News, views and commentary from the telecoms sector across emerging markets and developing countries worldwide

Saturday, 14 February 2009

Reconciling the profit motive with the development of the economy and society in emering markets

On what is the eve of Mobile World Congress week, I am fielding friendly messages from people suggesting meetings there. For the first time in recent years I must decline these because I am using the short gap between my last job and the next one to catch up with relations in the Sunshine State of Florida. Sitting by the pool in the sunshine with a nice cold drink, I will really miss lugging a laptop and printed materials around airless meeting rooms and giant exhibition halls. No, really.

Earlier this week, I posted a link to this blog on the wall of a Facebook group set up by someone I met at last year's MWC and with whom I have corresponded on-and-off since then. The Social Mobile Group was set up by Ken Banks, the founder of FrontlineSMS and Ken specialises in the application of mobile technology for positive social and environmental change in developing countries, having lived and worked in countries including Kenya, Nigeria, South Africa, Mozambique, Cameroon, Zambia, Uganda and Zimbabwe.

In 2007 Ken hit the headlines when his text messaging application, FrontlineSMS, was used to help monitor the Nigerian Presidential elections, as discussed in a My Social Actions blog post by Peter Dietz. Since launch the software has been successfully implemented in countries including Indonesia, Zimbabwe, the Philippines and Pakistan.

With the free FrontlineSMS software, a laptop computer and a mobile phone, users can create a central communications hub for sending text messages to large groups of people. One of the most recent applications involves supporting a telemedicine initiative in Malawi.

I was briefly a 'rotating group officer' in Ken's Facebook group but I will admit to being rather tardy and irregular with my appointed task there, which was to add articles of possible interest to group members. I hope that giving Ken's remarkable efforts a plug here goes some way towards mitigating my ineffectiveness as a contributor to the group. That said, Ken's work is so often reported in the press these days (rightly so!) that a link from this blog is only a very small gesture in the context of all that coverage.

At last year's MWC, Ken stood out for me as the only person I met whose motivation for attending was not primarily commercial. That said, there does exist a strong relationship between commercial, for-profit telecoms enterprises and improvements in the the lives of people in developing countries. It has been argued, for example, that just by making connectivity available, mobile operators can provide a vital boost for growing economies.

An article carried last month by India's Economic Times is just one of the most recent examples of this view being discussed. It cites a yet-to-be-released study, 'The Impact of Mobile Phones,' conducted by the Indian Council for Research on International Economic Relations (ICRIER). The study is said to show that Indian states with 10% higher mobile phone penetration will enjoy a 1.2% higher annual average growth rate than those with a lower teledensity. The study flags up the uneven distribution of mobile and Internet services in India. According to the article, "Delhi's penetration rate is in excess of 100% but states such as Bihar, Orissa, Assam and Madhya Pradesh have not yet reached the critical 25% threshold. In addition, access to the Internet is only around 5% nationally and in some states, such as Bihar, the figure falls to 0.1%."

Studies of this sort are not new. In the winter of 2005 I was developing a conference, which I hosted in Dubai early the following year. The broad theme was around how operators could cost-effectively reconcile the profit motive with extending the availability of services to under-connected regions and population segments in developing countries. In the research phase I spoke with Dr. Leonard Waverman, who was then Professor and Chair of the Department of Economics at the London Business School. Dr. Waverman had contributed to a paper titled The Impact of Telecoms on Economic Growth in Developing Countries, which found that "a developing country that had an average of 10 more mobile phones per 100 population between 1996 and 2003 would have enjoyed per capita GDP growth that was 0.59 percent higher than an otherwise identical country."

This paper was included in a public policy document produced by Vodafone, on whose Advisory Board on the Social Importance of Mobile Dr. Waverman serves. The document, Africa: the Impact of Mobile Phones, includes opening remarks from Neil Gough, then the company's Director of International Institutions. Gough asserts that "while there is a lot of focus on low absolute rates of mobile penetration, this underestimates the real impact that mobile is having through the innovative and entrepreneurial ways in which the technology has been extended
beyond the model of individual ownership. Thousands of jobs have been created and some very successful indigenous companies have emerged." A point made by Gough to which I would like to pay particular attention is that "all of these results were achieved through enterprise rather than aid. A clear success story in commercial terms but one that also had a profound impact on the development of the economy and society" (my emphasis).

Neil Gough was another helpful research respondent as I worked to construct the agenda and round up speakers for the 2006 conference in Dubai. Gough, now in the related role of Director of Public Policy for Emerging Markets, was in the news in October last year when he articulated Vodafone's desire for a short delay in auction for 3G operating licenses in India, asking for more time in order to raise adequate funds in credit crunch conditions.

I remember a number of respondents I spoke with back in 2005-06 wanting to make the case for governments in emerging markets doing more to enable operators to run sustainable, profitable businesses. This is picked up again by the recent Economic Times article about the Indian market: "According to experts, there is a serious need for policy shift. Policy makers should consider restructuring the current caps on foreign investment." The article quotes Professor Rajat Kathuria, who led the research team behind the ICRIER report: "Government needs to re-look at the licensing policy. The tax implied is very high. Then there is USFO policy that needs to be restructured. The amount that they take away from the operators is very high. These changes could stimulate greater investment in Indian telecom industry, improve access to communication in poorer areas and ultimately lead to increased economic growth."

Looking at the whole mobile services ecosystem, it is not just operators that can make a positive impact on the lives of poor people in emerging markets. Another recent story from India concerns the Tamil Nadu Social Welfare Board, the Madras Christian Council of Social Service (MCCSS) and the Manpower Awareness Social Service (MASS) collaborating with handset vendors Nokia and Motorola and with motherboard manufacturer Foxconn to find alternative employment for one particular disadvantaged group.

My understanding is that members of India's transgender community routinely suffer from discrimination and are in most cases economically marginalised as a result. According to the article, about 100 members of this community will be trained for a month and will then assemble parts for these three companies. Nokia, Motorola and Foxconn have sub-contracted the assembly of spare parts to the MASS Trust. Poet Salma, Chairperson of the Tamil Nadu Social Welfare Board, said "This is a good opportunity for transgenders whose livelihood has for long depended on begging and commercial sex." The article also states that the MASS Trust has been acting as a facilitating agency to enable people with disabilities and those in rural areas to get jobs, adding that this is the first time transgenders have been included in the plan.

Working to have a positive impact in emerging markets is not, however, always without pitfalls. In September last year, Cellular News picked up the widely reported story of Bangladeshi cellco Grameenphone being accused of 'using child labour'. This is not the only bump in the road for the generally successful, market leading MNO. An October article on the Finance Asia website reported a "public tussle" the company's two shareholders Telenor and Grameen Telecom. Muhammad Yunus, the man behind the Grameen family of companies apparently claimed at an Oslo news conference in early September that "the aims of the two owners were not in accord", saying that while both Telenor and Grameen Telecom want Grameenphone to succeed, "the agenda of Telenor to maximise returns for the benefit of its owners is in conflict with the social and non-profit agenda of Grameen Telecom". It seems that Yunus cited the case of child labour being used at a workshop belonging to one of Grameenphone's suppliers, which he said helped bring the entire Grameen name into disrepute. Another issue for the Nobel Laureate seems to be the issue of ownership. According to the article, Yunus said that when Grameenphone was founded in 1996, Telenor agreed that in six years it would be majority-owned and run by Bangladeshis. A few days after Yunus made these comments, the article continues, a conciliatory press release was put out: "Both the shareholders of Grameenphone, Telenor and Grameen Telecom...have reiterated their continued commitment to the success of Grameenphone and to the ongoing IPO process." Even if the problems had been ironed out, the article asserts, such a high profile disagreement between the major shareholders will not have helped persuade international investors to participate in this frontier market.

I am warming to this theme. There is so much more to say about the good work done by telecoms companies in emerging markets - and about the challenges they face. I shall continue mulling over these issues in my next post. Until then, I'd just like to wish my former colleagues at Informa Telecoms & Media a safe trip to Barcelona. I know you will all work hard and wear out a lot of shoe leather in those exhibition halls, chaps (and chapesses). Enjoy. I'll raise a cold drink to you from my Florida retreat early next week.


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