WASHINGTON—Companies from emerging markets outpaced those in developed countries in production, growth and performance in the communications, media and technology industries over the past five years.
A recent "State of the Industry Report" from Oliver Wyman Group noted that firms in emerging markets have made great inroads in the communications sector. They have captured around 60 percent of the world's market and earned $1.1 trillion in revenues in 2007. Wyman is a subsidiary of the Marsh & McLennan Companies, a major consulting and insurance brokerage firm.
The results of the study were based on the Shareholder Performance Index, which tracks shareholder earnings. The index considers market volatility, local interest rate variances, mergers and acquisitions, and other market indicators.
"Customer demand and business innovation have flourished in emerging markets over the past five years, particularly for pure mobile communications, driving the lion's share of growth," disclosed the Oliver Wyman press release.
The study also talks about the importance of doing business in emerging markets. Companies experiencing a stagnant market at home have turned around their declining fortunes by moving into emerging markets. When Telefonica S.A., a telecommunications firm from Spain, became a major player in Latin America, its stockholders were handsomely rewarded. American Tower Company, a U.S.-based company that operates wireless and broadcast towers, improved its profitability after expanding into Mexico and Brazil.
The Telenor Group, a Norwegian provider of mobile communication services, "has strategically cherry-picked its early investments in Asia and Eastern Europe," and has improved its fortunes by expanding into emerging markets, said Wyman researchers.
Telenor was ranked number one in the global Sustainability Yearbook 2008, a ranking of the world's 2,500 largest firms based on the Dow Jones Global Sustainability Index.
Former Deputy Director of the World Bank's International Finance Corporation Antoine W. van Agtmael invented the term "Emerging Markets" in 1981 while at an investor's conference in Thailand.
"People looked down upon the 'Third World.' It sounded distasteful. I thought people with that feeling would never invest," said van Agtmael in the article "When are Emerging Markets no Longer 'Emerging?'" published by Knowledge @Wharton (KW), a publishing arm of the University of Pennsylvania.
The Top Performers
The Wyman study gives special mention to a few emerging markets top performers, including America Movil S.A., the largest Mexican wireless communications firm and a Fortune 500 company; Orscom Telecom Holding S.A.E. of Egypt, a leading telecommunications company that serves a total of 460 million people in Middle Eastern, African and South Asian markets; and Mobile Telesystems, the largest Russian mobile operator.
Another top performer is Bharti Airtel Limited, a telecommunications firm in India, with more than 60 million customers, around $1.7 billion in revenues and $426 million in net earnings for 2007. The Boston Consulting Group (BCG) released "The 2008 BCG 100 New Global Challengers" list of leading emerging markets companies in December 2007. On the list is Grupo Bimbo, a major global Mexican food and beverage producer, which earned $6.8 billion in sales during 2007, and MOL Plc, a Hungarian oil and gas company that earned $14 billion in 2006.
Out with the Old, In with the New
Governments around the world have been quickly reforming outdated business regulations, according to a recent World Bank report.
Major winners for taking advantage of relaxed business environments have been women. Studies have shown that more women have become successful entrepreneurs in emerging markets than in the past.
The term emerging markets has become somewhat of a misnomer over the years. Many emerging markets companies are significantly more profitable than firms in developed countries, according to some professors at the University of Pennsylvania. Others disagree, as they see large poverty-ridden segments with only a handful of firms outpacing those in developed economies.
The professors cite India and China's growth, but confess that they are not yet ready to be designated as developed markets. "While India and China both enjoy pockets of glittering prosperity, national wealth is unevenly distributed and most of the population in these countries lives in poverty," said the professors.
What puzzles researchers is that at some point in time, certain countries such as Argentina and Lebanon were ready to make the move to become fully developed markets, but were hit by economic calamities. Argentina saw the 2001 financial crisis and has yet to fully recover. Lebanon was considered "the Switzerland of the Middle East, with strong trade and high per capita incomes before it descended into Civil War, never to recover is economic place in the world," lamented the KW experts.
New names are thrown around to bypass the developed market designation, such as "middle-income emerging markets" or "graduating emerging markets."
"Most investors simply realize there's money to be made in these markets—not just the portfolio investors, but also major corporations The name is now less important that the fact that people recognize this is a part of the world that is no longer a backwater and no longer peripheral, but an increasingly important part of the world," said KW's Agtmael in the report.
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