The World Teleport Association (WTA) just published its 2010 update of Sizing the Teleport Market, which provides the only market data on the teleport sector, from number of facilities to revenues, workforce and purchasing power. WTA's Executive Director Robert Bell deconstructs the study and its implications for the industry.
The recession of 2009-2010 is not an equal-opportunity recession. In the industrialized nations of North America and Europe, some sectors are suffering terribly while others are relatively unscathed. The satellite and fiber transmission business, I'm glad to say, is in the latter category. But if you are looking for places where the recession has hardly made a dent, you need to look at the emerging markets.
According to The Economist, growth in the emerging economies of the world began to outpace the US and Europe in 2000, and remained positive even through the 2008-09 financial crisis. There are now 21,500 multinational corporations in emerging markets, and 70% of the world's economic growth in future years is likely to come from emerging economies, with China and India together contributing 40%. The number of BRIC (Brazil, Russia, India, China) companies on the Financial Times 500grew 4x from 2006 to 2008, from 15 to 62. The emerging markets' share of global GDP (at purchasing power parity) grew from 36% in 1980 to 45% in 2008 and is expected to reach 51% by 2014.
From my own little corner of the global economy, I can validate the trend. WTA just published its 2010 update of Sizing the Teleport Market, which provides the only market data on the teleport sector, from number of facilities to revenues, workforce and purchasing power. It is available free to our members and on a paid basis to others at www.worldteleport.org.
The global revenue figures within this specialized sector tell the same tale. In North America and Europe, industry revenues have growth at a compound annual growth rate (CAGR) of 4% since 2004. But with a global CAGR of 7%, where is the growth coming from? From Russia and the Newly Independent States, Latin America, the Middle East and Africa. None of those markets can compete with North America and Europe in sheer size but that is where the strongest growth is taking place.
What about Asia? The region enjoyed strong growth from 2004 to 2007 but growth flattened in the most recent three years. Aren't two of the most dynamic growing economies – China and India – located in Asia? They are indeed, but they are also places where the telecommunications market operates within tight restrictions. China is by far the fastest growing economy in the region, as well as its largest. But strict state control of telecommunications eliminates the entrepreneurship in telecom that has driven teleport growth in other nations. In India, the government restricts the ability of foreign satellite carriers to provide capacity, and capacity shortages are slowing the growth of DTH and other satellite businesses, while preserving the profits of domestic players, entrepreneurs and incumbents alike.
North America and Asia actually saw a decline in the number of commercial teleports from 2007 to 2010, while the Middle East, Africa and Russia/NIS were flat. Only Latin America and Europe experienced growth in the number of commercial facilities in the past three years. (For the full six-year period from 2004, every region saw growth in facilities as well as revenues.)
The financial crisis that began in 2008 certainly had some effect, with its impact on the availability of risk capital. Another trend during the 2007-2010 period was industry consolidation, with bigger companies buying smaller ones and then rationalizing their assets by taking some facilities out of commission. As always, this trend was balanced by new entrepreneurial entrants to the business, who were in greatest evidence in Latin America and Europe and least active in North America – the region that gave birth to teleport entrepreneurship more than three decades ago.
In business, of course, it is not assets that count but the income they can produce. Over the period of the Sizingstudies, teleport operators have clearly learned to "sweat their assets" in order to generate higher revenue from few facilities. Whatever the current direction of the business cycle, that is a winning strategy.
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Robert Bell is Executive Director of the World Teleport Association, which represents the world's most innovative teleport operators, carriers and technology providers in 20 nations. He can be reached at: rbell@worldteleport.org
