Download Financial crisis - World Bank Group

ICT and the Financial Crisis
Phillippa Biggs, Economist, International Telecommunication Union
11 March 2009
Agenda
Agenda
• Origins of the Crisis
• Is this Crisis any Different?
• Firm outlook in high-income
economies
• Firm outlook in emerging markets
• Telco strategy
• Impact of the crisis on MENA
• Impact of the crisis on Egypt
2
Origins of the Crisis
Distribution of US Dollar Mortgages,
US Housing Association
• Niche origins in
US housing market
and expansion of
high-risk Alt-A
& sub-prime
mortgages.
• Sub-prime mortgages rose from <10%
in 2002 to 21% of all mortgages in 2006.%
3
Risk Pooled Around the World
Investment banks became exposed through holdings
of derivatives mortgage-backed securities (MBS)
Source: Bank for
International
Settlements.
4
Crash, Crunch and Crisis
•US housing bubble crashed in 2006, making
mortgage-backed securities ‘toxic assets’.
•HSBC announced write-downs of $10.5 bn in Feb
2007, leading to a ‘credit crunch’
& massive decline in inter-bank lending.
•Financial crisis erupted in mid-Sept 2008 in failure
of Lehman Bros & sale of Merrill Lynch.
•Situation triggered a global economic slowdown US, EU & Japan now in recession.
5
Is this Crisis Any Different?
• Origins in credit market,
rather than an asset bubble.
• Crisis originated & spread through
systemic failures in financial regulation &
banking system.
• Originated in high-income countries,
but its impact is spreading fast.
• Unprecedented coordination to date in
intergovernmental response.
6
But what is the impact of
the financial crisis on
ICT firms in Egypt and MENA?
Source: Sequoia.
7
Firm outlook is bleak…
in high-income countries
• Telcos paying 3-4% more for financing
• Uncertain consumer demand not yet tested in
recession – consumers are wary
• Need proven business model & cashflows &
established credentials to access VC.
• But return of State funding? Government
intervening with investment in broadband in
Australia, Italy, Greece, USA and EU.
8
Outlook in emerging markets
• Demand for mobile largely unaffected,
despite softening in some markets
• Mobile phone services still widely viewed as a
necessity.
• Growth in mobile broadband and Internet looks set
to continue
• BUT… what about the economic backdrop &
consumer demand, if emerging markets slide into
recession?
9
Telco Strategy
• Capex, not opex – focus on controlling costs;
• Consider network-sharing to cut costs;
• Continue to invest in QoS for the future;
• Focus on flat-rate & prepaid packages likely to grow,
as popular with consumers (impact on profit margins?);
• Mobile operators more flexible re capex than fixed;
• Cut debt where possible & focus on refinancing.
10
What implications for MENA?
• MENA benefits from own sources of finance,
including SWFs and homegrown investors
• Prospects for South-South investment
• Strong growth potential in mobile & Internet
• Investment in ICTs could offer a way out of
the crisis, but needs to be prioritized.
• Delays in licenses: Bahrain, Jordan & Lebanon
• Still a strong potential role as a regional hub
- Outsourcing Destination of the Year 2008
11
Growth in Egyptian mobile
Growth of mobile market, 2005-2008
50.0
45.0
40.0
Vodafone Egypt
Etisalat Misr
ECMS
35.0
Millions
43.8
30.6
43.8%
30.0
25.0
16.0%
17.7
20.0
15.0
12.6
40.2%
10.0
5.0
0.0
Source: ITU.
2005
2006
2007
2008
12
Slowing in growth?
Year-on-year growth, Q1-Q4 2008
80.0%
70.0%
67.1%
60.0%
55.5%
50.2%
50.0%
43.0%
40.0%
30.0%
20.0%
10.0%
0.0%
Q1 2008
Source: Informa.
Q2 2008
Q3 2008
Q4 2008
13
Impact on Egypt’s telecom sector
• Strong growth in mobile projected
to continue from 58% in 2008 to 74%
penetration in 2009, despite crisis
• But slowdown in net additions in Q408
(Informa)
• Most analysts foresee limited impact on
mobile usage and revenues.
• Early signs of a slowdown in fixed-line (BMI)
• Second fixed-line licence postponed
• Egyptian mobile in transition - penetration
in cities high – how to grow rural market?
14
MobiNil
• Expecting slower revenue growth in 2009,
due to slowing economy;
• Mobile BB: 200,000 subscribers Oct 2008
• Mobinil is forecasting year-on-year revenue
growth of about 10% in FY2009, compared with
over 21% in FY2008.
•Mobinil has also stated it will cut its CAPEX in
2009 to US$450-550m, from $580m in 2008.
15
Vodafone Group
•Cost cutting – 1 billion GBP cost reduction
programme, including cuts in headcount
•Asia-Pacific and Middle East growing strongly –
‘Egypt is doing well’’, with growth in 3G and
advanced services
•Strengthening its liquidity with bond issuance and
effective refinancing
•Emphasizing customer value, mobile data and
broadband services.
16
Fixed Telephony
• Award of second fixed line licence delayed
• Telecom Egypt continues to build market share
• Meanwhile, mobile broadband offers are coming
into their own.
• Impact on the value of the second licence?
• Timing?
• Uncertain investment climate?
17
Read more about the impact
on the global ICT industry in
Confronting the Crisis:
Its Impact on the ICT
Industry
www.itu.int/crisis2009/
18
Thank you for your attention
[email protected]