Emerging Markets Communications Strategies

Analyzes the issues facing existing and new players who are looking for a share of growing mobile markets in over 30 developing countries, including the developing regions of Asia and Africa.

January 27, 2010 11:01 telliott
Nokia announced at CES a million dollar prize for “a mobile product or service that raises the standard of living or enhances the lives of those in growth economies.” Now Nokia is probably second to none in the industry in taking the “bottom of the pyramid” seriously and respectfully. Nokia Life Tools, for example, seems to offer genuinely useful services to some of the world’s poorest people. So let’s assume the Venture Challenge produces something that improves lives. Great. The bottom of the pyramid can use the help, and if Nokia and the winner make money from helping, I’m fine with that. “Doing well by doing good” sometimes accurately describes a situation. But we shouldn’t assume that the best or only solution to a problem is a product or service – when quite coincidently we are in the business of selling products and services. As one of Nokia’s own anthropologists points out, “finding the right balance between aspects of the task that can be carried out by the user and that which can be delegated to the system” is critical, and not always easy. Take the first product idea that occurred to me. (Yes, the million bucks caught my attention.) A handset in the developing world is often shared by many people who chip in to purchase airtime collectively and use the phone individually. What about a simple accounting app to track individual usage and contributions, so that nobody gets cheated? It could be done and wouldn’t add much to BOM. But before I started drawing up detailed specs, it occurred to me that humans in small groups have been avoiding being cheated for longer than there have been mobile phones. Is my app necessary? Is it in fact potentially harmful, mechanizing a process that social mediation might handle better. What if it pitilessly announces that User X owes 80 naira ($.50), when Phone Manager Y would rather quietly cut him some slack, because he didn’t get work today? The app may still be a good idea – and feel free to pursue it, as I am keeping my day job – but the lesson I draw from my thought experiment is that the bottom of the pyramid contains a lot of shrewd consumers. Those who would do well by peddling good technology should consider they may be competing with zero-cost soft solutions. - Tom Elliott

January 11, 2010 22:01 David Kerr
Afte the inevitable wave of irrational exuberance has come the equally inevitable correction and flow of negative comments regarding Google Nexus One.
  • We are now seeing a huge rebound of criticisms about customer service, implementation and execution, moaning and complaining for existing t-mobile customers who have to pay more than a new customer to get a cool device and strong complaints from developers about availability of SDK and support.
  •  Naturally, the questions about Google's ability to execute on direct sales are being raised but these shall pass very quickly in our view.
Within our wireless team we had divergent opinions from network centric, application focussed and device driven analysts but ultimatlely we arrived at the following key perspectives:
  • Consensus is that Nexus will be successful by high end tier Smartphone levels (single digit volumes in 2010 but upside potential when it rolls out beyond TMO in US and to more open markets in Europe). Nexus is likely to sell more through operator channels than direct overall. Handset volume though is not the metric by which Google will measure Nexus success nor should operators as Nexus sales are a means to an end.  If Google is successful and Nexus ends up driving usage and value for operators, they will support it with subsidies.  Otherwise, operators can passively watch Google evolve its own-branded offering with little to lose. Tier One handset vendors (SAM, LG) may have the most to lose as Google’s marketing muscle and brand coupled with compelling devices and experiences will be a strong competitor for Operator slots, subsidy dollars.
  • Handset revenues and profits are a nice to have for Google. Key to their success and long term ambition is too boost the mobile browsing ecosystem. More open devices capable of browsing/search/maps from Google or others is positive for Google.  Google needed to update and get close to parity in terms of an engaging, fun, easy browsing UI with competitive links to key apps like maps, media etc and this device achieves that goal. Google is great at creating a buzz and the media is ready to talk about something other than Apple.
  • Google Nexus and indeed the whole Android approach is not about controlling/owning the user (contrast this with Apple). Google’s key metric is advertising revenue. Google's vision is well publicized: the browser is how they will deliver services, even on mobile, and apps are a stop-gap measure as far as Google's strategic vision is concerned. Google is banking on HTML 5 as their solution to fragmentation but we believe they are drinking too much of their own coolaid here and underestimating the importance of apps. Google’s key goal is to increase eyeballs and advertising.
  • Some key elements that have not been addressed which we believe are key in Google’s future evolution and will be key to watch relate to Voice and what Google does its Gizmo5 acquisition to push Google Voice into a full VoIP proposition. This is where Telcos should be most worried and where we have yet to see all the pieces positioned on the battlefiled.

January 7, 2010 21:01 telliott
Barely two months after the break-off with MTN, Bharti is on a shopping spree once again. This time, instead of looking for big buy outs like MTN, Bharti is aiming at a smaller target: a 70% stake in Warid Telecom, the #4 operator in Bangladesh, for US$ 300 million. Warid has around 2.7 million subscribers, which is roughly how many Bharti adds every month in India. So clearly the story here isn’t the impact on Bharti’s bottom line, but rather what the acquisition says about the company’s growth strategy.  After having its fingers burnt twice with MTN, (for details see our recent report “Bharti Airtel- Looking to Start Afresh”) Bharti has now realized that deals of that scale happen once in a blue moon. If it is not content to stay only in India – and why would it be, since it competes with 10 or 12 price-cutting rival for low margin business? – it makes more sense to concentrate on smaller markets with growth potential. Not bad thinking really from the management. I don’t think Bharti will benefit substantially in the near term by foraying into nearby markets like Sri Lanka and Bangladesh, but if nothing else it will give jitters to the other multinationals competing there, like Telenor (majority owner of Grameenphone), NTT DoCoMo, which just last year bought 30% of Aktel, and Axiata, which owns 85% of Dialog in Sri Lanka. After all, here is a well-funded operator with a lot of experience in low ARPU markets, hoping to push a low-ranking operator further up the chart. Bharti’s timing is good, too, beating out Viettel, which was also interested in Warid. So is it a shift in Bharti’s foreign (acquisition) policy to give up on megadeals? It’s not right to say that there is a shift in policy but it’s proper to say that Bharti has become much more aggressive and opportunistic in looking at easier deals to do if they make strategic sense. We also suspect other operators will focus more on incremental expansion. Orange just announced it was done with megadeals, and Bharti competitors like Telenor and Etisalat have always expanded their emerging market footprints slowly and steadily. Might a mature North American operator look at home market saturation and consider a small presence in Africa? Might Telefonica think outside Latin America and look to potentially game-changing investment in a #3 or #4 operator in Asia, like Sun Cellular in the Philippines? And where will Bharti turn next? We shouldn’t be surprised to hear about Bharti acquiring a stake in some smaller African country like Tanzania. So keep watching this space.   - Rahul Gupta