Question

Why are developing countries interested in privatization their telecommunication industries? What opportunities does this privatization have for telecommunication MNC`s?

How has the formation of the EU created new opportunities for member countries? Of what importance are their opportunities to international managers in other geographic regions such as North America or Asia?

Answer 1

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Why are developing countries interested in privatization their telecommunication industries? What opportunities does this privatization have for telecommunication MNC`s?

Telecom industry, by its very nature is highly capital intensive. The capital expenditure, capex involved in executing nationwide telecom projects is so high that in the case of developing countries there is insufficient capital to seek economic growth in this sector. Besides, modernization of the telecom sector demands laying of optic fiber cables and installation of cellular infrastructure on a large scale.

The telecom sector in developing countries is seeing exponential growth. Wireless technologies in particular are seeing increased usage among consumers. The reason is its convergence with internet has opened possibilities like e-commerce which in itself has become a large industry. With such developments, developing countries realize they can maintain the momentum of overall economic growth only by increasing investments in the telecom business. The economic growth can be sustained only if efficient communications systems are in place. Thus due to the capital intensive nature of the industry, developing economies need to append the domestic capital with technical know-how and foreign investments. This is possible when MNCs are ready to commit large investments with an assurance of high returns and operating control. Further, the increasing demand for telecom services in developing countries will require further investments, majority of which will come from overseas. All these conditions call for privatization of the telecom industry which was hitherto the domain of the state-run companies in developing countries.

It is therefore not surprising to see that state run telecom companies like Sgp telecom, Paktel, KR telecom have been privatized. The result of privatization has seen telecom MNCs from developed countries invest in these now privatized companies.

Telecom MNCs have a lot at stake in investing in developing countries through the route of privatization.

1. They have the chance to participate in a sunrise industry in these economies, because in these markets, the telecom industry is still in a nascent stage.
2. Their own growth is going to come from these developing economies for the possibilities that they offer, both in wireline and wireless businesses
3. Developed economies are saturated markets for the telecom companies. On the other hand, developing economies still need substantial telecom penetration, thereby offering a lucrative opportunity for MNCs to invest.
4. Many large developing countries like CHINA and INDIA have a large untapped customer base waiting for subscription to telecom services. Government telecom companies in such economies have limited resources to expand their services to this target market. MNCs can fill this void through privatization of state-run companies

The above factors thus offer ideal conditions for MNCs to harness and make investments in the telecom sector of developing countries. Moreover, increasingly governments are offering liberal terms for MNCs to make telecom investments with major operating control and high ROI.

Technological innovation and the decreasing costs of wireless and other technologies, combined with progressive policy and regulatory environments, have resulted in the provision of telecommunication services in remote areas thought unserviceable by incumbent telcos in Latin America, Central Europe, and Asia. In line with the increasing number of success stories in other parts of the world, the South African government, as part of the policy of "managed liberalization" of the telecommunications sector, lifted the monopoly provision of telephone services in under-serviced areas by permitting smaller-scale entrants into the telecommunications market.

How has the formation of the EU created new opportunities for member countries? Of what importance are their opportunities to international managers in other geographic regions such as North America or Asia?

European Union is a political and economic union of 28 member's states, formed in 25march 1957. They formed with the aim of ending the war between the neighbor countries and develop the human right and provide equality. The formation of the European Union creates the opportunity for members countries is the opportunity for the employment and infrastractural development and services, development of internal marker, other opportunities like build the economic strengththrough the effective trade policy and agreement with other countries. Those opportunities have opened up the major new market for members state brought significant economic benefit. These opportunities are become important and necessary to international managers in other geographic region in Asian countries. These opportunities are make to reduce inequality among people and maintain the relationship with the other countries. Develop the service and infrastructure facility of the country and increase the employment opportunities. The country like India became developing county and increasing the growth rate by 7.2% in 2014-15. Increase the trade with other counties and achieve the trade share which leads to elimination of war among the countries and maintain good relationship.

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