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.

October 28, 2011 10:25 telliott

One of my favorite ever headlines from the technology press was in Wired almost a decade ago: “Charities Say No to Obsolete Crap.”

The story was about the reluctance of charitable organizations to take outdated computers, even as gifts, but the principle is broader than that: just because someone doesn’t have a lot of disposable income, it doesn’t mean they’ll accept any old junk as long as it’s free – or very cheap.

Nokia’s new line of Asha handsets, announced this week, shows a firm belief in this principle. The lowest end model in the line, the QWERTY Asha 200, has an estimated retail price of EUR 60 excluding taxes and subsidies, and the line extends to the Asha  303, with a capacitive touch screen and a price tag of EUR 115.

Clearly these aren’t the cheapest phone you can find in the developing world. They’re not even the cheapest Nokia phones. But that’s not their point. The Asha line (the name is derived from Hindi for “hope”) is built on the belief – which I share – that there are a lot of people in developing countries who are willing to stretch financially to get things that will make a genuine difference to their lives.

An objection that I’ve heard raised at this point goes something like “If you can make phone calls and send texts on a EUR 20 Shenzhen Special, what ‘genuine difference’ is that extra EUR 40 going to buy?”

To that objection, two rejoinders:

1)      From what I could tell, the Asha phones are solidly built. They will be making calls and sending texts long after cheaper phones have been recycled for parts.

2)      But rejoinder #1 is just economics: total cost of ownership. It may be true, but most people don’t really think that way. The rejoinder that is really at the heart of the business case for Asha is this: people who can find a way to afford a phone that feels better in the hand, that looks better when they show it to friends, that has a better speaker and better graphics, are going to feel that their money was well spent.

And who am I to say it wasn’t? Nobody in the North who spends the Apple premium to get an iPhone is doing so from some utilitarian calculus of price/performance over time. Why should we apply different standards to people in the South?


October 2, 2011 17:51 telliott

Strategy Analytics’ Teligen service recently highlighted the fact that Kenya has by far the lowest mobile rates in Africa, three times lower than neighboring Uganda.

I spent most of last week in Kenya conducting research. When I landed I bought what I thought was a modest amount of airtime from Safaricom – about US$14 – but I failed miserably to exhaust it, even making multiple calls back to the US. So yes, it really is pretty cheap to use a mobile phone in Kenya.

But that may be changing, at least a little. On September 30, having telegraphed the move for some time, Safaricom raised all its domestic voice tariffs by 1 shilling (KES) per minute (1 KES equals roughly 0.01 USD at the current exchange rate) to 4 KES on-net/5 KES off-net.

With market share just north of 70% and the admirably sticky M-PESA mobile funds transfer service – enthusiastically endorsed by 100% of the taxi drivers I spoke with – Safaricom can probably make this rate hike work.   

  •  The actions of other operators will be interesting to see. The local Essar operator, yu, recently launched free voice calling during daytime hours, so they don’t exactly appear to be in a revenue maximizing frame of mind.

Safaricom has been arguing for some time that rates are unsustainably low, and certainly insufficient to expand coverage further into rural areas, as the government would like it to do. But bringing the issue to a head right now is the soaring inflation in the Kenyan economy, as witnessed by the dramatic decline in the value of the shilling versus the US dollar.

The weakening shilling poses a number of problems for Kenyan mobile operators, not least of which is the impact on the price of diesel fuel for base station generators. A moderately sized generator could easily burn 100-150 litres of fuel a day, which means that the 26% decline in the value of the shilling since the beginning of the year adds a great deal to operators’ fuel bills, independently of movement in the global price of oil. 

  • Less than 20% of the Kenyan population has access to grid power, and those that do find that it is not always reliable – buildings seeking tenants routinely advertise their backup power capability. So it is no surprise that about a quarter of Safaricom’s base stations are entirely diesel powered, with others having diesel backup.

Even with Safaricom’s rate hike, Kenya will likely have the lowest costs on the continent for some time. But next time I might be able to burn through $14 in a week of international calling.

 

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See "Renewable Energy Fuels Rural Network Expansion in Pakistan and Elsewhere" November 2009