Ad-driven MVNO concept ailing in Europe but set to succeed in India?

In March, I chewed over the question of whether India or one or more markets in Africa would be the most likely setting for genuinely successful MVNOs to gain traction. I came down on the side of India, notwithstanding the fact that earlier the same month I had commented briefly on regulatory wrangles which looked set to frustrate certain business models for prospective MVNOs in the country.

One possible new entrant in India, according to a Cellular News story today, could be Blyk. For anyone not familiar with this company, Blyk, positioned by its developers as a "totally new proposition", has been making headlines (in Europe at least) and, as I have observed, stimulating debate at telecoms industry conferences since its inception in 2007.

The Blyk business model has been built on a belief that young people (the offering has been targeted exclusively at 16-24 year olds) love to communicate, would like to do so without eating into their disposable income and can thus be persuaded to accept a certain amount of advertising being sent to their mobile devices in exchange for a free service.

The Finnish founders of Blyk, Pekka Ala-Pietilä and Antti Öhrling, contend that their offering to advertisers is also very compelling: "Blyk allows advertisers to reach young people using the only channel that they carry with them everywhere," says the blurb on Blyk's corporate website. Advertisers, runs the blurb, "can engage them in a dialogue, one that they are uniquely ready for, because they’ve opted in." The ad-driven MVNO says its advertising products are "based on the most dominant pattern of mobile behaviour among young consumers: getting a message and responding to it" so that "its offerings create awareness, build relationships and drive sales.

Will this resonate in India? Possibly, but there might be a number of questions asked. The Cellular News story quotes Sanjay Behl, head of branding and marketing operations at cellco Reliance Communications, who has expressed concerns about whether consumers would find the adverts too intrusive, while declining to confirm or deny if the company is in talks with the MVNO.

This kind of response is not new for Blyk. When the UK press covered the launch of the new service back in 2007, the main talking point seemed to be to what degree consumers might find mobile advertising irritating. The Guardian newspaper, for example, warned that advertisers would "have to be careful not to annoy their new users with the mobile equivalent of spam email."

Pekka Ala-Pietilä, once President of Nokia, responded to this challenge in the same article: "We will collect the profiles of the young consumers, or members as we call them, who use the service to find out their areas of interest," he said, adding that "by understanding the preferences of our customers, advertisers will be able to create very relevant campaigns."

It now seems that this model is indeed set to be brought to the Indian market. According to a recent MocoNews article, senior level recruitment is already underway and Blyk spokesperson Ann Sarimo has confirmed that the MVNO does indeed plan on doing business in the country.

How successful, then, has Blyk been in Europe? Well, while the company can claim to have had some impact in the UK markets, recent reports have focused on a scaling down of its ambitions to offer similar services on the same basis elsewhere.

Caroline Gabriel, for example, writing for Rethink Wireless, suggests that the Blyk variation on more standard MVNO business models "is now showing signs of strain", with the company "reported to be scaling back its efforts."

Gabriel talks in terms of Blyk's UK operation "only" having acquired about 200,000 subscribers, which, in her view, "suggests the model may be proving too limited to support Blyk's ambitions and those of its backers, especially at a time of advertising downturn." In Gabriel's article, Pekka Ala-Pietilä is said to have admitted that the economic crisis has forced the company to cut costs and streamline its operation, despite having raised an additional USD 51 million to support a planned expansion into the European mainland. Gabriel reports that even when these funds were raised, Blyk was indicating that it favoured a switch away from running full-blown MVNOs of its own, in favour of a new marketing strategy based on partnering with major MNOs and media companies. Gabriel suggests that the most likely route forward now is for Blyk to work with larger cellcos, perhaps to run an ad-supported strand of their business under the MNOs' brands rather than Blyk's own.

Around the same time, Mobile Today echoed Caroline Gabriel's thoughts, contending that Blyk "has declared it will freeze its expansion plans into Europe." This article, too, insists that "modest consumer take-up" and "investor reluctance" are the factors which have "grounded" the project. Blyk co-founder Antti Öhrling, now the CEO of the UK operation, is quoted as saying that the UK would be used as a 'proof of concept', i.e. a case study for selling the mobile advertising concept to other markets.

I had to smile when this article brought up comments made by John Strand of Strand Consult. Strand admits in his own bio that "being honest - and giving his honest opinion on current issues in the mobile industry has become [his] trademark - even when it means being controversial or treading on some toes." I have seen this at first hand at one or two conferences and remember sharing a joke with a colleague who is still in the telecoms conference production business, as I was for a good few years. We agreed that nothing was surer to rattle an august line-up of big name speakers from major telecoms businesses than a few particularly piercing questions from Mr. Strand. We couldn't decide if this was a good or bad thing for a conference organiser - good in terms of livening things up a bit, or bad in terms of scaring top-name speakers away from future iterations of an event.

The Mobile Today article reminded me of the comments Strand made when Blyk was first launched. Adopting his trademark style, Strand remarked then that he "would rather put his money on a lottery ticket." Last month, commenting on the reported scaling back of Blyk's ambitions, he said "it is a difficult proposition because you need a hell of a lot of advertising revenue to mae it work." Tell it like it is, John.

In the context of what can hardly be construed as good news about Blyk in its native Europe, it will be interesting to see how the mooted move into India plays out. Perhaps the sheer scale of the market there will enable the business model to prevail more successfully. That said, I have noted here before that while India's low overall mobile penetration and vast population appear to offer rich opportunities, the market is already so competitive that players such as BSNL and Bharti Airtel are increasingly looking to foreign adventures for further growth prospects, the latter having gained much recent coverage concerning a hoped-for link up with giant pan-African cellco MTN. So let's see if this competitive market does indeed offer a decent opportunity for Blyk and for any other innovative MVNO propositions.

Ad-driven MVNO concept ailing in Europe but set to succeed in India?

Nokia's cheapest emerging markets phone vs. El Vergatario

Emerging markets winner? The Nokia 2720 Fold - picture from Cellular News

Just when I'd finally recovered from the side-splitting hilarity of discussing the (allegedly) saucily-named low-cost cellphone recently launched in Venezuela, along came another emerging markets handsets story to remind me of the fun.

The (nudge, wink) Vergatario will cost the man and woman on the streets of Caracas a mere USD15. It's recently been reported in the press that this represents only 25% of the cost of manufacturing and distributing the device. According to the country's state news agency, there is "a long-term project to export phones from Venezuela to the rest of Latin America". It will be interesting to see whether the Chavez Government would be interested in subsidising cheap phones for the masses beyond the borders of their Bolivarian Republic. Last year, I had the opportunity to visit the HQ of Venezuela's renationalised national incumbent wireline operator, CANTV. I learned a little about the company's (and the Government's) desire to use ICT/telecoms as a driver of Bolivarian socialism - but not enough to speculate with any degree of confidence about whether this could include underwriting the cost of handsets in markets where CANTV's mobile unit, Movilnet, would not have the opportunity to recoup the subsidies during the subscription lifecycle of the customer. I suppose it's theoretically possible that an arrangement could be worked out with friendly operators elsewhere in Latin America, or even elsewhere in the world.

Let's assume for a moment that something of that sort does not turn out to be feasible. With which handsets would a non-subsidised El Vergatario be competing on the global low cost devices market?

One suite of such handsets has been launched recently by Nokia, according to a Cellular News item I received today. The Finnish device maker says the new phones are aimed at emerging markets and come preloaded with a range of Nokia's mobile internet services. The Nokia 2730 classic, Nokia 2720 fold and Nokia 7020 each come Internet-ready, and work with Nokia's range of emerging markets services.

The article quotes Nokia's Alex Lambeek, who says "we've seen mobile technologies catalyze the growth of the informal sector across the world, empowering local entrepreneurs and having an immediate and lasting impact on people's lives. Services like Nokia Life Tools and Ovi Mail, combined with the mobile phones we're launching today, bring powerful solutions that can be the gateway to knowledge, entertainment and people, without the need for a PC."

According to extensive Nokia consumer research, states the article, nearly 50% of consumers in emerging markets would indeed rather connect to the Internet over a mobile phone than a PC.

An interesting component of Nokia's service bundle is Ovi Mail, "which has the potential to be the first digital identity for many people in emerging markets" Unlike most other email services, the Cellular News article reminds us, "an Ovi Mail account can be created and used directly on a Nokia device without ever having to use a PC." The article indicates that since the launch of the beta service in December 2008, around 90% of Ovi Mail accounts have been created on a Nokia phone rather than a PC.

How do these devices stack up price-wise against the Venezuelan phone?

The most affordable of the set of three is the Nokia 2720 Fold, a compact clamshell handset expected to begin shipping in Q3 2009 for an estimated retail price of EUR 55 (USD74) before subsidies and taxes. By my maths, El Vergatario comes in at around USD60 when not subsidised by the Venezuelan state, so it does look competitively priced vs. a comparable device from Nokia. The Venezuelan handset, however, is a CDMA standard device. Presumably a GSM version would need to be on offer if the Chavez Government really does mean to export the phone.

Nokia's cheapest emerging markets phone vs. El Vergatario

Mobile content in emerging markets: Which services offer the best prospects?

In a former role, I hosted a number of conferences and discussion events with a mobile content focus. More times than I care to remember, I grinned politely at the well-worn joke that 3G stood for Girls, Gambling and Games. The premise, of course, was that three areas stood out as being likely to generate decent revenues for anyone involved in the mobile content value chain.

Looking back, it now seems strange that these product areas were emphasised more than, say, mobile music services. My understanding is that while mobile gaming continue to be an important output of the wider mobile entertainment industry, in terms of revenues generated music is a much bigger deal. Gambling, too, continues to account for quite a small portion of overall mobile data revenue. In 2008, my understanding is the global revenue from mobile gambling services was around USD 200 million - vs. USD 10.1 billion for music services.

I always took the 'girls' referred to in the joke about 3G to be the kind of girls prepared to make their living through the provision of adult content. This segment is, of course, not to everyone's taste but I hear that the wider adult entertainment business looks set to be quite recession-proof. While mobile content value chain participants do make money in this space, writers of reports on mobile VAS seem to struggle to provide exact revenue figures and forecasts. This is because adult content revenues seem to be split by format (video, wallpapers etc.) and amalgamated into other categories. I assume this is due to a keenness for big brands not to be too closely associated with something that many customers will always see as morally dubious - while at the same time making money from it. I daresay significant sums change hands, but it seems a little bit tricky to know how much.

It's not something I've studied closely, but I've always assumed that the added value in specifically mobile content lies in... er... mobility, i.e. that the content is deliverable anywhere, anytime to the user's eyeball. This advantage around immediacy and availability was, I thought, why users would tolerate the limitations of the mobile phone form factor, i.e. a very small screen and, until fairly recently, annoyingly slow connection speeds. My own mobile content use is pretty much limited to catching up with real time football (soccer) scores when I am not near a PC or TV. While I am perfectly happy to do that in a public place such as on a train or in a cafe, I can't help noticing that people near me sometimes like to have a crafty glance at the screen to see what I'm up to - much as commuters peek at one another's newspapers. Were I in the market for adult content, I think I'd be a bit concerned about getting caught in flagrante by some curious member of the public. This seems like an inhibitor to revenue growth to me, but maybe I'm unusually squeamish or self-conscious.

It seems fair to assume that the kinds of mobile content likely to gain traction vary across world regions, in line with factors such as disposable income and cultural norms. With reference to the latter, gambling and adult content, particularly, are never going to fly in territories where they are prohibited by law. Even where that is not the case, the mobile VAS space is bound to look a little different from country to country.

The vast, growing Indian market is an interesting example. On a visit to Mumbai in 2007 I was told that the mobile content industry there is all about ABC - astrology, Bollywood and cricket: a trilogy of national obsessions. A company which seems to have taken this on board is Nokia, which started to get more deeply involved in the Indian market early last year by customising its Ovi-branded offering in line with these obsessions.

The international potential of Bollywood is being stifled by "the hefty upfront fees expected by local license holders and the questionable origin of much of the content", according to Informa's Ronan Shields, writing in Mobile Media late last year. Shields notes that "many players in the mobile industry are eager to export this content to the massive number of South Asians living in Africa, the Middle East, North America and Western Europe and offer it on phones in the form of wallpapers, ring tones and video clips." The article contends that the development of a truly international market for the content is being hampered by a handful of India-based licence holders that "are often loath to loosen their grip". According to Shields, this handful includes one particularly powerful player: "digital-content giant Hungama alone holds licenses for 70% of all Bollywood content, according to sources."

In terms of services which sell well within India, a good chunk of the action seems to be in ringback tones - and more revenue potential from this kind of product might lie in other emerging markets. Mindful of this, Vodafone has, according to a recent Cellular News story, signed a deal with India's OnMobile to offer ringback tones across a number of territories. ­"Currently," states the article, "millions of Vodafone Essar customers in India use OnMobile's ring back tone service, which will be rolled out across Vodafone’s other emerging markets from the Spring."

Another sort of service tipped by some to do well in emerging markets is mobile social networking. A Mobile Media article written in Q2 of last year, for example, says that "even as cellcos in developed markets struggle to make money from such services," their counterparts in developing countries are "desperate" for a piece of the action.

In January, while still working with Informa Telecoms & Media, I was invited to make a presentation at a Mobile Monday Istanbul meeting. Offered a few choices of themes on which I felt I could speak, the organiser chose mobile social networking. Drawing on a related Informa report, I shared the view that vastly lower levels of PC and fixed broadband penetration might make specifically mobile networking services grow well in emerging markets. Had I spotted the Mobile Media article before heading for Turkey, I might have added the point made there that while MNOs in the developed world are "fearful of introducing advertising" (the business model upon which social networks depend), "the low profit margins for mobile data services in emerging markets mean that cellcos there are more open to the idea of supplementing their earnings with other sources of revenue, such as advertising." David Dew, CTO of messaging-software company Critical Path, which is branching out into social networking, is quoted as saying that cellcos in price-sensitive emerging markets are less wary of the perceived intrusiveness of mobile advertising, since users there welcome the opportunity to receive discounts and other special offers from brands.

Ringback tones and social networking as hot tips for mobile VAS in emerging markets, then. Is there, however, a good level of solvent demand? In the Cellular News article, a Vodafone spokesman is quoted as saying that ringback tones are an "affordable" way of personalising a mobile device - but in the context of emering markets, what does "affordable" really mean?

Writing in Mobile Media earlier this year, Informa's Guillermo Escofet notes that in relation to the average user's spending power, India has the least affordable mobile content of sixteeen countries surveyed. In the case of mobile games, writes Escofet, "although India is where the cheapest mobile games can be bought on-portal, at US$1.03 each, it is also where they are most expensive in relation to per capita income – even when weighed against the US$9.64 charged by Vodafone Germany, at the other end of the spectrum."

"With a mobile game in India costing most of what the average Indian earns in a day", asserts Escofet, "it could be argued that the market for such products is largely confined to the country's middle- and upper-class minority. The same could be said for other emerging markets."

Perhaps with this in mind, companies such as Nokia have dedicated part of their efforts to the development of services which offer less affluent subscribers much more practical benefits. A Mobile Handset Analyst article written in November describes the Finnish handset vendor's unveiled introduction of seven low-cost handsets equipped with features developed for users in rural communities, "in keeping with its new business model of bundling services with the appropriate devices." According to the article, this has been driven by the company's desire not to compete for a greater share of emerging-market sales "by lowering prices, as Samsung and ZTE have done."

The competition for emerging markets is heating up, contends the article "because the already long handset-replacement cycles in developed markets are being extended by the economic crisis." In this context, Nokia, states the article, "is eager to identify the software and services that will provide it with new revenue streams and protect its share in certain markets." An unnamed Nokia spokesperson is quoted as saying that the company's Mail on Ovi service will give "millions of users the possibility to create their first Internet identity and communicate in new ways." Global Crown Capital analyst Tero Kuittinen is quoted as saying it will serve as "a firewall aimed at preventing BlackBerry from migrating into low-end business and emerging markets.

Despite the global economic downturn, mobile content/VAS in emerging markets seem to present operators, handset vendors and others with some interesting opportunities. I'd be interested to know which of entertainment services and more practical applications is the hotter tip.

Mobile content in emerging markets: Which services offer the best prospects?

Africa or India: Which will be first to see mass-market MVNOs?

I was pleased to see confirmation that those to whom I handed over the task of organising this year's annual Eurasia Com conference in Istanbul have found a speaking slot for Cristobal Alonso, Chief Commercial Officer at mmChannel, a technology company dedicated to the development and management of digital entertainment services and platforms on a B2B format.

Cristobal and I have been in contact since mid-2007 without ever having the opportunity to meet face-to-face. This is a shame for me given how much he has to share about boosting the take-up of mobile value-added services. You can get some sense of Cristobal's ideas by having a look at his blog, where I noticed that he and I have something in common - we have both recently had the pleasure of attending a Mobile Monday Istanbul meeting. In January, I gained from the wonderful networking opportunity which Mobile Monday events provide and made a short presentation on the theme of mobile social networking. Cristobal was at the February get-together, and on his blog he reports on that meeting's MVNO-themed discussions. I imagine that was a lively session, given that the mooted market entry of MVNOs in Turkey has been something of a hot topic for a while now. Cristobal is quite right to compliment the MoMo Istanbul organiser Natali Yeşilbahar for the great job she has done to boost attendance and further improve the usefulness of the discussion sessions.

I guess Cristobal maintains a keen interest in whether MVNOs will succeed in emerging markets, given that his blog also mentions the insightful materials on this theme recently prepared by his colleague Carlos Valdecantos. Carlos asks whether there is any realistic prospect for successful MVNOs in Africa, where "most markets are experiencing pent-up demand, customer segmentation has only started to be a buzz word, and capacity is scarce." As Carlos notes, this is a markedly different scenario from that seen in the mature markets where MVNOs have sought to exploit the challenges faced by their host network operators, namely "slowing subscriber growth, lack of consumer segmentation, and excess network capacity."

As well as discussing which MVNO business models might work in an African context, Carlos segments the continent's many markets according to the likelihood of their being able to bear the entry of MVNOs. Carlos believes the high potential markets (good market size/GDP, strong economic liberlisation and a "dynamic" telecoms sector) are Morocco, Algeria, Tunisia, Egypt, Ghana and South Africa:

Assuming the onset of the global economic crisis has not caused him to revise his view, I assume that Peter Boyd, the former CEO of Virgin Mobile South Africa, would agree with this assertion. Back in July 2008, Boyd was quoted in a Middle East and Africa Wireless Analyst article as saying that "if there is one place where consumers need choice, it's Africa." Boyd argued that "you don't need multiple network licenses – that's an inefficient allocation of resources. Having an environment that lets people plug in an MVNO is a much more efficient way to serve consumers."

My former Informa Telecoms & Media colleague Matthew Reed wrote the article, noting that "even in South Africa, MVNOs are technically illegal. The only way for Virgin to introduce one was by forming a joint venture with Cell C, which holds a license to operate." If this and other barriers to MVNO market entry could be overcome, Boyd felt that the MVNO model enables the host network to sell its spare capacity, giving it new income to recoup expenses or invest in extending its coverage. This sounds quite compelling when applied to markets in which MNOs and governments jointly have the aim of extending the availability of services to less affluent prospective subscribers in the under-connected hinterland.

Matt's article noted that Virgin Mobile, then lobbying the Independent Communications Authority of South Africa for reduced interconnection fees, had acquired very few subscribers compared to the more than 40 million subscriptions shared by South Africa's three MNOs. Matt noted that while Virgin Moblile was lagging far behind the MNOs in this regard, "one figure where [it] is ahead of its rivals is ARPU, as a result of targeting higher-spending users rather than the mass market."

Has this situation improved for Virgin Mobile South Africa? It seem the answer is a pretty clear 'no'. Now led by new CEO Steve Bailey, the company has yet to have had a significant impact on the market, according to a more recent MEAWA article. Writing last month, Dario Talmesio notes that although the MVNO still has the highest ARPU in the market, "it had signed up just 600,000 subs by end-2008, and only 200,000 of them were active – giving it a market share of just 0.4%."

Talmesio reminds us that before launch, Virgin Mobile South Africa had hoped to acquire 10% of South Africa's mobile market within five years and asserts that target is now unrealistic. Talmesio feels that the company is unable to differentiate its services other than by using its distinctive branding. 3G services are not an option, notes Talmesio, because host operator Cell C, has not deployed a W-CDMA network. Of the three cellular network operators competing in South Africa, Cell C is alone in not having a 3G offering. Rivals Vodacom (50.98% market share according to WCIS) and MTN (35.55% share) began to sign up 3G subscribers in December 2004 and June 2005 respectively.

Virgin Mobile is also prevented from lowering its prices, Talmesio writes, because of the high interconnection rates it continues to pay. Talmesio also states that the MVNO has a more limited handset portfolio than its rivals.

In contrast to Virgin Mobile's highest ranking ARPU, host network Cell C had the lowest ARPU in the country in 2008, according to Informa Telecoms & Media. Talmesio writes that "from Cell C's perspective, hosting MVNOs makes sense when they can complement Cell C's market position and reach a different segment of the country's customers."

Talmesio seems to feel that Virgin Mobile South Africa has just one unique selling point: "the simplicity of its semiflat tariff" with "VMSA customers pay[ing] a premium rate in return for getting a simplified tariff".

Talmesio also argues that lateness to market may have worked against Virgin Mobile in South Africa, noting that "mobile penetration was already 72% when VMSA launched" and that "by contrast, the UK's penetration was just 40% when Virgin launched [there]". Therefore, he writes, "VMSA had to try to lure users away from incumbents rather than focus on greenfield users, as Virgin Mobile UK did in the late 90s."

If this last point is one of the most important inhibitors to strong growth for Virgin Mobile South Africa, this might suggest that, favourable regulatory regimes permitting, less highly penetrated markets in Africa might prove more fruitful for future MVNOs. Of the countries coloured green on the map above, perhaps Ghana looks the best bet, then. I also wonder whether Nigeria might be a viable environment for new MVNOs.

Whether MVNOs do succeed in Africa, or in other emerging markets, remains to be seen. Writing for Billing World in September, Patrick McGrory of customer care and billing giant Amdocs felt that "new services — Internet access, VoIP, WiMAX — and evolving business models like MVNOs enable cheaper and faster deployment in areas that previously were not viable prospects".

Two companies seemingly not about to launch MVNOs in an emerging market are Ericsson and Nokia. A Total Telecom report last Friday rubbishes recent rumours that the Scandinavian firms were planning to offer MVNO services in India.

"The speculation is completely incorrect – it's pure nonsense," an Ericsson spokeswoman told Total Telecom.

"Nokia is not planning on offering MVNO services in India," commented a Nokia Siemens Networks spokesman, who added "we provided input and advice to the Telecoms Regulatory Authority of India to help educate them with our experience of providing services to MVNOs, and that was it."

The denials of these two companies notwithstanding, some analysts feel that the Indian market is ripe for exploitation by MVNOs. The Total Telecom article quotes a research note from Ovum which states that "being able to enter a huge market with a population of 1.2 billion people when the mobile penetration rate is extremely low at around 26% is certainly a dream prospect for MVNOs, and many will find it hard to resist." My former Informa Telecoms & Media colleague James Moore is quoted as saying "the MVNO model will be an opportunity for GSM operators without a 3G license to offer WCDMA services."

If Africa continues to be a hostile environment for prospective MVNOs, perhaps it will be India which proves to be the first emerging or middle income market in which virtual wireless operators gain traction and become a large scale phenomenon.

Africa or India: Which will be first to see mass-market MVNOs?

Nokia: Low TCO is key in emerging markets - but how to achieve it?

I recently made reference to an emerging markets-focused publication which I consider to be an excellent source of information and insights: Expanding Horizons magazine, which is offered to ICT decision-makers in the private and public sectors by Nokia and Nokia Siemens Networks. The latest issue is a special edition packed with interesting articles from the last 2-3 years. Expanding Horizons aims to explore the socio-economic benefits that mobile technologies offer as well as best practices from around the world in order to encourage affordable mobile communications and bring the Internet to the next billion consumers. Its editors also aim to demonstrate how to create favourable environments for market growth in developing countries.

One of the most recent articles opens with a challenging question: Why is TCO (Total Cost of Ownership) of USD 5 per month possible in India, Pakistan, Sri Lanka and Bangladesh but not in 76 other emerging markets covered in a study conducted by Nokia in 2007. For the purposes of the study, TCO was defined as a combination of the service fee, taxes and mobile device price. The study found that the average TCO for subscribers in these developing countries was USD 13 per month and its authors asserted that bringing this figure down to less than USD 5 would enable a majority of low-income prospective subscribers to use mobile services. Surely, then, all four South Asian countries with outstandingly low average TCO should have very high mobile penetration rates when compared to the broader selection of emerging markets. Let's look at mobile penetration in these four countries as of December 2008, according to the World Cellular Information Service.

• India: 28.31&
• Pakistan: 51.68%
• Sri Lanka: 49.48%
• Bangladesh: 28.95%

Of the 76 countries found to have higher average TCO, quite a large number have outperformed these South Asian markets in terms of mobile penetration. Let’s pick out some examples, choosing only countries with lower per capita GDP and/or ranking lower on the Human Development Index than India. Again, the figures are from the Informa Telecoms & Media World Cellular Information Service:

• Vietnam: 79.37%
• Yemen: 28.53%
• Kyrgyzstan: 65.83%
• Cameroon: 31.01%
• Nigeria: 44.50%

I wish I had time now for a detailed discussion about why some of the above countries, all of which have higher average mobile services TCO than the South Asian markets, have done better in terms of getting mobile devices into the hands of larger slices of their populations. In lieu of that discussion, for which I hope to find time another day, it does, at least seem fair to assert that while low average TCO is highly desirable, it is clearly not the single most important factor for mobile services to be taken up by the less affluent population segments in developing countries.

This is not to say, of course, that it is not worth trying to understand how TCO can be minimised. Nokia were interested enough to commission a follow-up study, executed by LIRNEasia, a regional ICT policy and regulation capacity-building organization active across the Asia Pacific.

So what explanations were found for the USD 5 TCO in the four South Asian countries? The Expanding Horizons article states that "surprisingly, the data led to the exclusion of such factors as per capita GDP, mobile penetration and growth rates, population size and density, and governance." In each instance, the article continues, other countries surveyed with more favourable values for any one of these characteristics also had monthly TCO levels substantially exceeding the crucial USD 5 per month. Instead, "our study told us that the two factors most common among the four countries that had the lowest TCO levels was superior market access and business model innovation," said Mr. Rohan Samarajiva, executive director of LIRNEasia. "In addition to the availability of low-cost handsets and modern wireless infrastructure equipment, a market requires a ‘disruptive competitor’... one who does not play by the established rules."

To summarise, the strategies of these 'disruptive competitors' have, according to the article, involved shifting the operator’s focus to lower income consumers and increasing network utilization. The article continues that this kind of strategy is built on the principle of widening the user base significantly, handling a greater volume of smaller transactions very efficiently, driving down customer acquisition costs and creating an efficient network architecture. All of this is done, continues the article, with the goal of allocating the network’s fixed cost structure over a broader user base while significantly raising more marginal revenue through higher numbers of previously under-served, low-income consumers.

In the case of Bangladesh, my guess is that the first-mover in terms of being a 'disruptive competitor' would have been Grameenphone, famous for its association with the Village Phone microfinance initiative, now replicated in African and other Asian markets, which puts mobile devices in the hands of low-income subscribers in rural areas and enables them to build sustainable businesses. In the case of the other three markets, the identities of the 'disruptive competitors' does not immediately spring to my mind. Perhaps some helpful reader has a view.

Nokia: Low TCO is key in emerging markets - but how to achieve it?