetic to pure Telco players) to more ITcentric (and hence more synergetic to pure IT players). These services range widelynot only in terms of revenue generation potential but also in terms of EBITDA margins(3-45%)The motivation of telecoms operators to enter the ICT battlefield has been varieddepending on the type of player. The result, however, has been strategies that turnICT into an important part of operators business- In Emerging markets, the ICT opportunity is at different stages of development:In

South East Asia, business process outsourcing is at the forefront of ICT servicesbeing provided. Operators are in some cases quite advanced as they started withtheir ICT efforts more than a decade ago

- In the Middle East, slow deregulation of the telecoms markets hinders strongdevelopment of ICT. Operators are in the process of building their skills and theyuse partnerships to achieve so

- In Africa, poor fixed infrastructure also affects ICT negatively. Operators try mostlyto leverage their mobile assets to deliver ICT services

The size of the opportunity in these Emerging markets is expected to reach USD 230Bln by 2013. The window of opportunity for aspiring telecoms operators is narrow.

Firstly, because competition is increasing on the access side. Secondly, because ITplayers are moving aggressively to lock in long-term contracts enterprise and SMEcustomers willing to outsource a number of their networking and IT needs


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Introduction

ICT services

About Information and Communications Technology (ICT)1.

As the boundaries between telecommunications and IT continue to blur, there is an increasinginterest in ICT, the services falling in the intersection of these two industries. Beyond the usualhype surrounding new service offerings, ICT is gathering pace and according to Gartner, it isestimated that ICT-related services will generate more than USD 3.3 trillion in 2010 and growingto USD 4 trillion in 2013.

In this environment, players from both industries are moving to capture momentum. Pure networkoperators are expanding their portfolio beyond network products to include certain IT capabilities,while pure IT players are expanding from the opposite end of the range of ICT services.

Relevance for telecoms players Defensive and offensive2.

The motivation for telecoms operators in developed markets, for instance, British Telecoms (BT),France Telecom (FT), as well as in developing markets, Singapore Telecommunications (Singtel), ismixed as they see ICT as a means of both defending traditional revenue streams and of attackingnew revenue pools that belong to other traditionally non-competing players (e.g. IT).

On the one hand, they are faced with threats in their traditional business, as they experienceincreased competition in the enterprise market from direct industry competitors (enabled byregulatory intervention) and large IT players.

On the other, they realise that they have the ability to tap into a new and large pool of revenuesnow, as IP-based networks allow telcos to offer an extensive array of ICT products on theirnetworks. In parallel, operators see that corporate customers tend to favour a one-stop-shop forICT services, which telcos can leverage to build unique offerings, given that they are the ownersof the customers connectivity. This opportunity is sizeable, growing at rates higher than puretelecoms revenues (i.e. >10% vs 3-5%).

While a full ICT portfolio encompasses all services ranging fromtelecommunications to IT, a further categorisation is necessaryto highlight not only the differences between assets and skillsrequired to provide such services, but also the variances in margins

for telecoms operators across those different categories.


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ICT P&S categories1.

The ICT offering can be broken down into six different categories of services, from more network-centric (and hence more synergetic to pure telco players) to more IT-centric (and hence moresynergetic to pure IT players). These services are:

Network products: standard telco operator products around pure voice and data provision

Managed network services: set up and management of third party networks on top of, or

connected to, the traditional telco operator networks e.g., WAN, LAN, IP based networksManaged convergent services: Software (SW) and Hardware (HW)-driven services that

fundamentally rely on network and connectivity services e.g. messaging services, workforceservices, M2MManaged IT services: SW- and HW-intensive services that fundamentally rely on connectivity

but are driven by typical IT skills e.g. data centresIT professional services: IT consulting services and BPO e.g. IT strategy consulting, IT network

architecture, CRM customisation and integrationIT and convergent products: third-party HW and SW reselling

Referring to Exhibit 1, the three service categories (and partially the fourth) from the left side ofthe exhibit are mainly enabled by operators network capabilities and could become immediatecomponents of an ICT offering by a telecoms operator. In order to capture the new revenuepotential, only modest investments would be required by operators, estimated between USD5-15m 1, e.g., in platforms and in peoples skills, as the majority of necessary assets (especially thosethat are needed to protect their traditional fixed connectivity revenues) are already in place.

EXHIBIT 1: ICT SERVICE CATEGORIES

1 Based on data from HP. These numbers will vary depending on the extent of service offering as well as the number of users that have to beprovisioned. Investments highlighted exclude OPEX costs related to potential managed services agreement with a company like HP or otherprovider.


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Growth potential of each P&S category2.

Value contribution is not evidently the same across the P&S categories in Exhibit 2, with the firstand last category producing 65-75% of total annual ICT revenues generated in a typical market.

Given the diverse nature of these services and underlying assets required for their provision, thedifferent categories show markedly differing margins. Average margins decrease progressivelyfrom pure network-centric (a 35%-45% in network products) to pure IT-centric products (3%-15% in IT and convergent products).

While the ICT market as a whole is expected to grow, not all service categories have the samegrowth potential. The growth rate will depend both on structural conditions in each market andon generic ICT trends. In markets where a large number of players exists at the access level andwhere the regulatory environment continuously fosters competition, the revenues from networkproducts is likely to stagnate due to multiple factors, e.g. price competition, VoIP or wholesaleofferings that will potentially destroy value for the whole industry.

On the flip side, as enterprise clients grow more comfortable with outsourcing of IT infrastructureor even the entire business processes, and as they get more accustomed to technologicaladvancements, such as cloud computing, it is anticipated that managed services will grow fasterthan other ICT services. Furthermore, expansion of cloud computing onto the residential segmentwill give telecoms operators the opportunity to extend revenues from managed services beyondthe corporate segment.

EXHIBIT 2: INIDICATIVE INVESTMENT REQUIREMENTS FOR OFFERING OF MANAGED SERVICE,USD MILLION

Note: This is a high level estimations and needs to be taken very broadly due to the complexity of the requirements and theindividuality of different projectsSource: HP


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Other factors that will drive growth in specific services relate to the size and economic situation ofspecific countries. For example, it is far more likely that services such as Business Process Outsourcing

(BPO) will be a growth area for the Philippines ICT market (large population relatively low GDPper capita), than it will be for a country like the United Arab Emirates (UAE).

In summary, while ICT services growth depends largely on market-specific conditions, managedservices (network, convergence, IT) are positioned to benefit the most from growth in themarket.

Cloud computing3.

Cloud computing is a decades-old concept that current technological developments allow to

materialise and to fulfil the promise of significant disruption in the ICT space.

While definitions and understanding of What is Cloud? vary widely, common ground suggeststhat Cloud is the provision of IT-enabled capabilities as a service via the Internet. Attributes thatdefine cloud computing are that it has to be service-based, scalable and elastic, shared, meteredby usage and all this has to happen via the use of Internet technology.

The main benefits of Cloud-based services are that they provide enterprises with flexibility,scalability and speed, as well as the transformation of CAPEX into OPEX. Cloud-based servicescan be categorised as follows:

Infrastructure as a service

Platform as a service

Software as a service

Business process utility as a service

While cloud computing has been overhyped and expected to bring to enterprises benefits oftransformational magnitude, the reality is that Cloud services are a viable means for deliveringICT in the future. As such, cloud-related revenues, while already sizeable today, are forecasted toreach USD 150 Bln by 2013.

The Cloud, similar to any outsourced arrangement, contains certain risks compared to IT handled

in-house. The main risks relate to security, availability and reliability, control, compliance. However,a phased approach together with selection of appropriate partners will usually help mitigate mostof these risks.

From the perspective of the telecoms operators, cloud computing presents opportunities. Ifaddressed properly, it can open up the door to capturing value from the IT industry (albeit, notfrom the large players, e.g., IBM. In the case of players like IBM, it is more likely that it will enablethe selling of joint standardised offers to SME driving more fixed internet and connectivity) andcan be a defence against IT players foray into traditional telco areas.


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As telecoms players design their Cloud strategy, they have to take into consideration of thefollowing:

Cloud services are a reality and their value, according to Gartner, is expected to almost triple

in the next 3 years, by 2014The key to provisioning of Cloud services is connectivity, i.e., the telecoms operators

traditional strength. This means that uptake of Cloud services will always bring additionalvalue to telecoms operators, as Cloud players require increasing amounts of bandwidth, it isespecially the case in less competitive telecoms countriesFor telecoms operators it is difficult to become positioned at the forefront of Cloud services,

as they lack the pedigreeTelecoms operators, however, can pursue a phased introduction into the Cloud space by

offering services in which they already have significant in-house capabilities, such as data

centres, established business processes such as billing and customer care, and so on. They canthen extend their offering that would include SaaS while building the relevant capabilitiesFor the most part, the Cloud is a zero-sum game. As customers shift an increasingly large par t

of their IT budgets to the Cloud, the traditional IT expenditure, such as software purchasing,hardware purchasing, IT systems integration and other services, will lessen. Consequently,heightened competition is expected in the Cloud as traditional IT players resist the erosion oftheir revenues. This is likely to spill over to the telecoms arena, as Cloud services will enablethose players to offer VoIP solutions

Telecoms operators in ICTOperators rationale for competing in ICT1.

In this environment, telecoms and IT players leverage their own skills and expand along the servicecategories. Pure network operators are expanding their portfolio beyond network products toinclude certain IT capabilities, while pure IT players are expanding from the opposite end of therange of ICT services. Hence these two intrinsically different types of players (given their underlyingassets and capabilities) have met and are competing mainly in managed convergent and managerIT services, while still trying to defend their core business and keep it intact from each other.

In the case of telecoms players, the move into ICT aims to address two basic strategic intents:

Defensive: Protecting core telecoms revenues - Operators try to ring-fence existing customers

and revenues by offering a bundle of telecoms and ICT services. This product offering makesswitching costs higher for the customers and locks them in, as typical ICT contracts arelonger than pure telecoms contracts and can extend to between 3-10 years.Offensive: Growing revenues from adjacent services - Operators have identified ICT as

a potentially lucrative new revenue stream and build their ICT portfolio to offer servicesadjacent to their traditional telecoms services, thus capturing higher share of wallet fromthe enterprise segment. Furthermore, operators have identified emerging clients in the SMEand SOHO segments and develop standardised, off-the-shelf offers to address their needs,as those customers increasingly shift from an in-house to a managed-services model fortelecoms and IT services.


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While this rationale applies to all telcos, the main focus is different for each of the following typesof operators:

Global players, e.g., BT: ICT is addressed as their core business

Fixed incumbents, e.g., Telefonica: ICT is addressed as a vehicle to protect fixed market

shareSecond, third fixed entrants, e.g., Orange in Spain: ICT is addressed as a means to gain share

of fixed telco. Dumping data centres services in the process is not uncommonMobile players, e.g., Vodafone: ICTs focus is to address the SME segment by leveraging on

incumbent offers or promoting fixed line replacement by mobile

Furthermore, significant differences can be observed between operators in developed market andthose in developing markets. Developed markets operators (e.g., Orange, Singtel, Telefonica) have

embraced ICT more tightly and reap higher rewards, as ICT revenues contribute 10-15% of theirtotal revenues. In contrast, emerging market players derive less than 1% of revenues from ICT.

Typical telecoms players positioning2.

Not all telecoms players are positioned in the same way in the ICT market. Some players havehistorically been strong in IT services as a result of strategic choice, others have developed ITcapabilities opportunistically to address specific customer needs, while the rest as a resultofresponse to the local competitors.

In general, the telecoms players positioning in the ICT market can be distinguished along threeaxes that have fundamental implications regarding their revenues and margins from ICT:

Breadth of product offering: the more expanded towards the pure IT services, the higher the

revenue pool, but lower the marginsBreadth of geographical coverage: the further the geographical coverage, the higher the

revenue pool (per client), but generally lower the margins (due to lack of own infrastructureon additional geographies)Target segments: the bigger the size of the targets, generally the lower the margins due to

bigger negotiation power by key accounts and need for higher customisation of productoffering (e.g., key multinational clients)

While this classification is useful to understand the differences better between the players, marketreality shows that there are many trade-offs that operators have to make. For example, focus onspecific service categories does not necessarily mean that a telecoms operator can address theneeds of all customers in these categories. Conversely, an operator that serves multinationals doesnot necessarily mean that it can offer the full range of P&S. Both local and global operators oftenoffer part of their services to key clients through partnership models, both at home and abroad.


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Approach for building ICT capabilities3.

In developing their ICT positioning and capabilities, telecoms operators have had to developcertain skills organically, yet very often they also resort to inorganic methods. The rationale forinorganic growth, however, goes beyond just acquiring capabilities. Acquisitions have been usedby large telecoms operators as a means to:

Expand or consolidate geographies by acquiring well-positioned players in a market into

which the telecoms player wants to enterDifferentiate by acquiring key assets, which strengthen the telcos current offering locally or

globally, e.g., network, data centresConsolidate positioning in a vertical by acquiring assets that solidify an already strong position

in a specific industry, e.g., banking, oil and gas

A prime example of addressing the above objectives via acquisitions is the case of BT. BT is thetelecoms operator with perhaps the largest ICT capabilities, a large part of which were developedinternally. However, BT has also spent approximately USD 3 Bln in the acquisition of more than 40companies to develop presence in new geographies or solidify positioning in specific verticals.

Joint ventures have been another common means for addressing the ICT market. This has beendriven largely by the need of global ICT players to deliver services to their multinational clients,while they lack the local access assets in one of the clients countries of operation. On the flip side,incumbents in developing markets that lack ICT knowledge and capabilities see joint ventureswith large ICT players as a way to leverage their telecoms assets and quickly build a certain levelof ICT skills, e.g., AT&T and Qtel with their joint venture NavLink.

Obviously, these different approaches imply fundamental trade-offs of immediate versus mid-termfinancial returns, time to market and operational control. While acquisitions have an immediateimpact on capabilities and business size, they generally show more questionable financial returns

and organisational difficulties.

EXHIBIT 3: EXAMPLES OF TELECOM OPERATORS POSITIONING


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Conversely, building capabilities internally takes significantly longer time, but at the same time thefinancial downside is limited, there is more organizational control and generally robust, long-termcompetitiveness is achieved.

Telecoms operators considerations and key success4.factors

For those operators who are keen to move beyond their traditional capabilities and capture theICT opportunity, certain key considerations and success factors are important to keep in mind.

I. Valuation considerations

First and foremost, the decision to move into ICT comes with a size versus margin-dilution trade-off, which often impacts company valuation. Telcos with high ICT focus have lower valuationscompared to other telcos as, while still having high CAPEX requirements, they attract additionalrevenues from ICT that have significantly lower margins. For the ICT foray to result in value

accretion, the incremental revenues derived from IT services have to offer sufficient margin tomake up at least for the difference in valuation between the traditional telco and the ICT telcobusiness model.

II. Existing skills and assets as ICT enablers

Before telecoms operators decide on the breadth of their ICT portfolio and on targeted customers,they need to carefully analyse their existing skills, assets and current scale. While certain skills, e.g.,network, data centres, even the operators own IT department, can be easily leveraged to offerICT services, others require significant investments both in money, e.g., specific platforms, butmost importantly, in time, e.g., peoples skills, culture.

EXHIBIT 4: BT ACQUISITIONS RATIONALE


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For operators who choose to expand the service portfolio around network-centric skills, traditionaltelco margins are more likely to be maintained, while stretching the service portfolio to IT-centric

skills and services will reduce average margin.

Finally, the operators geographical footprint is very important in deploying an ICT offensive, asmargins are generally linked to infrastructure ownership. Venturing into service provisioning formultinationals outside an operators own infrastructure footprint will generally dilute margins.

III. Go-to-market approach

Successful ICT operators have generally followed a phased go-to-market approach leveragingexisting capabilities, complemented by partnerships and acquisitions. A typical entry-level serviceportfolio is built around network-centric services, which tend to be similar across industries.

More IT-centric product offering, which requires vertical approach-to-market to address industryspecific IT requirements, is addressed at later stages. Especially after one or two anchor clientshave been acquired in a given industry vertical. Otherwise, the operatorsfocus is primarily on SMEand Corporates within its own market, and the ICT offering is initially seen as a way to providediscounts to defend contracts (sometimes the IT services are offered for free as part of a totalcontract value negotiation).

All this is usually built on the basis of an independent business unit inside the operator to ensurefocus, provide visibility of margins (especially if the operator is quoted) and to portray ICT as aserious business of the operator to the corporate clients.

IV. Second/third entrants considerations

The ICT game is not equally attractive for all telecoms players in a market. While incumbentsare usually well positioned to leverage their network assets and at the very least capture theconnectivity revenues of ICT services, second and third entrants in the fixed or mobile marketshave a more difficult ICT business case ahead of them. They are likely to end up direc tly competingwith the IT players without having high margins from the telco business to support them. Theseplayers have to consider the minimum fixed line investments they have to incur to be competitivein ICT and consider if and how they can leverage their backbones for the provision of such services.Furthermore, they have to consider what their options are for international Internet connectivity,as this is a key ingredient for the provision of ICT services. In most cases, if these players do nothave an international gateway, offering ICT services becomes a challenging proposition.

V. Implementation considerations

Telecoms operators have some of the network assets required to offer ICT services. However,successfully competing in this arena requires a different operating model and a different mindsetthan those common in telecoms players.

In particular, the operating model surrounding the commercial, service delivery and customer carefunctions are fundamentally different. Offering ICT services requires a much deeper relationship

with clients that go beyond the typical box-pushing approach of telcos sales. An ICT key accountmanager must understand the specific needs of the client and offer solutions to address them.


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These solutions often require customisation, and the product factory needs to have the capacityand sufficient independence from the telco factory to deliver it. Finally, offering customer care for

the client often entails servicing customers at their own premises.

All the above require a differentiated service mentality, culture and skills from those traditionallyfound in typical telcos. The transition from a telco to an ICT mentality has been accomplished withvarying degrees of success by many telecoms players. However, one should not underestimate theneed for a lengthy transformation program to make it happen.

VI. Ending note: No silver bullet

The high level analysis above provides a primer on how ICT can be approached by telecomsoperators in emerging markets. However, each operator faces different competitive situations,

market dynamics, potential customers and opportunities. Moreover, each operator has access todifferent skills, financial resources and knowledge. This means that devising an ICT strategy shouldentail specific tailoring to the operators own circumstances and should address key strategictrade-offs, such as the high impact on the companys profitability and valuation.

ICT window of opportunity5.

Telecoms operators venture into ICT with the knowledge that connectivity is the baselinerequirement for each ICT offering and that their network assets put them in the pole position tooffer many ICT services. From this starting point, many operators from developed markets havemoved towards an extensive ICT portfolio.

In emerging markets, however, operators are behind the development curve where iCT is pursuedonly on the surface, offering limited services primarily driven by their network assets.

In some cases, these players are comfortable with their limited offerings because they operate inless competitive, closed markets, and they are not eager to develop additional revenue streamsthat partly lie outside of their traditional area of expertise. In other cases, these players just do nothave the knowledge to develop their ICT practice properly.

Whatever the reason be, there is a window of opportunity for ICT services that operators cannotmiss. Firstly, the window is narrow (especially in emerging markets in which the size of the fixedtelecoms market is significant), as regulators push for increased competition on the access side,and the arrival of new submarine cables and alternative technologies (e.g., WiMax or LTE) furtherheats up the markets.

Secondly, the window is closing. As enterprise and SME customers become more willing tooutsource a number of their networking and IT needs, IT players move aggressively to addressthose needs. While telecoms operators will, in most cases, still capture the connectivity revenues,they risk losing all upside potential from managed services in the long-term as ICT contracts aretypically signed for a long period of time.


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Introduction1.

The nature and stage of maturity of the ICT market varies across developing regions. While globaltelecoms and IT players are present in these regions and they offer a high degree of customisedservices to their Multinational Corporation clients, the ICT efforts of local players range from justoffering plain connectivity to offering a substantial portfolio of services.

These differences are driven by environmental conditions that are unique to the regions. Forexample, South-East Asia is home to large populations with relatively low labour costs, whichmakes the region a likely provider of outsourcing and specifically business process outsourcingservices. At the same time, the Middle East has still some way to go by way of deregulation of thetelecommunications markets, while Africa has poor fixed telecoms infrastructure, two factors thataffect ICT developments negatively. These are but a few reasons that contribute to the differencesin ICT development and in the size of the opportunity across the regions.

Size of the ICT opportunity2.

The size of the ICT opportunity is significant in all three regions and it is expected to grow rapidlyin the next three years, as markets mature, economic growth increases enterprises and SMEsinvestments in IT, telecommunications regulators foster more competition, and operators continueto embrace ICT and its potential.

ICT in emerging regions SouthEast Asia, Middle East, Africa

EXHIBIT 5: ICT REVENUE EVOLUTION IN EMERGING MARKETS, 2009-2013, USD BILLION


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Telecoms operators ICT activity3.

Even if the three regions are at different stages of development when it comes to ICT, telecomsoperators in all regions have been positioning themselves to capture the ICT opportunity.

Operators in South-East Asia are more advanced as in some cases, they have started with their ICTefforts more than a decade ago. Regional operators are appearing with diverse product offeringand they leverage their socioeconomic conditions to offer competitive BPO services. Acquisitionsare being used to complement existing skills and footprints.

Operators in the Middle East are in the process of building their skills and forming partnershipsto achieve it. Specific to ICT, their product offering is less advanced, Given that the fixed-linemarkets are not fully liberalised, operators leverage their (near) monopoly to offer connectivity and

enhanced last mile access (e.g., FTTx). At the same time, their geographic area of focus is mainlytheir home market, as the regulatory environment does not facilitate cross-border deployments.Major acquisitions of ICT companies have not yet hit the markets.

Operators in Africa are, in most cases, hindered by lack of fixed infrastructure and the mobileassets are leveraged to deliver ICT services. Vodafone is well positioned to play this game as theyhave been competing in this way in much of their footprints. Other contenders in the region seemto be following the acquisition and partnership route to gain access to the necessary ICT skills.For all of the above, the ICT offering is still relatively basic and players are still deliberating on thebest approach forward.

EXHIBIT 6: TELECOMS OPERATORS ICT ACTIVITY BY REGION


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Summary - The ICT opportunity per region4.

The ICT opportunity in South-East Asia, Middle East and Africa is sizeable with potential forfurther growth. This growth will be driven by different factors across the regions:

In South-East Asia, where large regional operators are already positioned, the opportunity

lies in leveraging socioeconomic conditions to take advantage of BPO opportunities and intaking the current offerings to the next level of complexity and sophistication. Consolidationis likely to the extent it offers clear footprint benefits.In the Middle East, beyond the global players servicing multinational clients, there is good

potential for development of strong country-specific ICT offerings before regional playscan be contemplated. The opportunity will be driven mainly by those who put emphasison dedicated ICT skills and organisations that will cover the relative vacuum in the local

corporate and SME markets.In Africa, the opportunity lies mainly within the top two ICT countries, i.e., South Africa and

Egypt, with less immediate potential in the other North African countries. As ICT skills andfixed infrastructure improve, the operators offering will increasingly address the growingneeds of local and regional corporates as well as those of SMEs.

However, the opportunity and urgency to act is not the same for all markets. As depicted on Exhibit 7,the opportunity is expected to be higher in markets with greater fixed market and higher competition.

Operators in South-East Asia, the Middle East and Africa are positioning themselves for ICT, as theysee it both as a defensive response to threats to their traditional telecoms business from a multitudeof competitors, and as an offensive strategy to capture value from adjacent revenue pools. Operators,however, do not yet fully capture the opportunity, especially in the Middle East and Africa, as they arein the process of developing their capabilities.

Building these capabilities is a process that requires operators to transform away from the telco mindset,assets and operating model to those of an ICT player. This is the case even if operators prudently decideto follow a phased approach and mainly leverage their telecoms assets to offer a partial portfolio of ICTservices. However, the investments required are relatively small and they may only increase if the ICTventure proves successful for the operators.

Conclusion

The ICT opportunity is sizeable, with potential for further growthand it represents operators with an avenue for additionalrevenues.


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In any case, operators have to consider their relative size, assets, capabilities, resources and marketenvironment before they venture into ICT, as they have to devise their own clear strategy on how to

approach the opportunities and risks entailed by the ICT market.

These risks relate mainly to the reality that, due to lower margins of ICT services, ICT players are facedwith lower valuations than those of pure telcos. Furthermore, the actual transformation onto an ICTplayer is a long-term process that requires strong top-management support and disciplined executionto make it happen.

Finally, operators have to consider that the window of opportunity for ICT is narrow, especially in themore lucrative oil-rich Middle Eastern markets and the key South African and Egyptian markets. On onehand, liberalisation and technological evolution could render operators uncompetitive if they have not

developed the necessary ICT capabilities. On the other, the high-value clients are going to be lockedaway in longterm contracts with their telcos and IT competitors.

EXHIBIT 7: DRIVERS OF ICT MARKET POTENTIAL


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Delta Partners is the leading TMT advisory and investment irm in emerging markets. With more than 160 pro essionals, the

irm operates across 50 markets in the Middle East, A rica, Central & Eastern Europe and Emerging Asia. Delta Partners provides

three synergistic services: management advisory, corporate inance and investments rom its o ices in the UAE, Bahrain, South

A rica, Spain and Singapore.

Advisory: Delta Partners advisory pro essionals partner with C-Level executives in telecom operators, vendors and other TMT

players to help them address their most challenging strategic issues in a ast-growing and liberalising market environment in

over 50 markets.

Investments: As a und manager, Delta Partners manages an USD 80 Mln private equity und, targeting investment opportunities

in the TMT space in high growth markets. The ocus is the Middle East, A rica, Eastern Europe and Emerging Asia. Delta Partners

private equity und leverages the frms unique TMT industry expertise to create value or its investors throughout each stage o the

investment cycle, rom deal sourcing to supporting port olio companies in driving value extraction.

Corporate Finance: Delta Partners provides corporate fnance services and has been involved in several buy-side and sell-side

telecom transactions in the region. As true industry specialists, the frm o ers a di erentiated value proposition to investors

and industry players in the region. Delta Partners actively leverages its close link to its private equity arm to access the investor

community as well as top-level fnancial talent.

Delta Partners delivers tangible results to its clients and investors through its exclusive sector ocus on telecom, media and

technology, and a unique approach to services, combining strategic advice and a hands-on pragmatic approach.

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ict in emerging markets: a usd 200 bln opportunity that cannot be ignored

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