1.3 is. 1.5 Impact on Demand The financial crisis

1.3
The economic crisis

The financial crisis in 2008 has been the worst financial crisis
since the Great Depression in the 1930s. The crisis cannot be traced to a
single event, it was a result of a number of events. The beginning of the crisis
was caused by the exorbitant lending of subprime mortgages in the US market (ITU, 2009).
As consequence, investors lost confidence in the mortgage and loan markets.
This developed into a global banking crisis with the bankruptcy of the
investment bank Lehman Brothers. Due to the close interaction of banks across
the world the crisis was followed by a decline of the international economy and
a global liquidity crisis. A well representing, often
used symbolism for the economic crisis is a growing soap bell which pops after
a while when it has grown too big.

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1.4
The impact on ICT

Due to the financial crisis, the industry has
experienced decreasing demand, operational cutbacks and reduced investment (ITU,
2009). But in comparison to most other industries, the area of mobile
communications has been proving to be more flexible. In the financial crisis of
2008 the ICT sector has had a role as both villain and hero (ITU, 2009). On the
one hand, it was acting as a leading indicator of decline while on the other
hand also proving to be an important power assisting the recovery of the
economy.

In 2009 the typical American wireless user
interacts with wireless technology via a cellular telephone and about 90% of
U.S. citizens use a mobile device actively (ITU, 2009). In contrast to this, Greece
is experiencing a mobile penetration rate of larger than 200% (ITU, 2009). This
means that on average every Greek inhabitant has two devices connected to a
mobile network. These statistics show how explosive the expenditure of the
mobile phone market is.

 

1.5
Impact on Demand

The financial crisis had a huge impact on most industries all over
the worlds. In contrast to that, the mobile market in developing countries
remained growing. For example, the two largest developing countries China and
India. China mobile, the world’s largest mobile operator added 74 million
additional mobile users in the year through October 2008 (ITU, 2009).
 In India, the world’s second largest market 10.4 million additional
mobile subscriber were listed in October 2008 (ITU, 2009). In Brazil, the number of
subscribers rose by 4 million in October 2008 which is more than twice as much
as in October 2007(ITU,
2009). As these data show the mobile growth of
developing countries has been weakly influenced by the financial crisis and
even further increased after the crisis. On the other hand, the general
demand in most industries decreased because of less income per head. Less
expensive purchases were done in mobile phones and operators. This was also
partly due to the fact that people did not want to freeze expensive monthly
deals for 2 years. This indirectly stimulated the economic crisis as it is a
down warding spiral.

 

1.6
Impact on supply

The Supply of the mobile industry is mainly influenced by the
expenditure and investments in telecommunication networks. Due to the financial
crisis, the capital expenditures decreased. These expenditure cuts mainly
influenced developed countries that triggered the crisis. In contrast to
developed countries
the developing counties, also called “the home
of the next billion subscribers” (ITU,
2009), have the potential of untapped demand.
Therefore, it is very unlikely that investors will cut investments in markets
with such high future potential (ITU,
2009).