Strolling through his local convenience store, editor Michael Schwartz saw the headline on the latest issue of the Economist: The power of mobile money. He is glad the Economist is summarising what Developing Telecoms has been saying for the last four years...
“A special report on telecoms in emerging markets” is the sub-heading to one of the most recent front covers of the Economist. The actual heading is “The power of mobile money.” A 20-page supplement bringing home to a global circulation of 1.3 million each week many of the stunningly successful developments that Developing Telecoms has been writing about for the last four years is a real boost for the emerging markets.
The supplement even begins with one of the cliches of the new markets: a lady who allows her fellow-villagers to make phone calls from her handset for a small fee. Only this time it’s not Bangladesh, it’s Uganda. Micro-financing enabled the lady’s first handset; profit led to a second set, plus a beer-music-and-video shop, the fees for her children’s education fully paid off, and no more micro-financing loan.
The Economist is very keen to stress mobile’s triumph when compared to the emerging markets’ existing “bad roads, unreliable postal services, few trains and parlous landlines.” Just don’t get us started on the last of these...
Remember, too, the reports we have run about more mobile subscriptions meaning more GDP growth? That’s in the review as well. The Economist above all is blunt in its statistics: “In 2000 the developing countries accounted for around one-quarter of the world’s 700 million or so mobile phones. By the beginning of 2009 their share had grown to three-quarters of a total which by then had risen to over 4 billion.”
And by 2013 the total number of mobiles will be 6 billion according to the GSMA. With half of these new subscriptions going to China and India alone, there is a shift in gravity from developed to developing countries. The biggest changes of all are taking place in the poorest markets, Uganda again being cited.
The Economist identifies three trends reshaping the landscape:
- the home-grown mobile operator in the new areas which rival or exceed the industry’s Western incumbents. The Indian model is attracting low-spending subscribers who would not have been considered in earlier years;
- the emergence of the Chinese manufacturers ZTE and Huawei; and
- services beyond just voice and text: emerging markets have taken to health, money transfer and agricultural advice by mobile, as well as low-cost but high-quality Internet access via mobile networks and low-cost computers.
Eureka moments
The Economist devotes time (in an article aptly named Eureka moments) to one of the ironies of modern telecoms - that a device initially adopted by the richest of subscribers could help the poorest. Postpaid billing hindered and deterred those who paid the bills. Prepaid helped lay the foundations for the explosion in mobile growth which has made its presence felt in even the poorest nations.
Handset costs were a second problem. Low spending power on the part of would-be consumers concentrated the minds of producers. The Economist quotes prices at less than one-tenth of what they were in 1997: US$250 to US$20 - perhaps even the sub-US$30 handset we have reported on previously is now an out-dated concept.
The phone ladies make their appearance at this juncture, accompanied by useful statistics: the ladies own only 220,000 out of GrameenPhone’s 8.5 million customers but they account for one third of all calls precisely because of the economic environment of Bangladesh. The village-phone model is now flourishing in Cameroon, Indonesia, Rwanda and Uganda, while Afghanistan requires a period of just eight months for a micro-finance loan to be paid off. Even the note of warning that the village-phone model may yet be under threat is down to a good cause - lower handset costs mean more locals buying them and achieving their own telecoms independence.
Still in the Eureka moment section of the review, liberalisation is mentioned but only briefly -and this is surprising. There is only one comparison (Ethiopia with Somalia) where the statist Ethiopia achieves a teledensity of less than half that of war-torn Somalia, where over a dozen operators are present. There is also a note of cynicism: “even warlords want their phones to work...so they leave networks alone: Celtel launched its networks in Sierra Leone and DR Congo during civil wars and both prospered.”
By contrast, there is major coverage of the economic benefits of mobiles. Step forward, for example, Jussi Impio, Head of Nokia’s African research arm. He brings to our attention an entrepreneur who sells underwear and ice cream (an interesting combination as he puts it). Don’t knock it. The gentleman’s income soared 70% in the six months after he started using a mobile: stock handling and negotiating prices became so much more efficient with his mobile.
Then there is Afghanistan’s Roshan, the country’s largest private company, has a 25,00-strong network of agents who sell top-up vouchers.
And how about Kerala in Southern India, where fishermen with mobiles call several markets while at sea, thereby gauging demand and reducing waste and ultimately retail prices. Profits have increased by 8% and the mobiles are paying for themselves in two months.
And so it continues. Many case-studies which this website has reviewed in the last four years are cited in support of the new markets in telecoms.
And there is one final thought.
Cost of the Economist report as a paper reprint is US$7 plus whichever taxes and postal rates are applicable. And there is a minimum order of five copies.
Come on, Economist. How about an Internet-downloadable version which emerging subscribers can better afford? Or how about free copies to every politician and warlord in the emerging world to show them where their money and efforts should really be invested?
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