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 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.


October 31, 2010 15:10 telliott

The Legatum Center at MIT put on a conference last week on entrepreneurship in emerging markets. I’m not overly optimistic about the planet’s prospects, but I left more hopeful than I came: mix a lot of creative energy with good technology and a sense of purpose, and as a species we just might contrive to live long and prosper.

A case in point is Sproxil, a Nigerian start-up which presented its method for using scratch-off labels and SMS to ensure the legitimacy of a drug at the point of sale. Drug counterfeiting is a huge problem in the developing world. Given desperate need and loose regulatory oversight, it should not be surprising that there is a major business in supplying counterfeit or substandard drugs to pharmacies and other outlets in Asia and Africa.

  • Just how major is difficult to say, as with most illegal activities, but in 2009 Nigeria’s food and drug regulator estimated that 17% of the drugs sold in the country were counterfeit. A Nigerian audience member at Sproxil’s presentation gave anecdotal confirmation: in his section of Lagos, knowledgeable people get prescription drugs from only one pharmacy, preferring it even to hospital dispensaries, because it is known to deal only in legitimate product. 
  • Of course, the cost is not just monetary. Sproxil’s CEO, Ashifi Gogo, cited an International Policy Network estimate of 700,000 annual deaths due to counterfeit tuberculosis and malaria drugs.

Sproxil works with pharmaceutical manufacturers to place a unique identifying code in a scratch-off label on each package. At the point of purchase, the customer scratches off the label covering, sends a free SMS with the code to Sproxil, which checks the submitted code against its database and sends a return text indicating whether or not the drug is legitimate.

Be that as it may, the fact remains that a very simple mobile technology can now be used in a straightforward manner to address a serious problem that affects the well-being of millions. As I say, I’m marginally more hopeful.


October 12, 2010 04:10 David Kerr

sa photo dk

At CTIA in San Francisco last week, away from the fanfare around LTE rollouts and the next dozen tablet devices (ok, I exaggerate a little), Sprint had an announcement which will have significantly higher impact on mobile broadband adoption and revenues: Sprint ID. 

Sprint ID promises to up the ante on personalization and ease current feature phone users into the smart phone ranks.

Sprint ID offers instant personalization along key themes/packs where the operator has done the heavy lifting of identifying and group related applications of interest to different persona from wallpaper to ringtones to apps. While the one click marketing line is not quite matched by reality given pesky little things like accepting terms and conditions etc, Sprint ID is a significant breakthrough in my opinion as:

  • it broadens the market appeal of Smart phones to current feature phones users with a simple to understand offer in a range of device price points including the critical $49 and $99 levels.
  • it tackles one of the biggest weakness of all app stores: discoverability of content and simple personalization.

Three handsets were featured at launch of Sprint ID: Sanyo Zio™, Samsung Transform™, LG Optimus S™. These three devices cover key price points in the Sprint portfolio and provide customers with a range of form factors, industrial design and brand to meet their tastes. Interesting to note that both LG and Sanyo retain the right to put their own packs on their handsets as well. This is a big win for LG as its Optimus S™ will be available for under $50 with contract giving the vendor a much needed boost in the smartphone space. Samsung meanwhile continues to shine at Sprint occupying the lucrative $149 spot with its Transform™. All three devices of course require a Sprint Everything Data plan.

However, for me the more significant impact is that operators and oems are finally realizing that customers don’t buy phones or services or apps… what they really want are positive experiences

… be that socially connected, sports, education, health and fitness, fashion etc. This is something that our User Experience team has been evangelizing for the last 7+ years. Whether its 80k apps on Android or 250k on Apple store or 10K on RIM, one common experience has been exasperation at the huge waste of time, energy and emotions in finding ANYTHING!!! Which happens first, eyes glazing over or fingers cramping with so much scrolling? Either way the net result is often a disappointing experience which the early smart phone coolaid drinkers have learned to live with.

Newbies to the smart phone arena, will certainly have less tolerance and spend less time to personalize their device and enable applications. Sprint ID is well tailored to the next wave who are taking tentative steps into the smart phone space

 

David Kerr

dkerr@strategyanalytics.com


September 23, 2010 22:09 David Kerr

September 23, 2010

While there has understandably been a lot of attention given to consumer apps post iPhone and the plethora of application stores that have emerged, business mobility and enterprise mobility offer huge potential from horizontal to vertical applications and from smartphones to iPads and tablets to superphones.

In both NA and W. Europe, business customers account for under 30% of users but are the dominant streams of both revenue and profits for operators. On the device side, premium priced models from RIM, Nokia, and Microsoft Mobile licensees as well as the iPhone have long been key drivers of profits in a market where low single digit margins are the norm.  The explosion of smartphone choices has led to the battle ground moving beyond the corner office, to other executive and now increasingly the midlevel manager.

With a new range of devices competing for space in the corporate market, the issue of corporate versus individual liable has become an increasing priority for IT decision makers. Add on the complexity of managing an expanding list of OS (Android, iPhone, Windows Mobile, Symbian, Palm, MeeGo, Bada from Samsung) and the growing importance of mobile portable devices with access behind the firewall and one can already feel a corporate migraine forming…. And that’s before we even discuss device management, mobility policy, device retirement etc. etc.

I am looking forward to CTIA Fall (San Francisco October 5-7) and in particular to the Enterprise Mobility Boot Camp moderated by Philippe Winthrop of the Enterprise Mobility Foundation. The boot camp spread over two days will address many of the issue listed above with our own Andy Brown featured in an analyst roundtable on October 6th.  I look forward to meeting you there. Don’t hesitate to contact Philippe for passes to this the deep dive enterprise mobility event.

David Kerr

David Kerr
Snr. VP - Global Wireless Practice
Tel: +1 617 614 0720
Mob: +1 262 271 8974


August 25, 2010 21:08 telliott

Stay in any business long enough, particularly a growing one, and it’s easy to start thinking that your product or service is the key to human happiness. Automobiles in the early days were going to bring about freedom and the perfection of democracy. Pesticides would eradicate global hunger. Electricity from nuclear power was going to be too cheap to meter.

And let’s face it, we in mobile communications are the same way. Just put enough phones in enough hands and markets will become efficient, families will stay connected, dictatorships will topple, and the Age of Aquarius will finally dawn.

Looking at the developing world it is particularly easy to fall into this mindset: having a mobile phone really can make a tremendous difference in quality of life. But hold on a minute, says ”Mobile Phones and Economic Development in Africa,” a forthcoming study by economists Jenny Aker of Tufts and Isaac Mbiti of Southern Methodist University. Before we assume that m-development, m-health, m-whatever is the only sensible thing to promote, let’s take a cold-eyed look at the evidence.

  • Studies that have produced much cited relationships between mobile penetration and GDP growth – e.g. a 10% increase in mobile penetration is associated with a 0.6% increase in growth rate – do not credibly establish that mobile penetration causes GDP growth, only that the two are associated. They may both be results of some other cause, or the relationship could be reversed: make a country richer and more people are likely to have mobile phones.
  • The use of mobile phones by NGOs to distribute cash is appealing and reduces the NGO’s overhead, but may transfer risk and cost to the beneficiary by forcing them to travel to a retail agent to get their cash.
  •  According to a 2009 FinAcess study they cite, M-Pesa does not primarily serve the unbanked, as 72% of users have a bank account.

Aker and Mbiti are certainly not arguing against encouraging mobile phone use in Africa, only against the idea that it is “the ‘silver bullet’ for development in sub-Saharan Africa.” It doesn’t benefit a millet farmer much to know the price of grain in a market to which there is no decent road.


July 28, 2010 02:07 telliott

For some time now, a dominant cultural meme – a word I use experimentally and won’t repeat, since it evoked a fierce gag reflex as I typed it – holds that there will be more of everything in the future, especially people, and that stuff will cost more, unless it’s digital hardware in which case it will cost less and there will be way more of it.

Real estate crashes and the more serious specter of deflation suggest that in fact stuff may not always cost more. And according to UN demographers, while global population will continue to rise for some time, there are places where population is shrinking.

This sounds like good news, considering global warming etc., but it may not be, if your business depends on selling more stuff next year than you did this year. Fewer customers just makes your job harder. And if that shrinking customer base already has a lot of your stuff, it’s harder still.

Consider the situation in the developing world, as shown in the chart below, which plots mobile subscription penetration against projected population growth for 135 countries. (I ran out of label space in the middle; email me if you’re curious and I’ll send you the whole list.) pop-vs-pen.jpg

Rapidly growing population and low mobile penetration (lower right of the chart) does not necessarily mean a country is a terrific opportunity. Afghanistan, for example, has some issues as a business environment. But the scenario of high mobile penetration and shrinking population (upper left) raises a unique set of challenges to growth.

Clearly, penetration on a user basis in these countries is lower than 100%; subscription penetration is particularly high in Russia and elsewhere because of multiple SIM and multiple device ownership. So it is not the case that everybody who wants a mobile phone already has one. But an awful lot of them do. And a shrinking population means fewer first time buyers are entering the market.

Clearly, the focus for an operator in a developing country with high penetration and low or negative population growth needs to be different than in the more usual case of emerging markets with rapid population growth and low penetration. Loyalty and churn reduction become critical, as does revenue enhancement through incremental service offerings, and in particular, cold-eyed and ruthless cost justification of network expansion. If you build it, they won’t come if they’re just not there.


June 8, 2010 17:06 rgupta

Realizing the potential emerging markets have, Research in Motion (RIM) has upped its ante and is going full hog in the Chinese market, a market which has been a strong hold of Chinese handset manufacturers.  China Mobile launched Blackberry three years back, and now China Telecom is going to launch Blackberry handsets on its EVDO network. Not only this, RIM’s venture capital arm, Blackberry Partners Fund, which invests in Blackberry applications, has joined hands with China Broadband Capital partners to set-up a US$ 100 million fund for mobile internet and development of Chinese mobile applications in China.  Content localization or developing applications in local language is nothing new for established handset vendors. Nokia’s low cost handsets are available in 11 Indian languages and are offering Chinese content on its devices in China as well. But what’s more important is targeting the right audience at the right time and on the right platform.  Now that two major mobile operators are launching Blackberry on their networks, covering most of the Chinese population, RIM has made the right move to take advantage of the situation. At present Blackberry handsets have been mainly used by high end executives due to high device cost. Applications like email etc are accessed in English, which is not a preferred language in China.   Now that RIM’s focus is on consumer applications and 3G subscribers has been increasing every passing day, Chinese applications on Blackberry devices could make a killing in the Chinese market. It’s not rare for Chinese subscribers to have Chinese applications on mobile devices but it certainly makes a difference if a subscriber finds similar applications on Blackberry devices.  But just offering Chinese applications on the Blackberry may not be enough to ensure RIM’s success. Chinese handset vendors and other vendors like Nokia and Samsung are already offering such applications on their devices. RIM will have to differentiate itself from the already crowded Chinese market by launching some niche applications targeted at different consumer segments. But whether it will be able to make a difference in China, only time will tell.

Rahul Gupta

June 4, 2010 20:06 David Kerr
sa photo dk

 

 

 

The inevitable movement to tiered pricing which started with Verizon Wireless acknowledging its plans to do so for LTE and has been accelerated with the much anticipated data plan announcement by AT&T this week.  So, what next?

    • Will we see significant priced based competition for mobile data among the top US operators?
    • Will we see significant movement in share of adds for AT&T as iPhone wannabees are tempted by a plan of only $15?
    • What impact will lower data plans for smartphones have on AT&T’s Quick Messaging Devices and Verizon Wireless equivalent?
    • How long before we see family data plans and shared usage across multiple devices?

The move by AT&T is a smart play to extend the smartphone momentum as the low hanging fruit of Apple aficionados, multimedia techies and style seekers willing to pay top dollar has been significantly penetrated.

There is no doubt that the iPhone remains the coolest device on the marketplace and the end to end user experience remains easily the best in class. So, reducing the TCO to attract the next 20% of customers to a paid data plans while educating customers about data usage levels and managing the traffic risk is very smart business in my opinion.

The lower price points will help AT&T maintain its current leading share of smartphone users and may be attractive to casual social networkers

  • Although the 50 photos allowance is not exactly generous! For casual messenger, and social network status checking and moderate email the new DataPlus plan is quite attractive overall and will likely attract a portion of customers who would otherwise opt for a Quick Messaging Device from AT&T or a competitive offering from Verizon Wireless.

I do expect to see some modest price competition among the big operators

  • with T-Mobile most likely to drive prices lower given their need for scale and to protect their predominantly youth centric customer base. but also expect an increasingly strong Verizon Wireless handset line up to compete strongly.

The impact on Quick Messaging Devices is in my opinion likely to be modest

  • as a traditional qwerty remains overwhelmingly the input of choice for heavy messengers in the US although there is definitely room for lowering the $10 mandatory data plan on featurephones

Family data plans and data plans which allow access across multiple devices are in the pipeline

  • but will probably not make an appearance until 2012+ as part of LTE offerings.

From a device vendor perspective, the move to lower priced iPhone plans is likely to put further pressure on vendors like LG who have yet to make a credible offer in this space as well as RIM who will find more competition in the consumer space.

The lower pricing on data plans will be music to the ears of ambitious new entrants like Huawei, ZTE who plan to bring mass market priced devices to the US & Europe. The lower TCO of smartphones as a result of downward pressure on service prices boost their addressable market.


May 26, 2010 04:05 telliott
We recently did some interesting interviews with low-income mobile phone users in Manila. (See “Voices of the Next Billion: Initial Input from First Time Mobile Phone Owners in the Philippines.”) They were not the poorest of Manila’s poor, but they were poor enough, some with stories that were difficult to hear, like Edward, who took some architecture courses but has a part time job on a cleaning crew at a McDonald’s. He missed a call from a better job because nobody was home to answer the landline. He got a mobile phone after that, but the job won’t be calling him back – there’s too many others in line. Or Jennalyn, who makes $65 a month as a nanny, and whose husband had to go back to the family farm because he couldn’t get work in Manila. Obviously, we didn’t do the research to learn if being poor in Manila is a hard life – we pretty much knew that going in. (Although having names and faces and stories does take it out of the abstract a little.) A research goal we did have was to find out what people in constrained economic circumstances want in a mobile phone. There we did encounter unexpected things – not “rethink-your-entire-worldview” unexpected, but thought-provoking nonetheless. For example, not everybody wants a cameraphone, but for those who do, VGA resolution is not enough. Several people said a camera was a key factor in their next phone decision – but at least a megapixel. (This included non-cameraphone owners as well as those whose current phone has a VGA camera. Few respondents had digital cameras, so the cameraphone is their sole image recording device.)
  •  Edward, for example, wants to be able to take printable pictures of his 5 month old baby.
  • ­ Alvin, an unemployed 27 year old, has a used Nokia 3200 but would like to upgrade to a used E71, primarily for the camera. He wants to be able to upload pictures onto the Facebook account he maintains at Internet cafes.
I’m not arguing on the basis of a small sample that megapixel-plus cameras are the key to the low-income market. But I am suggesting that bare minimum functionality may be where planning offerings for the bottom of the pyramid should start – but it should definitely not be where it stops. 3G phones, while currently a bit of a stretch for this segment, ought to be within a reasonable planning horizon.

March 30, 2010 00:03 David Kerr

sa photo dk Returning from CTIA in Las Vegas last week and with only 2 days before going off on vacation to Florida, I found myself reflecting that two of the most interesting meetings I had at the show were with mobile operators.

During CTIA I spent some time with AT&T emerging devices and T-Mobile M2M teams and was impressed with how both these units had managed to cut (or at least untie) the cord to the mother ship and avoid having innovation stifled by the Borg up at Corporate.

    • AT&T’s efforts to encourage a broad range of new applications and devices has definitely paid dividends with Mr. Lurie and his team adding an impressive 1M users in Q409 as a result of new device categories (mostly PND and EBR).
    • T-Mobile revealed a somewhat unheralded pedigree in M2M.

Partnership is the order of the day.

AT&T highlighted partner applications ranging from location enabled pet collars (Apisphere) to glow cap bottles to aid compliance with medication schedules (Vitality) to a very cool new tablet from Openpeak which is very different to the announced but apparently supply side challenged iPad.  Verizon Wireless and Sprint are of course also praying at the alter of open development but perhaps with less public presence.

When I think of enterprise mobility, AT&T and Verizon Wireless are top of mind but T-Mobile has in fact quietly been developing strong competency in the M2M space over the last 7-8 years.

T-Mobile offers four different SIM form factors to suit specific applications and have enjoyed triple digit growth for the last four years. T-Mobile US has quietly activated “hundreds” of different device types on its network with only a handful of devices being rejected or pulled due to network unfriendly characteristics. These devices span Telematics, Connected Energy, Telemedicine and several other applications.

So what is the common DNA of two very different operators that has allowed them to innovate and focus on new opportunities? Separation and operational autonomy to facilitate and open funnel approach to partners and speed of execution not normally associated with US carriers.

In the case of AT&T, the Emerging Devices group was chartered with developing a new space and freed from the legacy of voice & data consumer tariffs and prepaid/postpaid categories which just don’t cut it in the new connected reality where users will have multiple devices connected but used in very different ways. Mr. Lurie and his team have been able to streamline device certification and experiment across the spectrum of business models for new connected applications.

For T-Mobile, speed of certification (days not months) and the independence of being a self-contained unit (own engineers, own sales although linked to broader enterprise group) reporting to Finance & Strategy have allowed them to pursue their “easiest to do business with” approach to the M2M markets.

So, the takeaway? Innovation is alive and well at US operators but separation from the collective corporate mind is essential.

David Kerr