The telecoms industry in emerging European markets, the Middle East and Africa is set for massive growth over the next few years with capital investment likely to increase around 13 per cent annually at about $14 billion a year, said a study.

But operators are not controlling their cost base and are hitting cash flow problems because of later payments and need to cut procurement costs, according to research by global business advisory firm AlixPartners.

The study, the AlixPartners 2010 Global Telecommunications Outlook, included amongst global operators, an in-depth analysis of the top 13 regional players.

'Growth will come through a combination of mergers and acquisitions, cross border takeovers, organic development and a massive 20pc increase in the demand for data transmission over the next five years,' said AlixPartners in Dubai director Nnenna Ilomechina in an interview with the GDN.

'Our research found that while the regional operators have enjoyed healthy profits compared to the European and North American counterparts, these profits will continue to face downward pressure as markets open up to competition and consumer data demands increase, forcing further investments in infrastructure.

'The leading players will be those who move quickly to adopt operational improvement initiatives learned from the mature market operator experiences.'

She said that the regional industry would have to tackle problems of procurement and the cost of sales, the fact that major customers were now taking around 50 days rather than 30 days to pay two years ago and this was costing the regional industry around $250 million a day which could be used to move the business forward and provide working capital.

She added that while the cost of sales was rising by around 6.3pc a year in the region, the US had got this down to 20pc while Europe was actually reducing these costs.

'Figuring out a viable global structure in complex international markets is a challenge for many operators,' said AlixPartners in Dubai managing director Eric Benedict.

'This is compounded with the difficulties in finding and developing sufficient levels of management skills.

'Certain lessons, however, can be learned from telecom firms who have developed successful businesses across the globe and focused in on efficient structures in areas such as procurement, to show significant efficiencies across global operations,' he added.

'The demand for expanded and diversified services, such as data and video services, is set to increase significantly from roughly 5,000 terabytes in 2010 to 125,000 terabytes by the end of 2014 regionally,' said Ilomechina.

'This phenomenal growth in demand will provide revenue growth opportunities. However, the winners will be the operators with the most efficient operations and most effective investments in infrastructure under their belts.

'The challenge in the current climate will be within operations to release tied up cash to support new investments and take advantage of the revenue growth opportunities.'

AlixPartners identifies three key areas which could help operators in EMEA step up to meet the challenges ahead and sustain profitable growth - improvement in working capital management, advancing procurement practices to optimise operational and capital expenditures, and optimising synergies from mergers and acquisitions.-TradeArabia News Service