Transcript Barriers for increasing mobile phone penetration in emerging markets

Barriers for increasing mobile phone penetration in
emerging markets
Goal:
Identify factors that affect most to mobile phone penetration in emerging markets.
Scope:
Consisted of 18 emerging markets.
To who:
Study to Nokia entry business line.
Mikko Kielinen
Global cellular markets
•Market growth in develop markets slow
•Developing countries has big potential
•Characters of developing countries:
Lower ARPU
Low low end phones
Big customer base
Parties involved
• Market regulator
• Maximizes social profit by controlling the whole market
Cherish effective competiton
Control the operators (interconnection, optimizes scarce resources…)
• Cellular operators
• Attract customers whose ARPU is less than 5€/month
Manage costs
Services to attract these groups
• Mobile phone manufacturers
• Average cost per terminal below 50€
Manage costs
In order to increase mobile phone penetration market players have to adjust these conditions
Why some countries succeed better than others?
• Mobile phone penetration is correlated heavily to wealth
But:
•Saudi Arabia (7706€!!!) and Philippines (787€) have the same penetration.
•Thailand (40%) and Iran (5%) have the same GDP/Capita
50
Etelä-Afrikka
Turkki
45
Thaimaa
Matkapuhelintiheys (%)
40
Venäjä
Saudi Arabia
35
Filippiinit
30
Meksiko
Brasilia
25
Kiina
20
Kolumbia
Indonesia
15
Egypti
10
Iran
Vietnam
5
Why some countries are better
than the others??
Nigeria
0
Intia
0
1000
2000
3000
4000
5000
BKT/Asukasluku (€)
6000
7000
8000
Pakistan
Bangladesh
Study
Methods
• Interviews and literature survey
• Contacts as close as possible from these countries
• 32 contacts
• Market attributes to measure market conditions
• 17 attributes
• Divided to between all market parties (regulator, operator and terminal manufacturers)
• So, 18 markets each of them having 17 market attributes.
• All of these attributes were evaluated with “traffic light”
• Most important attributes are discovered by comparing these “traffic lights” to mobile
phone penetration and wealth.
• These results are also compared to growth in penetration during summer 2004 –
summer 2005
Results (1/3)
Regulatory drivers
Interconnection charges
Number of operatoes
Foreign direct investment
WTO membership
Vietnam
4,2%
17,9% Colombia
Egypt
8,5%
39,8% Thailand
44,0% Turkey
Pakistan
2,8%
31,5% Philippines
31,5% Mexico
32,5% Saudi Arabia
?
Operator business model drivers
Service tax
Call tariffs
minutes for 5% of monthly GDP/capita
Calling to other operators network
SMS tariffs
x sms for 5% of monthly GDP/capita
Denominations
Availability of eRefill
Calling Party Pays-scheme
Population coverage
Bangladesh
Iran
5,1%
?
Affordable terminal availability
Financing for terminals
Sales tax
Custom duties
2,0%
Nigeria
3,7%
44,7% South Africa
Indonesia
9,9%
33,4% Russia
India
30,2% Brazil
Current penetration:
3,5%
PENETRATION CONTRIBUTOR
22,0% China
By: Mikko Kielinen
Results (2/3)
•More simplified picture where “traffic lights” are evaluated with points
Country
Penetration 2004
GDP/Capita
Points
Philippines
31.5%
787 €
43
Thailand
39.8%
2 008 €
41
India
3.5%
491 €
40
Indonesia
9.9%
821 €
39
Iran
5.1%
1 748 €
36
Vietnam
4.2%
427 €
36
Mexico
31.5%
4 926 €
35
South Africa
44.7%
3 325 €
35
Columbia
17.9%
1 632 €
35
China
22.0%
1 032 €
34
Turkey
44.0%
3 316 €
34
Nigeria
3.7%
329 €
34
Egypt
8.5%
801 €
33
Saudi Arabia
32.5%
7 706 €
33
Bangladesh
2.0%
310 €
32
Brazil
30.2%
2 422 €
31
Pakistan
2.8%
415 €
31
Russia
33.4%
3 105 €
29
Conclusions:
•Success of Phillippines and Thailand can be seen
from here
•India and Indonesia will have rapid growth in the near
future.
•If the market conditions are not good wealth
compensates this heavily (Russia, Brasil and Turkey)
Points:
Green
3
Yellow
2
Red
1
Results (3/3)
Winners
• Countries where high penetration compared to wealth:
• Light taxation
• Custom duties are small
• Cheap calls
• Micro charging
• Countries where growth was fast during 2004 - 2005:
• High wealth!!
• Expensive calls
• RPP or CPP
• Interconnection charges not based on costs
Losers
• No competion
• Charging of prepaid account expensive
Conclusions
• Competition!!!
• 3 or more equal operators
• Market conditions are more important if the country is poor
• Prepaid connections are must!
• Minimum prepaid account charge value should be small
• Network coverage correlation:
• Network coverage >60%  penetration can be over 5%
• Network coverage >80%  penetration can be over 30%
• Interconnection charges shouldn’t be based on costs
• Calling party pays and Receiving party pays are both allow rapid increase in
penetration
• The effect of tariffs is smaller than expected
Thank you…