China and the emerging markets telecoms revolution

Throughout the developing world the telecommunications industry has been a truly transformative force, providing cheap phone and internet connections for the first time has allowed much of Africa and emerging Asia to “leapfrog” economic development by not having to construct expensive fixed wire infrastructure and allow cheap phones calls and net access, unthinkable twenty years ago. Improved communications has been a boon for commerce and entrepreneurs, allowing farmers to learn of crop prices in markets far from home, taxi drivers to pick up fares with ease and speed and allow the rapid communication that is taken for granted in the West.

This technology has also helped to connect likeminded people, arguably spurring the development of civil society organisations and democratic movements. The spread of the net has brought similar advantages, East Africa has been the world centre of innovation for mobile banking and companies like M-Pesa have allowed previously unbanked customers in Kenya to send, receive, hold and save money. These are the technological leaps that create the productivity gains which are vital for economic development.

From the Chinese perspective it has been a once in a lifetime opportunity for the likes of Huawei and China Mobile, who are among those companies who have gotten big and rich from the communications revolution. Like companies anywhere in the world, once they reach a certain size Chinese companies naturally start to look abroad to diversify their holdings, increase their sales and margins, as well as learn lessons managerial and technological from other countries. China Mobile made its foray abroad when it brought a loss making Pakistani carrier – Paktel for around USD 280 million in 2007 and has not looked back since.

Other companies that have been making waves are ZTE and Tencent. ZTE has quietly become the world’s third biggest mobile provider and in 2013 it was the fastest growing mobile manufacturer in the US, despite this or perhaps because its rise has come so swiftly it has not yet emerged as a major household name.

The rise of ZTE has not come without scrutiny, like Huawei it has been accused of corporate espionage by rivals and politicians alike, while this has not stopped its growth, the company is a fixture in the Chinese social media gallery, providing messaging, video sharing (Weishi), gaming and blogging all in one package. Headquartered in Shenzhen the company, worth around USD 139 billion on the Hong Kong stock exchange, has global ambitions to match its success in China. So far it has moved into India and South East Asia with success, but it may find further growth difficult as it runs into competition with the western majors of Facebook, Twitter and the other tech giants.

Alibaba is another venture which has already made an impact abroad, founded by Jack Ma, in classic entrepreneur style from a bedroom, the firm took China by storm, a combination of Amazon, Paypal and eBay it has now it has sought out an international audience by reaching out to overseas Chinese, but also by giving people in China access to the US market.

Opportunities and Threats

The success of Chinese internet firms has made their drive for overseas expansion and success irresistible, however for internet giants their rise may be a harbinger of competition and conflict, one that seems unfair as many of the tech giants cannot operate in China itself. But for small tech firms there are opportunities to build bridges with China’s tech giants by both supporting and assisting in their growth, such as providing software that assists or complements overseas operations.

Another area of growth will come in the form of providing support services for telecoms providers, this could be making cases for Huawei phones and computers or providing parts, repairs or distributions services for this new wave of suppliers.

For existing technology firms Chinese competition could become more of a reality in the future, although many firms have found it difficult to operate out their comfort zone in China, international exposure will make them more adaptable, innovative and sensitive to operating in different countries.



Categories: China Goes Global, Frontier Markets

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