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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.

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Barriers for increasing mobile phone penetration in emerging markets

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  1. 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

  2. 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

  3. 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

  4. 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 Why some countries are better than the others??

  5. 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

  6. Results (1/3)

  7. Results (2/3) • More simplified picture where “traffic lights” are evaluated with points • 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:

  8. 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

  9. 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

  10. Thank you…

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