The road to hell...

... is paved, as Dr. Johnson didn't ever say, with good intentions.

One such intention was set out here in the most recent DTW post, namely that this blog would review some of the predictions made in the Industry Outlook report that is made available for free downloading by Informa Telecoms & Media. The plan was to zero in on any predictions relating specifically to emerging markets and developing countries.


Two months have passed since that rash promise was made and not a peep has been heard from this once prolific blog - no fewer than 147 posts saw were published here in 2009.

Apologies, then, to anyone who has found DevelopingTelecomsWatch to be a useful source of news, commentary and speculation and who now wonders whether the blog has fizzled out of existence. Happily, for anyone that cares, this is not the case. That said, I do not expect to be writing anything like as often in 2010 than was the case last year. My commercial activities are, I am pleased to report, taking up far more time now, suggesting that this year will be more profitable than the one we have left behind us. I do hope that regular readers are facing this first year of a new decade with similar optimism.

Failure to deliver on good intentions notwithstanding, then, perhaps DTW and its writer are not on that proverbial road to hell.

What of our industry and its interests across emerging markets? Hellbound? Or good times ahead?

Belatedly, then, with two months of the new year having already passed, let's attempt to answer those questions by taking a look at a couple of the predictions made by the crystal ball gazers at Informa:

'So-called emerging markets will transition into a new phase of competition based on services and bring into question the validity of the term "emerging market" as it is understood in the telecoms sector today.'

Informa's report notes that "Until now, the term 'emerging market' in the context of the mobile sector has been used as a catch-all phrase to describe markets characterised by low penetration rates, a proliferation of mobile network operators, steep drops in the price of basic communications and resulting explosive mobile subscription growth."

This is familiar territory here at DTW. Numerous times, reference has been made to markets in which the price of mobile services has been squeezed down to a level that makes life very hard for some of the competing cellcos. In July last year, for example, this blog covered the decision of Millicom International Cellular to withdraw from all the Asian markets in which it once did business - Sri Lanka, Laos and Cambodia. The latter country certainly matches the Informa's report's reference to "a proliferation" of MNOs. No fewer than nine (!!) cellcos are currently fighting for business in a country with just 14.8 million inhabitants. Here they all are, with market share figures from Informa's WCIS product:

1. Cellcard (GSM, 42.12% market share - the operator in which Millicom had a stake)
2. Metfone (GSM, 18.86%, owned by Viettel of Vietnam)
3. Mfone (GSM/W-CDMA, 15.52%)
4. Hello (GSM, 13.38%, controlled by Axiata)
5. Star-Cell (GSM, 3.56%, part of the TeliaSonera group)
6. Beeline Cambodia (GSM, 2.90%, owned by Russia's Vimpelcom)
7. qb (W-CDMA, 1.95%)
8. Latelz (GSM, 1.32%)
9. GT-TELL/Excell (CDMA, 0.39%)

Regular readers may have spotted that from time to time I like to share video clips of telecoms operators' TV advertisments from around the world. Latelz (AKA Smart Mobile), as the list above suggests, is one player that may need some pretty compelling advertising if it is to become a more significant player. You decide how powerfully the Smart Mobile case is made by these:





Cambodia is a pretty extreme case, perhaps, but DTW has also examined a number of African markets which seem to be ripe for mobile market consolidation. I daresay there are many more around the world in much the same state.

While I am insinctively in favour of competitive environments which offer value and choice to consumers of mobile services, I do also sympathise when I speak with employees of operators that are struggling to improve shareholder value in the context of dramatically slashed prices. These guys, it sometmes seems to me, can feel as if they are on that proverbial inferno-bound round. If Informa's prediction is on the money, however, perhaps that fiery destination need not be reached this year.

On to the next prediction with an emerging markets/developing countries angle...

'Mobile banking efforts will continue to proliferate in emerging markets, but in the short-term these will be more important as a customer acquisition and retention tool than as a genuine driver of significant new operator revenue streams.'

The efforts made to date in this area got some coverage here last year. In May we noted that giant cellco Bharti Airtel was looking to tap into the big opportunity presented by the fact that 85% of the citizens of its Indian home market do not have bank accounts. By August, readers were invited to consider whether mobile operators would necessarily dominate the market for mobile banking services aimed at turning a profit while going some way to alleviating the poverty of subscribers in developing countries. An alternative that we discussed was the possibility of operator-neutral solutions gaining traction.

The chaps at Informa were have not been alone in keeping discussions of this sort on the agenda for 2010. Indeed, mobile banking in emerging markets got a mention during the plenary session of last month's Mobile World Congress. Simon Rockman of the Register noted, however, with some distaste, "that transforming the lives of millions of people by giving them bank accounts – something that can make the difference between eating and starving - didn't garner the same round of applause" as that received by the GSMA project aimed at making every mobile phone use the same charger."

Writing up his notes from the Congress the following week, Rockman also wondered at some of the number crunching around the scale of the m-banking opportunity. He noted that day four of event saw an assembly of the mobile money working group that has received USD 12.5m from the Bill and Melinda Gates Foundation and is working towards the GSMA's target of getting 20 million of the billion people who have a mobile phone but do not have a bank account onto the first rung of the financial ladder.

Ignacio Mas, writes Rockman, gave a detailed account of what the Bill and Melinda Gates Foundation wants to achieve: "They wanted the very poor and insecure to be able to save", targeting people living on less than USD 2 per day. "As much as they have low subsistence incomes", reports Rockman, "the real problem is stability - they might only find work occasionally and have to eke out money until they next find work. Or if they are farmers they get paid seasonally at harvest time."

Without access to banks, continues Rockman, such people are very vulnerable: "They will often give the money to people they trust for safekeeping but these are people in a similar situation to themselves. Lack of stability means people get multiple jobs. They can't concentrate on what will get the best return and pull themselves out of poverty because they have to opt for stability."

This, and other challenges, blight the lives of so many people around the world that it does seem reasonable to suppose that a huge opportunity does exist for the telecoms industry to provide what the retail banking sector cannot in underdeveloped countries.

Well, I enjoyed finally finding the time to write something here after such a long hiatus - but will refrain from making rash promises about when the next article will appear. More soon, I hope, though.

The road to hell...

DevelopingTelecomsWatch - age notwithstanding, pleased to be a part of YPBLOGS.com

I'd like to think that I approach everything I do with a reasonable degree of professionalism. Whether it's accurate to describe myself as a young professional, though, is open to question. While I do still feel pretty youthful, it seems that almost half of the thrusting young go-getters who visit YPBLOGS.com feel that a dusty old geezer like your humble scribe is far too long in the tooth to be known as a young professional.

YPBLOGS.com is a fast-growing blog aggregator, currently over 14,000+ articles strong. The site's creator describes it as the place for young professionals to find up to the minute news and information that matters. This is achieved by aggregating blogs - 200+ sites are checked automatically every 10 minutes for updated articles, to which links are posted.

On one hand, the blogs added to the site are very diverse in terms of the topics they cover - banking, personal finance, investments, career advice and new media news are among the fields I've seen discussed. On the other hand, the bloggers who have added their sites seem to be less diverse in terms of where in the world they are located. My observation is that, at present, voices from North America are by far the most numerous. Europeans like myself are a rarer breed at YPBLOGS - and bloggers from developing countries and emerging markets worldwide seem to be rarer still.

I'd like to see this rectified, not least because, as this blog often makes clear, innovative technologies, services and business models are being incubated all over the world - inventiveness is certainly not the sole preserve of those of us living in the most developed economies and the most affluent societies. In the telecoms space, it is in developing countries such as Kenya that bleeding-edge mobile financial services solutions are being developed and refined. That country is even home to the 18-year old mobile services entrepreneur who has developed an SMS-based solution which enables car owners to keep track of their vehicles, offering a defence against theft.

YPBLOGS is a useful arena in which to absorb the ideas of younger bloggers, thinkers and innovators. I feel, however, that this community would be even richer were it to be joined by innovative writers from developing countries. I would therefore urge the many readers of DevelopingTelecomsWatch who hail from Africa, Asia and Latin America to add their voices to the conversations aggregated at YPBLOGS.com - and don't be put off if you're over thirty.

Visitors to YPBLOGS.com were asked: What is the age limit for considering a person a "young professional"? The most common response (49% of respondents so far) was 'under 30'. Well, I don't fit in there - but this has not deterred me from taking advantage of the site or from enjoying the interesting material it aggregates.

So I call for an invasion of the over-30s and from developing countries. We can make YPBLOGS even better.

DevelopingTelecomsWatch - age notwithstanding, pleased to be a part of YPBLOGS.com

Mobile industry nicely balances profit motive with improving lives: not everyone agrees...

It has been a tendency of this blog to eulogise the ways in which telecoms companies with business units in developing countries are able to reconcile efforts to alleviate poverty and misery with their need to turn a profit and grow shareholder value.

I therefore tend to be very encouraged when I read articles such as that written in April by Rohit Singh of the Overseas Development Agency (ODI), a British think tank focused on international development and humanitarian issues. Singh writes about the numerous studies which support the idea that a rapid increase in mobile penetration contributes significantly to economic growth. He discusses the incremental, tranformational and production benefits brought by mobile phones:

• Incremental benefits: improving what people already do – offering them faster and cheaper communication, often substituting for costly and risky journeys.
• Transformational benefits: offering something new such mobile banking, enabling the unbanked to store value.
• Production benefits: resulting from the creation of new livelihoods, not only through professional telecommunications jobs but also through activities like re-selling airtime or phone cards.
  

Much praise, then, has been directed by DevelopingTelecomsWatch at the efforts of mobile operators worldwide, notably in Africa. None of what has been written here suggests that there might be a possible downside to the rapid growth of mobile infrastructure and services in the places where the world's least affluent people live their lives.

There are those, however, who voice precisely that concern. Notable, I think, is Steve Song, who spent ten years working on ICT for Development issues at the International Development Research Centre (IDRC), a Canadian state-owned enterprise whose role is to help developing countries use science and technology to find practical, long-term solutions to the social, economic, and environmental problems they face. Song is now based in Cape Town, where he has taken up a fellowship with the Shuttleworth Foundation, an organisation which works to drive social and policy innovation in the fields of education and technology through policy dialogue and practical projects.

I was very interested in Steve Song's reaction to Kenyan cellco Safaricom winning a UN-HABITAT award for its M-Pesa mobile money services. This got a mention in the recent discussion here about whether mobile banking and money transfer services branded and run by cellular operators in developing countries might be vulnerable to a competitive threat from apparently operator-neutral solutions such as the one recently announced by Monitise. My own reaction to a cellco being lauded for how its services improve the lives of poor people is always very positive - it makes me pleased to make my living in and around an industry whose technologies can be a force for good. On hearing about Safaricom's award, Steve Song, however, was prompted to consider, not for the first time, "the effective monopolies/oligopolies" that mobile operators in Africa have become.

While Song acknowledges "the miracle that mobile phones are" and says that "there can't be many people who still doubt the direct value that mobile phones provide to people", he is concerned that the wealth that is being generated by cellcos in Africa is being distributed too unevenly. To support this assertion, he cites the case of South Africa's MTN apparently acknowledging that is subsidises 3G data traffic with revenue from its core voice and SMS business. This means, says Song, that when it comes to communication, "the poor in South Africa are effectively subsidising the wealthy".

Song also invites us to consider "the microeconomics of the edge cases of mobile access" - the case of a remote village served by a single cell tower. He contends that in this scenario, the majority of calls made would be to other users in the same area, i.e. local calls. Song also asserts that people in Africa "are spending substantial amounts of their disposable income on access." So, he argues, if, say 50% of the phone calls made in a remote village are local and if people are spending 50% of their disposable income on mobile access, "that means that 25% of their disposable income is being siphoned out of that village."

Perhaps with my own mobile bill in mind, I initially wondered whether it could really be true that even very poor people could possibly be spending as much as 50% of their disposable income on voice and SMS. Apparently so, according to a 2008 report from Research ICT Africa, a twenty-country network hosted by the EDGE Institute in Johannesburg and funded by Steve Song's former employers, the IDRC.

We can see from the table below that the report has indeed identifed African countries where consumers spend more than 50% of their disposable income on mobile services. These include Kenya (52.5%), Nigeria (52.4%) and Zambia (60.3%). According to this study, for the same three countries, the percentage of disposable cash spent on cellular services for the bottom 75% of the population by disposable income rises to 63.6%, 60.9% and 73.9% respectively.
Is this phenomenon - people spending such a major chunk of their incomes on mobile phone charges - purely an unavoidable consequence of how poor these people are? Or might more competitive mobile markets deliver considerably lower prices, thereby freeing up African consumers' cash to be spent on other items?

Several times, a DevelopingTelecomsWatch piece has focused on a particular country and voiced the idea that perhaps that state's mobile market is currently contested by too many cellcos - too many in the sense of not all of them being able to turn a profit and justify further investment. In the few months since this blog's inception, that question has been raised about Cambodia and Sri Lanka and about Tanzania, Burundi and Gabon.

Along the way, I've sometimes been quite critical of operators with aggressively low pricing. Metfone (the Cambodian subsidiary of Vietnamese MNO Viettel) is one example. I have expressed the view that Metfone's distribution of free SIMs and airtime is a "disruptive" market entry strategy which is "very nice for quickly building a subscriber base, but taken to its logical conclusion this can seriously erode overall market value for all players."

What I've had in mind is an idea I've heard articulated countless times at many, many telecoms industry conferences - that telecoms groups will only invest in and improve the communications infrastructure of those countries where good profits can be earned; that most operators naturally settle around a band of prices which enable profitable operation and happy shareholders for all competitors; that operators which sell their services below the lowest end of that band of prices can be accused of destroying martket value and threatening the ability of others to keep investing; that regulators/governments which allow any market actors to do this are not acting responsibly.

Steve Song would presumably not sympathise with these sentiments because he rails against the failure of telecoms regulators in Africa either to license enough new market entrants or to curb the excesses of incumbent players with significant market power. He feels that this has led to a situation where existing operators "collude to maintain high profits", citing the global price of SMS per byte vs. the true cost of delivering text messages.

The ODI's Rohit Singh also deals with the role of telecoms sector regulatory agencies in developing countries. He writes about how governments should oversee such issues as interconnection between the operators, spectrum allocation, and access to the international gateway. He argues that the importance of this role is shown when, in the absence of regulated interconnection tariffs, dominant firms charge high prices for connecting calls from other networks. Singh asserts that this limits effective competition, with dominant firms earning monopoly profits, keeping their prices high, and having little incentive to expand or innovate.

Without effective regulation, Singh continues, ownership of bottleneck infrastructure by dominant firms can diminish the developmental impact of the mobile sector by pushing up prices and restricting coverage.

When Singh reaches for an example of this kind of failure of regulation, he thinks of Zambia, where he says international calls are very expensive because the state-owned fixed-line operator charges high tariffs to private operators to access the international gateway. This distortion, he argues, then affects the domestic calls market, because private operators have to subsidise their international calls to compete with the public sector firm. In this characterisation, private sector mobile operators are the good guys of the piece, forced rather than inclined to charge high prices for their services. My feeling, then, is that Rohit Singh and Steve Song have quite different views of the optimally desirable interplay between telecoms operators and regulators.

Going beyond the issue of pricing, in an earlier blog post, Song expresses concern about how mobile operators in developing countries might conceivably take advantage of the ways in which cellphones have become indispensable in people's lives. Drawing on a March 2009 presentation by Nathan Eagle, the developer of crowdsourcing application txteagle, Song observes that no one in Kenya can afford not to have a mobile phone because "even if you are digging a ditch by the side of the road, day labour is now organised via SMS." Song feels that this means that mobile operators have Kenyans by the throat. To support this argument, he discusses another anecdote from Nathan Eagle's talk, which concerns a water pump manufacturer in Kenya that, by combining an M-Pesa-enabled, solar-powered metering system with their water pumps, has completely changed its business model. This company is apparently now giving water pumps away for free and then making a profit by selling access to water through the M-Pesa service. In his presentation, Eagle observes that Michael Joseph, the CEO of Safaricom, "loves this because you have to have a Safaricom account to get water."

Steve Song ask whether he is alone in finding this a little disturbing and feels that there is something wrong about a single mobile operator acting as the gatekeeper to water supply. Song argues that "for any village in this situation, Safaricom can charge whatever they like".

When I stumbled upon Steve Song's blog, I felt it would be interesting to draw attention to the uncomfortable questions which he raises. After all, DevelopingTelecomsWatch was never intended as a cheerleader for a particular view of the role of the communications sector in developing countries and emerging markets. So, for anyone else who has so far been unaware of Song's writing, I hope it has been refreshing to consider the ideas of someone who observes the actions of mobile operators with a critical eye. What I like about Song's writing is that his arguments are not weakened by an unattractively shrill tone. However, if you're curious to hear from someone who really doesn't mince his words about cellcos, I'd suggest you read a recent article by Llewellyn Kriel about South African operators and the country's telecoms regulator.

Mobile industry nicely balances profit motive with improving lives: not everyone agrees...

Cellco-branded mobile banking to thrive without challenge?

If you were asked to reach for an example of mobile financial services gaining traction really impressively, perhaps you would think immediately of the M-Pesa service offered by the Kenyan cellco Safaricom, in which Vodafone owns a minority stake.

I daresay most readers are somewhat familiar with the service. For those who are not, Safaricom's TV advertisement provides a concise demonstration of the simplicity and utility of M-Pesa:



Since its launch in 2007, M-Pesa has attracted widespread praise. In February 2008, the 'send money home'-themed marketing campaign, of which this ad was a component, scooped the 'Best Broadcast Commercial' gong at the annual Global Mobile Awards ceremony hosted by the GSM Association. This year, 'Best Mobile Money Service' was introduced as a new award category at the same ceremony - Safaricom and Vodafone were joint winners. More recently, M-Pesa has been feted by UN-HABITAT, the United Nations agency for human settlements whose mission is to promote socially and environmentally sustainable towns and cities with the goal of providing adequate shelter for all. In June, the agency announced the first Habitat Business Awards for best practice in categories including affordable housing, clean urban energy solutions and innovative ITC solutions. In the latter category, Safaricom made the winning submission for M-Pesa, which the jury felt boosts urban entrepreneurship and clearly demonstrates the impact of innovative IT solutions for sustainable urbanisation.

In its submission to the judges, Safaricom mentions Kenya's large 'unbanked' population - people, largely from the urban poor, to whom opening a bank accounts is off limits. The submission document explains that such people face challenges around the safety of carrying cash (mugging and carjacking are cited as dangers they face) and the high cost of transferring monies to relatives in rural areas via existing channels.

The benefits for the consumer, then, are quite clear - but what does a mobile operator such as Safaricom gain from entering the mobile money space? Dawn Marshallsay of mobile^SQUARED, writing in January, emphasised how mobile financial services drive up cellphone usage. She also quotes Safaricom CEO Michael Joseph, who told delegates at a London conference that "banking is a value-added service for mobile, not a money-making product"

"The main purpose of mobile banking is getting the customer to have an emotional attachment with the operator as they entrust their monetary details with the operator. Customers then start using their phones more in general," Joseph continued.

Where one operator in a developing country achieves differentiation as the only provider of such services, benefits for that operator, then, would presumably include achieving a high degree of customer stickiness in a market where the vast majority of mobile users are highly price sensitive (due to their relative poverty vs. their counterparts in developed countries) and where prepaid plans are dominant.

This model, in which consumers are locked into a specific mobile operator's set of financial services, is open to challenge, however. Earlier this month, Richard Wray of the UK's Guardian newspaper wrote about a recently-announced deal between mobile banking firm Monitise and Paynet, a company which operates ATMs and electronic payment services across Kenya, Tanzania and Uganda in partnership with thirty-five banks. Wray writes that the deal "will bring financial services to millions of people in Africa for the first time". The suite of services will include checking balances, moving money between accounts, and enabling customers to fill a mobile-wallet with cash to pay bills or send money to relatives.

A pretty close resemblance to M-Pesa and other mobile operator-run services, then. The crucial difference emphasised by Wray, though, is that while operator-branded services demand that users are customers of a particular MNO or are connected with a specific bank, the Monitise system is open to any financial institution and any mobile phone network that wants to plug into it. If I have understood this correctly, it seems, then, that M-Pesa and rival services such as Zain Kenya's Zap are to be challenged by an operator-neutral alternative. Monitise CEO Andrew Lukies believes that "mobile money is most effective as an 'open ecosystem' where you can transact with anybody or any organisation, regardless of your bank or mobile operator. Another differentiator, according to the Monitise Group's press release on this deal, is that "uniquely among mobile banking services, [it] enables people without a bank account to use its services, as well as providing traditional mobile banking to those with accounts."

It remains to be seen how far operator-neutral services of this sort pose a competitive threat to cellco-branded solutions such as M-Pesa, Zap, Orange Money (launched by France Telecom's mobile operation in Côte d'Ivoire) and the service launched by MTN Uganda in March, which the South African group hopes to roll out across its African footprint.

Assuming any such threat can be withstood, services like M-Pesa - improving the lives of the unbanked while providing cellcos with a customer retention tool - seem to be good for consumers, good for society and good for the operator.

None of this is to suggest that M-Pesa and services like it are never subject to criticism or concerns around their reliability and security.

Earlier this month, writes Victor Juma of Kenya's Business Daily, a technical hitch in the M-Pesa service caused anxious customers to crowd at outlets to have their accounts updated. For several days, it seems, users were unsure of whether some transactions had been properly credited to their accounts.

The service also appears to have been targeted by organised criminals depositing counterfeit currency via M-Pesa agents. Kenya's Daily Nation newspaper reported on 4th August that staff in two bureaus in the towns of Kutus and Kianyaga had received fake money worth Sh29,000 (about USD 380). Accounts used by the fraudsters were topped up without agents spotting the counterfeit cash. I assume that fraudulent deposits of this kind can be stopped once noticed, but this incident demonstrates that no system is completely immune from human error. Having visited Kenya, but never having stepped inside a retail bank there, I have no idea whether counter staff in banks there are more highly trained than M-Pesa agents and therefore less prone to making mistakes of this kind. Whatever the case, my feeling is that if mobile operators in developing countries are to capitalise on consumers' lack of access to traditional financial services and institutions, the authorities in those countries would be justified in insisting that the cellcos' services are subject to many of the same regulations imposed on the banking sector. I daresay, however, that incidents like the two mentioned here are relatively rare, so none of these observations are meant as a very serious criticism of mobile financial services in developing countries.

Kenya - and more specifically Safaricom's M-Pesa - stands out as a mobile money success story. How far is it an exceptional story? Can we expect services of this type to face greater obstacles to consumer acceptance and commercial success in other developing countries?

Sarah Rotman of the Consultative Group to Assist the Poor (CGAP) could presumably take a view on this, having written in July about the question of whether the success of mobile banking in Kenya can be replicated in neighbouring Tanzania. Rotman notes that unlike the rapid service uptake and quick development of an agent network in Kenya, things have moved much slower for Vodacom’s M-Pesa product in Tanzania. Explanations offered are as follows:

• Geography/demographics: Tanzania is a less densely populated country than Kenya, which is important in light of the idea that the density of an agent network is a key factor in the success of any mobile financial services suite.
• Market and competition: Safaricom in Kenya dominates its market (77.59% market share as of June 2009, according to WCIS), holding its own very well against established competitors and new entrants. Vodacom in Tanzania has just a 35.28% market share (according to WCIS) and is losing ground to the local operation of the Zain group and Millicom International Cellular's Tigo-branded operator.
• Control over agent networks: according to Rotman, it appears that Vodacom Tanzania has less direct control of and influence on its airtime distribution channel than Safaricom. Also, Vodacom works directly with just six airtime wholesalers, compared with 300 for Safaricom. Safaricom’s airtime distribution network was a key element in the rapid development of the M-Pesa agent network.
• Marketing and strategy: Initial Vodacom M-Pesa marketing seems not to have communicated the easily understood 'send money home' message we say in the Safaricom advertisement. As a result, writes Rotman, customers were unsure of what the product offered them and if it was really geared at the average Tanzanian.
  

While there are plenty of reasons to be bullish about the success prospects of mobile money services offered by cellcos to unbanked people in developing countries, then, it seems this enthusiasm should perhaps be tempered by an awareness of possible competitive threats from operator-neutral solutions and an understanding that a one-size-fits-all approach might not work effectively across a multi-country footprint.

Cellco-branded mobile banking to thrive without challenge?

Zain Africa Speculation Watch: Episode 6

For an entity supposedly up for sale and coveted by a wide variety of interested parties, Zain's African unit has certainly been very busy creating new partnerships and gaining publicity for its various activities.

One example of this, brought to my attention by TelecomPaper this week, is the operator's cooperation with Western Union, whereby the two organisations will work together to deliver mobile money transfer services in countries in Africa and the Middle East through Zain's new Zap platform. The service enables Zain subscribers to manage their bank accounts, top up mobile airtime (and transfer airtime to other subscribers), pay utility bills, pay for goods in retail outlets, and transfer money to friends and family.

The opportunity around providing financial services to the unbanked in Africa and in developing countries worldwide is a certainly a rich one. At the Mobile World Congress in Barcelona earlier this year, GSM Association CEO Rob Conway observed that "there are over one billion people in emerging markets today who don’t have a bank account but do have a mobile phone." Conway feels that mobile operators "are perfectly placed to bring mobile financial services to this largely untapped consumer base" and that "mobile money for the unbanked has the potential to become a USD 5 billion market opportunity over the next three years."

Conway was speaking during an announcement made jointly with the Bill & Melinda Gates Foundation, which provided a USD 12.5 million grant to the Mobile Money for the Unbanked (MMU) programme, the aim of which is to "encourage the expansion of reliable, affordable mobile financial services to the unbanked."

With Rob Conway having set out the scale of the opportunity for MNOs, the Foundation's Bob Christen was keen to stress the humanitarian benefits, noting that "technology like mobile phones is making it possible to bring low-cost, high-quality financial services to millions of people in the developing world so they can manage life’s risks and build financial security."

Mobile financial services then, should surely be a vital component of the strategy of any telecoms group whose operations are, in large part, in developing countries - a nice revenue opportunity plus wonderful CSR benefits around poverty alleviation.

Setting up services of this kind, however, can be challenging. The last time I heard this discussed at a conference (East Africa Com in Kenya this April), delegates were asking questions about regulatory complexity and about to what degree securing the necessary participation of established financial institutions was going smoothly.

Bearing this in mind, it is perhaps worth noting that while Zain's announced partnership with Western Union sounds exciting, much of the text refers to this being a work in progress - not yet fully operational and subject to regulatory clearance in countries worldwide.

This leads me to wonder whether it would be sensible to dedicate considerable efforts to this venture if up to sixteen of the operations in which the service will work are really to be sold in the near future.

Another initiative possibly set to do wonders for Zain's image as an organisation committed to improving lives in Africa was announced only days ago. Dubbed "Weather Info for All", this involves Zain, Ericsson, the Global Humanitarian Forum and the World Meteorological Organization. The aim is to "radically improve Africa’s weather monitoring network in the face of the growing impact of climate change," which is said to be responsible for some 300,000 deaths worldwide each year and over USD 100 billion of economic losses, mainly because of shocks to health and agricultural productivity. As the Weather Info for All announcement indicates, "Sub-Saharan Africa accounts for close to a quarter of these losses, and is the region at the most immediate risk of droughts and floods."

Africa suffers not only from the effects of these adverse weather conditions, but also from a dearth of reliable information about when and where disaster is likely to strike. This is due to the continent having a weather monitoring network eight times below the WMO minimum recommended standard, and less than 200 weather stations that meet WMO observation requirements, compared to several thousand each in Europe, North America, and parts of Asia.

The Weather Info for All initiative is aimed at adding 5000 weather stations across Africa. Zain has got the ball rolling by providing access to tower sites in Kenya, Tanzania and Uganda.

Mobile network infrastructure provides an unrivaled wealth of support for weather stations - connectivity, power supply and security.

Ericsson, meanwhile, will develop mobile applications to help communicate weather information via mobile phones to the vulnerable communities whose lives can be wrecked by adverse conditions.

I know less about the levels of investment and commitment required of Zain with regard to the Weather for All Initiative than I do about the amount of hard work needed to roll out mobile financial services for the unbanked. Both initiatives, however, have in common a sense of being long term endeavours. Again, I ask whether all of this activity might suggest that the sale of Zain's African operations is rather unlikely.

Zain Africa Speculation Watch: Episode 6

Indian mobile giant continues to diversify and considers reorganisation

Mobile entertainment? Or highly practical applications designed to assist people out of extreme poverty? Last month I pondered the question of which of these is most likely to grow strongly in emerging markets.

In a recent interview with the Economic Times, Bharti Airtel Deputy CEO Sanjay Kapoor made the case for the giant Indian cellco becoming a major player in both areas. Certainly, the MNO is keen to be much more than a provider of highly commoditised voice and SMS. Says Kapoor: "we are moving away from share of telecoms to share of the customer’s wallet. We will do so by being in a position to offer a wide array of services."

Bharti Airtel is, according to Kapoor, "already the largest music company in the country" selling "more music than any other music company - both, in revenues and, volumes".

In terms of services aimed at India's poorer citizens, Bharti Airtel sees "a big opportunity in banking, says Kapoor, notiing that "about 85% of the country’s population is unbanked."

Diversifying the business may call for changes to the way in which the company is organised. In March, Global Mobile Daily noted that the operator is planning to split its business into separate operating units, according to local reports. That article stated that the firm would reportedly appoint new CEOs to each of nine operating units, which would include separate units for its mobile, broadband and DTH businesses.

Indian mobile giant continues to diversify and considers reorganisation

Cellcos banking on m-financial services in tough 2009?

I recently made reference to the Mobile World Congress preview written by my former colleague, Informa Telecoms & Media Chief Research Officer Mark Newman. Mark's article was in large part dedicated to wondering about how tech vendors would be able to balance showcasing next generation mobile broadband technology with addressing operators' concerns about the need control costs in response to the global economic downturn. Right at the end of the article, however, Mark found the time to say that he felt growth potential in emerging markets will remain a theme of so this year's event, adding that discussions could centre on mobile banking.

There does seem to have been plenty of activity in this area of late, across a wide range of emerging markets. Yesterday's Cellular News email carried a highly relevant article about UK-based Monitise, which says that it has been awarded US$1.5 million by the Africa Enterprise Challenge Fund (AECF) to help fund the launch of its mobile banking and payments service in East Africa.

Monitise East Africa will initially offer services in Uganda and then plans to expand into Burundi, the Democratic Republic of Congo, Ethiopia, Kenya, Rwanda, Tanzania and Zambia. The service will enable the provision of banking, payment and money transfer services by both banks and mobile networks, within the regulatory framework of each market. Hugh Scott of AECF said: "By helping enterprises to build successful businesses in Africa, we believe that we can make market systems work better and generate wealth that benefits the entire society. Through the extension of the reach of the banks and allowing people to save, make payments and transfer money to their families, we believe that Monitise East Africa has the potential to transform the economic outlook for literally millions of people. I also firmly believe that in due course many of the people who use the service will, through the empowerment that a savings and payments culture delivers, become business people themselves, creating a truly sustainable economy."

The cellular news piece mentioned that the news from Monitise and AECF coincides with a recent launch by the UK's Department for International Development of a £1.4 million fund to spur the development of biometric and mobile phone-based banking in emerging economies in Asia and Africa. Known as Facilitating Access to Financial Services through Technology (FAST), this project will explore the options for introducing 'branchless banking' in developing countries and look at how technologies such as mobile phone banking can help the poor to access financial services.

Also in the news in recent months have been related operator-led initiatives - or at least initiatives in which certain MNOs are key partners. Again with reference to East Africa, I read a Global Mobile Daily new item just this week about Zain launching mobile banking services in Kenya and Tanzania in partership with Citigroup and Standard Chartered. Branded 'Zap', this service is also set to be extended to Uganda. Zain intends to offer the mobile banking service as part of 'One Network' allowing subscribers to send airtime to each other across Kenya, Tanzania and Uganda without roaming charges. 'Zap' is supported on all devices including ultra low cost handsets (ULCH) which are especially popular in Africa.

I also noticed last month, again courtesy of Global Mobile Daily, that in the same region, Rwandatel, the Rwanda-based unit of Libya's LAP Green will launch a mobile banking and cash transfer service in October 2009, according to reports, allowing subscribers to send and receive money via SMS. The operator has a target of 600,000 subscriptions by the middle of 2009. My feeling is that the low level of mobile penetration in the country (13.36% at y.e. 2008, according to WCIS) will be something of a stumbling block. I daresay that higher rates of penetration in some of the other markets mentioned here will mean that the benefits of mobile banking will spread faster elsewhere.

Ugandan incumbent telco, Uganda Telecom, meanwhile, has selected software developer Redknee to provide its 'Mobile Money 2.0' mobile money transfer solution, according to a Global Mobile Daily article this week, which reports: "Redknee's new Mobile Money 2.0 service will aim to allow subscribers to store and transfer money through their mobile device, and will be targeted at rural communities with poor or limited banking resources. Implementation of the solution will begin as soon as all requirements for launching the service have been approved, and will initially be available for subscribers making domestic payments and transfers, before being expanded to microfinance initiatives."

While there is plenty of mobile banking news coming out of East Africa, Francophone West Africa has seen fewer developments. In December, Global Mobile Daily reported that Orange, together with French bank BNP Paribas, will launch its Orange Money service in Côte d'Ivoire, apparently the first mobile-based payment and money transfer service in Western Africa, according to the operator.

This claim seems a little strange given that around a month earlier, GMD reported that Senegal's Sonatel is to offer the Orange Money mobile money transfer service in the country in partnership with banking group BICIS.

As a UK citizen, currently resident in my home country, and as someone who has lived in Poland, I could not have failed to notice this decade's westward movement of people from the EU accession countries of Central and Eastern Europe. When I returned from Kraków in 1997 after four enjoyable years working there, I initially found it frustrating to have very few opportunities to practise speaking the Polish language, with which I'd made some headway in my time away from home. In the years that followed, it soon became that case that not a day would pass without having the chance to chat with someone po polsku, be it a colleague in the office, the guy delivering groceries, the lady serving me coffee on the way to work or the carpenter quoting me a (very good) price to build a bookcase. It felt like Polska had followed me across the Baltic en masse. I love it that I can buy a jar of bigos and a packet of pierogi z mięsem on the high street of the SE England commuter town where I now live. It also makes me smile to travel along London's Finchley Road and see Polish language bus shelter advertisements for money remittance services. My guess is that a good proportion of the monies earned by the grocery van driver, the coffee shop lady and the carpenter have been sent back to Poland to support families there.

In December, the UK's NatWest bank gave these members of our large Polish migrant community a new option - send money to Poland from the ‘Polish Welcome Account' via a mobile money transfer service. Maybe it's a pity that this service was not launched sooner. My feeling is that the number of Poles working in the UK is set to fall rather than rise. That said, a Banking Times article of 23rd December indicates that Polish migrant workers send an estimated £1 billion a year to their homeland.

Migrant workers sending money home via mobile remittance services could be one of the m-financial services applications with the best prospects. Of these, I would guess that the new international version of Safaricom's M-Pesa services may become one of the most widely known.
M-Pesa, developed in partnership with Vodafone, has just netted another award at Mobile World Congress. Receiving the awards, Safaricom CEO Michael Joseph said: “We are very proud of the M-Pesa service. It continues to impact positively on the millions of Kenyans who have no access to banking services."

Now, in addition to Safaricom subscribers being able to transfer money and make payments within their home country, they can now take advantage of an international money transfer service between Kenya and the UK. According to a Global Mobile Daily article back in December, users of the service will be able to send money from Western Union agents in the UK to subscribers to Safaricom's M-Pesa mobile money transfer service.

Hot off the press today is news of further investment in an MVNO set up specifically to leverage the demand for international remittance services for migrant workers. Japan's Sumitomo Corporation today announced its involvment in Malaysia's first-ever MVNO, Merchantrade Asia Sdn Bhd, whose focus is prepaid mobile and remittance services targeting foreign workers, from Bangladesh, Indonesia, Nepal, the Philippines, Vietnam, India and Sri Lanka. The press release indicates that in Malaysia there are over 2 million foreign workers in various industries such as construction, plantation, manufacturing and service sector.

Merchantrade launched its mobile service in mid 2007 and as of January 2009, it has 94,000 active subscribers, according to the press relase, which continues: "as for the remittance service, Merchantrade obtained the license to operate remittance business from Central Bank of Malaysia in 2007. One of the pioneer non-bank organizations to receive license to operate remittance business in Malaysia, Merchantrade outbound remittance transaction numbers is growing aggressively. Such remittance service is in line of the global efforts targeting to secure the transparency on the personal remittance."

All of the above suggests that Mark Newman is not too far wide of the Mark in tipping mobile financial services in emerging markets as a bright spot in a tough 2009.

Cellcos banking on m-financial services in tough 2009?