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.

February 24, 2011 19:08 telliott

It is often noted that people in emerging markets spend much greater portions of their incomes on communications than they do in developed countries. Low-income Indian mobile users we recently surveyed reported spending about 4% of monthly income on mobile service. People in the lowest household income bracket (up to US$750 per year) had mobile phones that cost on average 5.5% of their annual household income. In contrast, we estimate that the average US mobile user spends less than 0.4% of household income on a handset.

Findings like these are frequently offered in support of the idea that demand for mobile communications in developing countries may be less elastic than we think: the utility of mobile communication may be great enough that people will spend what seems at first blush like “too much.”

 But the demand for gaining access to communications by getting a handset is different from the demand for using it by making calls and sending texts.

 The hardly radical concept that charging less for communications services will increase usage is being tested in several places in Africa, notably Kenya, where new entrant Bharti Airtel has started a price war: 

  •   In August 2010 Airtel (then still Zain) cut tariffs in half, from 6 to 3 shillings (US$ 0.073 to US$ 0.037) per minute. Not content with that, in January of this year Airtel cut rates again, to 1 shilling for calls made between 6AM and 6PM. Airtel reports that MOU tripled after the first reduction.
  • Market leader Safaricom, whose Uwezo tariff is 2.24 shillings on-net/3.39 off-net*, is less than amused by this latest cut and has publicly complained about it. Telkom Orange has also filed a complaint with the Communications Commission of Kenya (CCK).
  • The CCK has blandly expressed a lack of concern, noting that “'We do not see the low tariffs having a negative impact to the economy.” Other parts of the government – particularly the revenue department, which saw airtime VAT collections drop by 37% in Q4 2010 – are not so blasé, and an inter-ministerial committee is being convened to study the impact of low tariffs.


But if inter-ministerial committees in Kenya move as slowly as those on the rest of the planet, Kenyan consumers should be able to enjoy current low rates for a good long time.



*Strategy Analytics’ Teligen group provides detailed tariff information on dozens of countries, including Kenya, South Africa, and Egypt.



Update 7 March 2011. At least one senior regulator, Dr Bitange Ndemo, who heads the Ministry of Information and Communications, has come out in favor of price floors.  On the other hand, Prime Minister Raila Odinga was quoted a couple of weeks ago saying he thought a price war would be beneficial.  As I say, this could take a while to sort out.



February 3, 2011 16:56 telliott

News reports this morning indicated that the Egyptian government used Vodafone Egypt’s network to send out unsigned and unattributed text messages urging support for the government. There is no information at this time about whether the Mobinil and Etisalat networks were used for a similar purpose.

Wired’s Danger Room characterizes this as a “hack” but Vodafone’s official statement, while strongly protesting the government’s actions, indicates that the Emergency Powers provisions of Egypt’s Telecoms Act oblige the mobile operators to send messages: “we do not have the ability to respond to the authorities on their content.” 

This raises a number of issues about the relationships between privately run communications networks and the national governments that license them.

  • When push comes to shove, private companies who want to stay in business in a country will do what the government tells them to do. To expect otherwise is naïve. However, between Push and Shove there is generally a large gray area – this is the area where RIM and various governments are finding themselves – and there can be an opportunity to work out compromises. The more symmetrical the power relationship, the more likely this is: yes, RIM needs the Indian government, but the Indian government also needs RIM.
  • For all the hyperventilating about “Twitter Revolutions” the Egyptian situation reminds us all that The Cloud rests firmly on physical infrastructure with more or less centralized points of control with plugs that can ultimately be pulled. Since Egypt’s mobile voice and data services were shut off by government command for varying periods of time, the demonstrations have relied on some very old technology: word of mouth, leaflets, and bullhorns. So if you’re planning political action, don’t put that photocopier up on eBay just yet.


Update 4 Feb 2011. France Telecom has indicated that Mobinil was required to send SMS to its customers by the Egyptian Army.