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.



April 7, 2010 16:04 rgupta


At last Bharti Airtel became the first Indian company to have presence in 18 countries. Bharti closed the Zain deal at $10.7 billion, which many equity analysts believe is an expensive deal, but Bharti’s African foray is a long term bet and only time will tell what future holds for Bharti in Africa. At the moment, Bharti is busy negotiating with Indian IT vendors for outsourcing African ‘non-core’ operations, something which it successfully did in the Indian market.


On the face of it, Bharti has got what it had been looking for years- presence in Africa, which it desperately needed, as its profit margins in India have been under pressure due to the massive domestic tariff war and the stiff competition provided by as many as 14-15 operators in each circle in India. Realizing the potential that African countries have, Bharti twice tried to acquire MTN but failed. Now, it has managed to get Zain in its kitty.


In January this year when Bharti acquired a majority stake in Bangladesh’s Warid, I wrote in my blog  ( http://blogs.strategyanalytics.com/gwp/?p=28 ) that Bharti would not benefit by foraying into small individual pockets like Sri Lanka and Bangladesh. Acquiring Warid immediately after the MTN deal was called off clearly showed that Bharti became much more aggressive in its acquisition strategy. At that time, Bharti was desperate and ambitious and looking for some big catch. I think Zain came at the right time as it fulfilled Bharti’s ambitions to become one of world’s largest operators. 

  Bharti’s new innings started on a good note as deal went through smoothly but challenges are ahead. EMCS benchmarked Zain in its report (http://www.strategyanalytics.com/default.aspx?mod=ReportAbstractViewer&a0=4837 ) and it was very clear that Zain’s performance was below average and ARPU and EBITDA were at or below regional average. It’s a challenge as well as an opportunity for Bharti.

We did a strategic assessment of Bharti ( http://www.strategyanalytics.com/default.aspx?mod=ReportAbstractViewer&a0=5166 ) and highlighted the fact that limited data service offerings is Bharti’s weakness. Hence Bharti will have to play the ‘voice’ game in African markets also and have to improve ARPU’s.


Challenges will always be there but Bharti’s presence itself in Africa is enough to give jitters to its competitors, especially MTN. After dealing with MTN, Bharti is very well aware of their operational strategies, which is an advantage to Bharti. Its competitors will feel the pinch with Bharti’s outsourcing and low-cost model. Don’t know how MTN will deal with it but Bharti has certainly made a right move.

  Rahul Gupta

March 5, 2010 04:03 rgupta


Once bitten, twice shy.  Bharti chairman Sunil Bharti Mittal doesn’t believe in such clichés.  Unperturbed by the MTN debacle, Bharti is once again trying its luck in African with Zain, which undoubtedly is easier to grab than MTN. It’s actually imperative for Bharti to go for multi-country operators as domestic market has become overcrowded with 8-10 operators in each circle and more to come. We had in fact recommended in a recent report (http://www.strategyanalytics.com/default.aspx?mod=PressReleaseViewer&a0=4844) that Bharti should continue to look beyond India.  A couple of months back the government owned operator BSNL too showed its interest in Zain . At that time we said that the government owned operators should focus on domestic operations and warned that foreign acquisitions could turn out to be a disaster for them. (http://www.strategyanalytics.com/default.aspx?mod=ReportAbstractViewer&a0=5097) Well, I don’t want to claim that Bharti and BSNL have gone by our recommendations but I certainly believe that they are taking the right approach: Bharti, by going aggressively for Zain and BSNL for withdrawing from it. Bharti has entered into an exclusive talk with Zain till March 25, but this US$ 10.7 billion deal is not as lucrative as it looks. There are some obvious hurdles, which I guess Bharti was expecting. A minority shareholder has emerged from nowhere to claim that Nigerian operations are not covered under this sale. Strive Masiyiwa, the CEO of Econet Wireless, which has a 5% stake in the Nigerian operations of Zain said that Zain gave an undertaking last year that it would not sell its Nigerian assets and he hopes that Zain has disclosed this to Bharti. If this claim holds up it is unlcear what Bharti will get from this deal. Nigerian operations are actually the main contributor to Zain’s overall revenue including Middle-East operations. In 2008, Zain generated fifth of its EBTIDA margins and 22% of its total sales from Nigeria. The other major headache is Zain’s license in Niger. The Niger regulator has reduced the duration of Zain’s license by five years citing poor quality of service, which essentially means Zain will have to wind up its Niger operations this year (Niger license was issued in 2000 for 15 years)or convince the regulator to revoke the decision .

But I hope that this deal will see the light at the end of the tunnel and won’t turn out to be a disaster like MTN for Bharti.

Rahul Gupta

October 26, 2009 22:10 telliott
The hyper-optimism of the African mobile “gold rush” seems to have calmed down. This is due partly to the global financial situation, but more to the realization that while Africa may in fact be the last place where lots of people don’t yet have mobile phones, that doesn’t mean it’s going to be easy or profitable to try to put them in their hands. This realization is inevitably leading to entrances and exits from the continent. A lot of press attention recently has been given to some of the more colorful of these possible re-alignments, notably the prospective sale of some or all of Zain to … well, to someone, and the twice-failed merger of MTN and Bharti. (On the former see “Zain: Leaving Africa So Soon?” and on the latter, see “MTN: Sticking to Africa After Failed Bharti Deal?” two recent publications from Strategy Analytics’ Emerging Markets Communications Strategies service.) Meantime, somewhat more quietly, Vodafone has established a strong presence in Africa, both directly and through its 65% interest in South Africa’s Vodacom. We would not be at all surprised if Vodafone in the next year or two takes advantage of a down market to acquire some new properties in Africa. Currently, the major regional market conspicuously absent from its portfolio is Nigeria, where Vodacom passed up an opportunity to enter the market in 2004. Vodafone CEO Vittorio Colao has recently expressed interest in Nigeria, describing it as “a prized and valuable market that we will be glad to operate in." In short, we should be looking for more red on the African map.
Tom Elliott