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.

November 14, 2012 16:10 telliott

Yeah, that’s what I thought: not a lot of hands in the air.

The auction, which opened on Monday 12 November – only to pause for the Diwali holiday on Tuesday – is putting up for bid 2G spectrum licenses that were invalidated earlier this year by the Supreme Court, which ruled that their original issuance in 2008 was “arbitrary and unconstitutional.” (So much so that the telecoms minister at the time, Andimuthu Raja, was arrested and jailed.)

Cancelling the licenses without compensation left a number of major international players, including Telenor, Etisalat, and Sistema with unpleasant alternatives: exit the market or pay again for something they thought they had already purchased. (See “Post Supreme Court verdict, it’s Catch 22 situation for foreign operators in India” and “Telenor, Etisalat, Sistema and India's License Debacle: A Harsh Reminder About Risk and Return “)

But the assumption was that at least the second auction of this 2G spectrum would be priced reasonably.

Well actually, not so much.

The Department of Telecoms has set the reserve price at roughly USD 2.6 billion for 5 MHz nationally. As of the end of Monday’s bidding, bids had crawled up to just over USD 300 million, and there were no bids in some circles, including Delhi and Mumbai.

There are wrinkles and subtleties to the story, no doubt, but one inescapable conclusion is that severe damage has been done to the brand image, if you will, of telecoms in India. However much the government may wish to reap large sums of money from telecoms providers, those providers are surely looking at years of contradictory and dilatory regulation and wondering just how much agony is worth enduring to compete in what is, at the end of the day, a very challenging low ARPU market. 

September 28, 2012 22:00 telliott

Apparently the Indian legal system is not the only one capable of throwing the occasional spanner in the telecommunications works. (See “Telenor, Etisalat, Sistema and India's License Debacle: A Harsh Reminder About Risk and Return.”)

In Indonesia, a long awaited auction of two additional channels of 2.1 GHz 3G spectrum was halted last week when state-controlled mobile operator Telkomsel was declared bankrupt and therefore ineligible to bid.

Telkomsel, which is by a considerable margin the market share leader in Indonesia, ended 2011 with assets of US$6.1 billion against liabilities of US$2.1 billion. It had a profit margin of 26% on revenues of US$5.1 billion.

We should all be so bankrupt.

Why is this apparently solvent and profitable behemoth bankrupt?  Because the Central Jakarta District Court says it is.

And this is not because the court has no basic accounting skills or because it is corrupt – it is actually one of the better regarded courts in Indonesia. It’s because Indonesian bankruptcy law says that a company can be declared bankrupt if it has at least two creditors and has an unsettled debt to at least one of them.

Needless to say, a company of Telkomsel’s size has a lot more than two creditors. In this case, the one with the unsettled debt is a distributor of prepaid cards, which says it is owed about US$ 557,000, a claim that Telkomsel disputes.

As a non-Indonesian and non-lawyer, I am not in good standing to say that this law seems odd, but I’m going to say it anyway: this law seems odd. Nevertheless, it is the law and the legal process must continue until things get sorted out, which could take months.

Meanwhile, a relatively minor commercial dispute is keeping the capacity-constrained 3G networks of Indonesia from getting a little bit of much-needed spectrum relief, frustrating consumers and depriving operators of revenue and the government of auction proceeds.

The impasse will be resolved, the spectrum will be auctioned, and life will go on. However, the lesson to be learned is that failing to reckon with all the possible sources of uncertainty in developing market telecommunications can be very costly. (See “Why Mongolia is a Better Bet than Algeria: Digital Investment Attractiveness Index Highlights Strengths and Weaknesses of Developing Countries”).

May 9, 2012 19:43 telliott


Let me make sure I’ve got this right: a Turkish mobile operator partly owned by Scandinavian and Russian interests is suing a South African operator in a US court over events alleged to have happened in Iran.

Yes, that seems to be correct. And suing for $4.2 billion, no less, which is more than a quarter of MTN’s 2011 revenues.

The background, in brief. In 2004 Turkcell received preliminary approval from the government of Iran to become the country’s second  mobile operator. Iran subsequently withdrew its approval from Turkcell and in 2005 awarded the franchise to MTN, in partnership with a business entity widely thought to have ties to the Iranian military. Turkcell now alleges that MTN got the license as a result of a rather spectacular program of bribery and influence peddling with such highlights as:

  • Orchestrating South Africa’s abstention on three UN votes on Iran’s nuclear program
  • Cash payoffs to Iranian and South African government officials amounting to some $600,000
  • A promise of helicopters and other South African military equipment, in contravention of the international arms embargo


Still, you may be asking what brings this to the U.S. District Court in the District of Columbia. If so, we’re glad you asked: it’s the “Alien Tort Statute”, which lay largely dormant for two centuries after George Washington signed it into law in 1789. It allows civil actions to be brought in US courts by a non-US citizen when a tort has been committed “in violation of the law of nations.”

It’s hard to see the District Court being particularly eager to open this can of worms; if nothing else, it has a pretty full docket of Americans suing Americans for things done in America. There’s a good chance it will decline to hear the case and Turkcell will be left without a venue.

But that may be cold comfort for MTN, which has already seen its stock price drop by 6% and its officers embarrassed by allegations of collaboration with the Iranian security apparatus in tracking down protesters through their call records. (In post-apartheid South Africa, this is a particularly serious accusation.)

  • Even if it were tempted to do so, MTN can’t afford to simply walk away from Iran. It’s too important: about 9% of MTN’s 2011 profits came from Iran, and it is expected to account for 20% of net new subscribers in 2012. 



See “Turkcell: Moving at a consistent pace in a challenging environment” and “MTN: Sticking to Africa after Failed Bharti Deal?” 




March 5, 2012 16:56 telliott

In the  talk at MWC in which he called for a $50 smartphone , Bharti Airtel Chairman Sunil Mittal also made an interesting observation about Airtel’s low price strategy in Africa: it isn’t working.

More precisely, what he said is that consumers haven’t responded to lower tariffs by talking more, which would at least sustain revenue. Instead,  he observed that “in Africa, subscribers use the money saved on lower-calling rates to buy food and not to talk more.”

The nerve! What’s the matter with these people? Buying food instead of talking on their phones about how hungry they are.

Seriously, Mittal’s remark seems like a staggeringly un-nuanced view of the African consumer, of a piece with his remark elsewhere in his speech that he was surprised to find there is no middle class in Africa.

That said, there undoubtedly are Africans for whom lower phone bills mean increased purchases of other - and more critical – goods.  But I think what we’re seeing here is the second edge of the dual edged sword that is demand inelasticity.

  • On the one hand, operators in countries like Angola have benefitted from the fact that high prices don’t seem to curtail demand: ARPU in Angola is about three times that of Ghana, but average minutes of use are actually higher. (See "Emerging Markets Mobile Subscriptions Forecast, 2010-2015: Sub-Saharan Africa")
  • On the other hand, as Airtel seems to be finding out, after a point cutting prices doesn't stimulate more use. 



Possibly Airtel’s African customers have said all they have to say.


PS. Mittal is also quoted as saying they were surprised at how expensive it is to operate in Africa. Sunil, man, give me a break! You mean nobody did any due diligence before writing that big check to Zain?

February 29, 2012 14:45 telliott

At MWC yesterday, several emerging market operators, led by keynoter Sunil Mittal of Bharti Airtel, cited a lack of affordable smartphones as the key obstacle to growing data services and – not coincidentally – ARPU. (GSMA covers the talks here.)

Mittal called for GSMA to mount a program aimed at producing a $50 smartphone in a year.

As goals go, this is less dramatic than President Kennedy’s 1961 challenge to put a man on the moon before the end of the decade. SA’s Wireless Smartphone Strategies service projects that just under 5% of global smartphones will ship this year with a wholesale ASP under $100, so much of the heavy lifting of meeting the $50 price point has already been done. (See “Global Smartphone Sales Forecast by Price-Tier: 2003 to 2016”.)

Still, it’s ambitious. But even more ambitious would be to offer a $50 smartphone that people in developing countries would actually want to buy and use. I hate to keep beating up on the $38 Aakash tablet – actually, that’s not true: I love beating up on it – but the lesson there is that meeting a price point without providing value for money is a bad idea.

Our recent interviews with potential tablet buyers in developing countries and before that with first-time phone users clearly demonstrated that low and middle income customers are willing to accept some compromises to meet their budgets, but not every compromise. A one megapixel cameraphone might be acceptable, but don’t try to foist off some old VGA sensors just to keep the BOM down. (See “Tablet Prospects in Developing Countries: The Voice of the Consumer” and “Voices of the Next Billion: Mobile Adoption at the "Bottom of the Pyramid")


For SA’s blogging from Barcelona, click here

February 21, 2012 18:54 telliott

In the past year a number of infrastructure sharing deals and outsourcing of network management from firms like Ericsson, Nokia Siemens Networks and Huawei have been announced across a wide spectrum of developing countries. For operators seeking to reduce expenditures as ARPUs relentlessly decline, these various techniques for cost sharing and organizational optimization can be very attractive. But is it also possible that such practices lower the barriers to entry or to expansion to the extent that competition in a given market is effectively enhanced?


See "Can Outsourcing, Infrastructure Sharing and Managed Services Lead to More Competition?"

February 21, 2012 02:33 rgupta


In emerging markets, some operators like Bharti Airtel and China Mobile launched their own app stores. This has given developers an opportunity to provide localized applications to operators. Some handset vendors like Nokia also focus a lot on localized app stores, but generally speaking, developers in emerging markets find operators easier to deal with as they understand local markets better than international vendors. However, in emerging markets operators have started focusing on app stores to boost their ARPUs.

Since smartphones are just 5-8% of the total installed base and less than 50% of the handsets have even GPRS capability, can app stores really be successful? 


See:  Localization is a Key to Success for App Stores in Emerging Markets



February 2, 2012 18:25 rgupta

The Supreme Court of India today cancelled 122 2G licenses that were granted in 2008 mostly to new players but also to Idea Cellular and Tata Teleservices. The court has given four months to the government to auction these licenses and till then the existing operators would continue to operate, so nothing will happen to the existing subscriber base. However, it would be a major setback for the foreign operators like Etisalat and Telenor, which have made substantial investment in passive infrastructure and subscriber acquisition. For a discussion of Telenor’s entry into India, see “Telenor's India venture: Is it a misadventure?

It will be very difficult for all the operators whose licenses have been cancelled to participate in the fresh auction. Most of these companies don’t have the financial muscle to participate in the auction as any fresh auction would cost them around US$ 1-2 billion. (This is a conservative estimate as for 3G licenses in 14 circles Bharti paid around US$ 3 billion)  Even those who would participate and win after paying such a huge price would find it difficult to compete with big players like Bharti Airtel and Vodafone. So in a nutshell the court verdict would eventually result in a few operators in each of the circles; tariffs will no longer be low as there won’t be any player which can afford to play the game based on cheap tariffs after paying huge auction money.

The government and the regulator are working on an exit policy for the operators but this would not solve the problem of the foreign players. Foreign players entered Indian market with the intention to compete in the Indian market and were here to stay and expand their businesses. The court verdict has put them in a Catch 22 situation. If they decide to exit, they will lose out a lot in terms of subscriber base and investment made, but if they don’t , they will have to shell out huge amounts to get these licenses back again. Essentially this would mean going back to the drawing board and chalking out a new strategy to get returns on the investments. At present the focus of these players is using cheaper tariffs to add new subscribers in smaller towns and villages, but the ROI demands of new license fees mean they would have to focus on high ARPU customers even though they don’t have 3G licenses, which is definitely an uphill task. 

- Rahul Gupta

See also, “Low Income Indian Mobile User Survey Analysis: Basic Services”  


January 26, 2012 22:25 telliott


There are many versions of what is going on with India’s much-heralded Aakash educational tablet, announced last fall with a price tag of $38 before taxes and support.

  • In one, which seems to have begun in a story in India Today a couple of weeks ago, the Aakash is a dismal failure, subject of so many user complaints that the sponsoring Ministry of Human Resource Development is contemplating refusing to pay DataWind, the Canadian manufacturer.
  • Not so, says Sunit Singh Tuli, CEO of DataWind in a story in “India RealTime”, a blog of the Indian Wall Street Journal. The project is on track, an improved version is in the works, and the customer is perfectly happy.
  • No so fast, shouts somewhat hysterical “True Indian,” posting an anonymous comment to the India RealTime story: “Suneet Singh Tuli is a known fraud & a liar! Check his track record and the state of his companies. The tablet – Aakash – does not work as has been known in various reports by independent agencies yet he says the tablet is approved by International agencies – WHICH ONE APPROVED IT?” [Disclaimer: Strategy Analytics is merely quoting this posting; we do not endorse its characterization of Mr. Tuli.]
  • To further roil the already murky waters, a story in Light Reading India last week says that IIT (Rajasthan), which was apparently involved in the procurement process, asked DataWind to implement  changes and improvements that would – according to DataWind – bring the cost up to something like $2,000. The story also claims that DataWind is discussing a deal with Reliance Industries to produce a sub-$100 commercial version of the Aakash.

This may be one of those things that an outsider has no hope of sorting out, but that may not even be the point. The key issue that the Aakash concept raises is whether there is some floor level of functionality that must be achieved for a device to be useful, even in rural Indian schools.

I personally believe there is, and if the Indian government wants my advice – which so far they have been limping along without – they’d be better off spending $38 x 100,000 on hiring more teachers, and wait until there are affordable tablets with great battery life, Wi-Fi and WLAN connectivity, and good screens.  (For my initial take on the Aakash, see “Aakash $38 Tablet is Not the Game Changer in Emerging Markets - But the Game will Change”.)


December 31, 2011 12:30 telliott

Few laws are more powerful than the law of unintended consequences. Change anything in a complex system – or even a relatively simple system – and something unexpected and possibly unwanted is almost bound to happen.

What could be better and more straightforward than giving solar chargers to village malaria workers in rural Cambodia? By keeping their phones charged they can send an SMS immediately on learning of a new case, rather than waiting a month or more for paper records to be collected centrally. This allows for the tracking of potential outbreaks in near real time, as well as better management of anti-malarial drug stocks.  

Prior to the solar chargers, the malaria workers, like the other villagers of Snay Anchit, got car batteries charged by the owner of a generator driven by an internal combustion engine, who was paid for the service. The car batteries charged phones and lit lamps in the village, which has no grid electricity.

The chargers, the result of a collaboration of the Cambodian government, the World Health Organization, and the Malaria Consortium .  are also sufficient to power a small lamp, bringing light to the malaria workers’ homes.

What’s not to like?

Substituting green energy for hydrocarbon-based power – not to mention forgoing lugging car batteries around – would seem like a great idea. Unless you’re the guy who owns the generator, who suddenly sees his income cut*. Thanks a lot, WHO. Or you’re a villager who isn’t a malaria worker – which is presumably most of them. You’ve got to keep on lugging your battery and paying to charge it while your neighbor enjoys a donated solar panel. And what happens when a malaria worker sets up as a competing charging station, selling excess capacity?

These are not necessarily reasons not to distribute solar chargers if it helps eradicate malaria. But they are reasons to consider carefully the ramifications of even the best sounding ideas.



* By how much is unclear. I have no hard data on what village phone chargers get for their services. One article on a solar program in Tanzania suggests a typical fee is about US$0.30 for a charge. Assuming $0.30 cents for one battery charge a week, which is probably conservative, the generator owner would lose $15 per year for every foregone customer. Cambodia’s per capita GDP is around $900, so this is non-trivial. More qualitatively, is it a great idea to undercut developing country entrepreneurs? 

For a view of some other NGO mobile activities in developing countries, see Second Screen Prospects in Developing Countries: The NGO Market