Altimo Index 4

Issue 4 (Q1-Q3, 2008)

Project Contributors:

London Business School
Cambridge University
New Economic School (Moscow)
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17 November 2008


Executive Summary

Altimo is proud to release the Fourth edition of the Altimo Index computed on the basis of the mobile industry data for Q1-Q3 2008.

Altimo Index was launched in March 2007 and is a product of joint efforts of professors from the three leading institutions of the world: Cambridge University, London Business School, and New Economic School (Moscow). Its objective is to produce a handy and practical measurement for national mobile telecoms markets according to their attractiveness for investors.

The Index is updated every six months, which allows us to build trends of development and to make reliable forecasts for the future of mobile industry in 81 markets world-wide.



  • Despite the global economical turmoil mobile operators have held up pretty well in Q1-Q3 2008, as wireless subscribers are still not willing to sacrifice mobile communications, which they view as an essential good.
  • Y2Y dynamics of Altimo Index shows that investors are negatively re-estimating potential attractiveness of the mobile industry in countries with weaker macroeconomic fundamentals, which are more prone to external factors.
  • Investment attractiveness of telecoms in the large well-regulated economies of "Old World" and resource-based economies of emerging markets is rising.

Altimo Index Q1-Q3 2008 key results:

Although the development of the telecom industry has not been radically influenced by global economic turmoil, there are obvious trends that suggest significant changes in its structure. The markets of pure economies, with large populations, low penetration rates, and minimal competition between mobile operators, are losing their investment attractiveness (e.g. Bangladesh, most of African countries). The credit crunch, weak economy, and high political and business risks make them as unattractive from investment perspective as small developed saturated markets (e.g. Eastern European countries). There is obvious shift in investor’s attention to large markets with either well-regulated economies (e.g. USA, Germany) or developing markets with strong macroeconomic fundamentals such as Russia, Indonesia, India, and Mexico. With regional trends becoming less important then infrastructural, during the global economics slowdown, the telecom industry will face significant differentiation between investment activities within the same geographical markets.



  • Indonesia, Philippines, and Vietnam are in Top 5 of Altimo Index due to an intensified growth in penetration and lucrative profit margins. These countries benefit from large populations and still have a strong potential to further expand client base in 2009-2011.
  • An investment attractiveness of well-regulated and large markets is increasing. The mobile markets of China and India remain in the Top 10 due to strong domestic demand staying firm despite the upcoming world’s economic recession. Both countries steadily increase the client base.
  • In India, a considerable increase in capital expenditures should improve and expand the existing infrastructure and contribute to further growth in penetration.
  • An attractiveness of risky investments at small or underdeveloped markets is falling due to a slowdown in prospective mobile spending and the impact of the credit crunch (e.g. Sri Lanka, Bangladesh, South Korea)


  • CIS reaffirms its position among the most attractive regions.
  • There is an increasing gap between rich, well-regulated markets (e.g. Russia), and the ones with weak macroeconomic and industry fundamentals (e.g. Ukraine’s rating significantly fall comparing to H2 2007 results).
  • Mobile spending and profit margins are robust in the natural resources exporting countries with large well-regulated telecom markets such as Russia, or Kazakhstan (Top 10 in Altimo Index).
  • Spending on value-added services and capital expenditures will fall due to the financial crisis, and this will have an effect on the weakest players in the region.

Eastern Europe

  • Eastern European markets became no doubt the outsider in the Altimo Index due to weak macroeconomic fundamentals and saturated mobile markets.
  • No single Eastern European Country in Top 30 of the Index and the total rating of the region is more then 15% lover comparing H2 2007 results.
  • Most Eastern European markets show negative Y2Y growth in Altimo Index, and the total decline of the region in Altimo index is 15% for the next six months. Also, Croatia, Romania, and Estonia are among the forecasted leaders of two year negative growth.

North America, Europe

  • The economic slowdown reaffirmed the attractiveness of telecom markets in strong economies (e.g. Germany is in top 20 of Altimo Index), reflecting a recent positive shift in investors’ perception of non-risky and less profitable markets.
  • Germany, France, and USA experienced Y2Y growth in investment attractiveness while the Italian telecom market fell 10% for the last six months. France is one of the Top 10 leaders of 2-year growth in Altimo Index while the developed but small markets of Ireland, Netherlands, and Denmark demonstrate negative dynamics for the same period.
  • The recession in the US and global economic slumps dampened demand for mobile communications, especially the value-added services, which support the flat saturation phase of developed mobile markets.

Middle East

  • Penetration growth should balance prospective decline in mobile spending at the Middle Eastern markets which remain attractive for telecom investors.
  • Iran, Egypt, and Turkey show Y2Y growth in Altimo Index; the first two are ranked top 10.
  • Middle East countries became more attractive among the underdeveloped markets and provide good investment opportunities for strong international telecom players.

Latin America

  • The mobile industry in Latin America has improved its standing. Penetration continues to grow fast, especially in Venezuela, and capital expenditures are rising in Brazil and Colombia. As a result, profit margins have risen from 1 to 3 percentage points in every country.
  • The mobile market in Mexico seems the most robust to the external developments due to oil exports, which should sustain mobile spending and profit margins. Venezuela and Mexico are among 10 leaders of 2 years growth in Altimo Index.
  • The region remains sensitive to the global economic slowdown, which may lead to deterioration of macroeconomic fundamentals and dampen demand on mobile services.


  • There are attractive investment opportunities in the oil exporting countries such as Algeria, Angola, and Nigeria that are in Altimo Index Top 20. These countries demonstrate significant Y2Y growth in Altimo Index
  • Most African mobile markets have poor short-term investment outlook due to their high sensitivity to external factors.
  • Potential investment boom is delayed at least until the end of the ongoing economic turmoil

Graph 1. Altimo Index Q1-Q3 2008 by country


Graph 2. Leaders of Altimo Index growth (Q1-Q3 2006 – Q1-Q3 2008)


Graph 3. Altimo Index 2002- Q1-Q3 2008 trends by region


Technical description of the Altimo Index

The index aggregates six country-specific factors (see Table 1) that determine the future profitability of a mobile company.

Table 1. Determinants of the Altimo Index

Variable Description Index weight
ARPCgrowth Difference between the predicted and actual log ARPC (average mobile spending per capita) 0.3
EBITDAm Earnings before interest,taxes,depreciation and amortization relative to revenue 0.3
PENgrowth Growth in the penetration rate over the last four quarters 0.1
CAPEX/REV Capital expenditures relative to revenue 0.1
POPULATION Population 0.1
GDP GDP per capita adjusted for the purchasing power parity 0.1

The average revenue per capita (ARPC) is measured as the total spending on mobile communication divided by the country’s population. Alternatively, it can be computed as the product of ARPU and penetration rate.

ARPCgrowth is derived from the cross-country regression of log ARPC on log GDP, which is re-estimated every time using the latest annual data. For example, in 2006, this regression is as follows:


where ei is the regression residual, which by construction has zero expectation and is orthogonal to log GDP. ARPCgrowth is the difference between the predicted value of log ARPC and its actual value (i.e., the negative of the residual in (1)).

1 Estimation is done using ordinary least squares (OLS) method. If t-statistics (below the coefficients) are in absolute value above 1.96, this implies that the respective coefficient is significant at 5% level. R2 is the percentage of the dependent variable’s variance explained by the independent variables.


The six variables that define a market’s attractiveness are then combined into a single index using user-defined weights. The aggregate index is computed as a simple linear combination of the standardized variables taken in logs (marked by underlining) using the weights described in the last column of Table 1:

Indexi = 0.3*ARPCgrowthi + 0.3*EBITDAmi + 0.1*PENgrowthi + 0.1*CAPEX/REVi + 0.1*POPULATIONi + 0.1*GDPi      (3)

The variables (in logs) are standardized by substracting the sample average and dividing by the sample standard deviation, e.g.:

GDPi = [log(GDPi) – mean(log(GDP))] / std(log(GDP))      (4)

By construction, the standardized variables are on average zero and have unit standard deviation.

This implies that each standardized variable and the aggregate index may be negative. Therefore, to make sure that the mobile development index takes only positive values, we compute Altimo Index as a linear function of Index:

Altimo Indexi = 0.5*(1 + Indexi)      (5)

The quarterly data on mobile companies are provided by Wireless Intelligence ( and mobile companies\’ websites. The annual measures are calculated as the average over the last four quarters with available data. The country-specific mobile industry measures such as ARPC and EBITDA margin are computed as weighted averages of the corresponding company data, with weights proportional to the company’s number of SIM-cards. The annual data on the country’s GDP per capita and population are taken from the World Bank (

The index is computed for countries that have no missing data on the five factors. If the country has no data on CAPEX/REV in the current year, we substitute the last-year value. In addition, we winsorized the most extreme values of CAPEX/REV and EBITDAm. If the observed CAPEX/REV was below 0 (above 0.8), it was replaced with 0 (0.8). Similarly, if the observed EBITDAm was negative, it was replaced with 0.

The index is calculated for eleven geographical regions: Africa, CIS, Eastern Europe, Eastern Asia, Latin America, Mideast, North America, Oceania, South Asia, South-Eastern Asia, and Western Europe. The regional index is computed as a weighted average of the respective country indices, with weights proportional to the number of SIM-cards in a given country.

The annual values of the index are available for individual countries as well as regions from 2004.