Brazil, Russia, India, China, and Indonesia will double their Internet users to 1.2 billion by 2015, fueling growth at media companies and phone carriers, according to Boston Consulting Group Inc.
The countries will have three times the Internet users of the U.S. and Japan combined by then, up from about two times at the end of 2009, the consulting firm said in a report released today. Personal computers will double in the five countries to more than 920 million, and mobile phones with Internet access will aid growth, according to the report.
As consumers gain more access to the Net, they’ll spend more time online, providing a boon to entertainment providers, Boston Consulting Group said. The surge in Web use will benefit media companies such as China’s Tencent Holdings Ltd. and phone carriers including PT Telekomunikasi Indonesia, analysts said.
“The fastest-growing Internet markets are those with low penetration rates and strong economies, and the BRIC countries all fall into these categories,” said Jake Li, an Internet analyst at Guotai Junan Securities in Shenzhen, China. “The opportunities for online advertising and e-commerce in these markets are huge.” He recommends buying Tencent shares.
The changing demographics of online users will create new sources of innovation beyond the developed world, said Paul Saffo, a managing director at Discern Inc., a San Francisco- based investment research firm.
‘Creating More Creators’
Just as South Koreans embraced social gaming years before Zynga Game Network Inc.’s “FarmVille” caught on in the U.S., a developing country may be the first to popularize concepts such as “microcash,” or small virtual payments, Saffo said.
“You have the perfect combination, local populations with intense local interest, and local entrepreneurs with tech savvy,” Saffo said in a phone interview. “What you’re doing here is not just creating more users and consumers, you’re creating more creators.”
The acronym BRIC was coined by Jim O’Neill, the chief global economist at New York-based Goldman Sachs Group Inc., in 2001 to refer to Brazil, Russia, India and China as a group of rising economic powers.
Boston Consulting added Indonesia to the group because of its population of more than 240 million and its proportion of mobile-phone users, which at 66 percent is higher than China and India, said David C. Michael, lead author of the report.
‘Best Prospects’
“Of the three markets, China, India and Indonesia, we believe that Indonesia has the best prospects for organic growth in telecommunications revenue,” said Tucker Grinnan, head of Asian telecommunications research at HSBC Holdings Plc in Hong Kong. “There is still a big rural opportunity.”
Indonesia’s wireless subscriptions will top 100 percent of the population by 2015, meaning some users will have multiple devices, according to Boston Consulting. Grinnan advises buying PT Telekomunikasi Indonesia Tbk (TLKM), the nation’s largest phone company, and Tencent, Asia’s biggest Internet company by market value.
“On China, we remain very bullish,” Grinnan said. “The China Internet space is my favorite subsector in the whole Asia- Pacific region.”
Twenty percent of China’s population owns a personal computer, compared with 32 percent in Brazil and Russia and 90 percent in the U.S. and Japan, Boston Consulting said. Tens of millions of additional users get online at Internet cafes or shared home or work computers, giving China 384 million Internet users at the end of last year, almost triple the total in 2006, the report said.
Cultural Differences
Media and telecommunications companies seeking to tap growth in the emerging markets won’t be able to apply the same formula to each country, since Internet usage develops in different ways depending on culture, technology and the affordability of service, Michael said.
In India, only 7 percent of the population was using the Internet at the end of 2009, the lowest of the five countries in the report. Indian users spend half an hour online a day, and productivity functions such as e-mail and job-hunting are their most popular activities. That will change as media companies take advantage of the growth in users, which will reach 19 percent by 2015, Michael said.
Internet users in Brazil and Russia will surge by 2015 to 74 percent and 55 percent of the population from about one-third last year, according to the report. High-speed Internet connections will become more affordable for more of the population, and mobile-phone networks will increase their speeds to allow a wider variety of applications beyond text-messaging and limited Web access, Boston Consulting said. Source: Bloomberg
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