Connecting Asia’ s poor through the “budget telecom network Connecting Asia s poor through the budget telecom network model”: Innovations, challenges and opportunities 2011 International Conference on mobile business (ICMB) Como, 20 June 2011 Ayesha Zainudeen Based on research conducted for Nokia, as well as research supported by funds from the International Development Research Centre, Canada and UKaid from the Department for International Development, UK, with contributions from Telenor Research and Development Centre, Sdn. Bhd.
Transcript
Connecting Asia’s poor through the “budget telecom networkConnecting Asia s poor through the budget telecom network model”: Innovations, challenges and opportunities
2011 International Conference on mobile business (ICMB)
Como, 20 June 2011,
Ayesha Zainudeen
Based on research conducted for Nokia, as well as research supported by funds from the International Development Research Centre, Canada and UKaid from the Department for International Development, UK, with contributions from Telenor Research and Development Centre, Sdn. Bhd.
OverviewOverview
• Mobile is dominating communication channels in developing g p gmarkets, even among the poor
• Operators in these markets have been able to get service cost d t b l USD5 ( l ) t bl th t tdown to below USD5 (even lower) to enable them to get connected; how?
• Innovations driven by intense competition; the evolution of y p ;the “budget telecom network model”
Bottom of the pyramid, l l bl d d ka large, valuable, under‐tapped market
• Lowest socio‐economic groupsg p– Roughly living on USD2 per day
– SEC D + E (LIRNEasia)
M i littl t• Many consumers consuming little amounts – Estimated 3 billion, globally
• Many opportunities for companies (as well as consumers)y pp p ( )
3
SOME INSIGHTS FROM ASIA'S BOP
4
Most have used a phone in the last 3 monthsMost have used a phone in the last 3 months
95% 96%
Use of the phone (% of BOP [outer sample])
Have used phone in last three months Have used a phone in last week
95% 96%86% 88%
79% 77%82%66% 65%
77%
38%
72%
Bangladesh Pakistan India Sri Lanka Philippines Thailand g pp
Among BOP
BOP make about 1 call per dayBOP make about 1 call per day
A b f ll k
1220
25
30
Average number of calls per week
8 8 915
9 6 67
12
5
10
15
20
8 8 7 9210
5
Bangladesh Pakistan India Sri Lanka Philippines Thailand
Non‐owners can get to a phone in ~5 minutes (walking)Non owners can get to a phone in 5 minutes (walking)
Time to reach the nearest phone (% of BOP non owner teleusers)
80%
100%
Time to reach the nearest phone (% of BOP non‐owner teleusers)
> 60 minutes
45‐60 minutes
30‐45 minutes
20%
40%
60% 15‐30 minutes
10‐15 minutes
5‐10 minutes
3‐5 minutes
0%
Bangladesh Pakistan India Sri Lanka Philippines Thailand
2‐3 minutes
< 2 minutes
• Over half have access within house (mostly via other household members’ mobiles)
Among BOP non‐owner teleusers
Even those that don’t ownmobiles already use themEven those that don t ownmobiles already use them
95 90
5976 74 69
ICT use and ownership (% of BOP)
Use a mobile Own a mobile Use the Internet Own a computer
59 5241 37 34 32
50
1 2 1 316 18
0 3 1 4 112
• Many not even heard of the Internet!
Bangladesh Pakistan India Sri Lanka Philippines Thailand
Among BOP
Many non‐owners planned to get connected within 1 f l bilyear from survey; mostly to mobile
Type of phone planning to buy (% of potential BOP owners)
0% 0% 1% 6%0%0% 2% 1%
33%
0% 0%2% 1% 0% 1% 0% 0%0% 4% 5% 3% 5% 0%
yp p p g y ( p )
Mobile Fixed (wireline) Fixed (wireless) Fixed (undecided) Not decided
98% 93% 92%
58%
89% 100%6%
33%
Bangladesh Pakistan India Sri Lanka Philippines Thailand
• Many would like to get mobiles with coloured screens, cameras, radios and torches• Some demand for SMS and MMS capabilities, Internet and Bluetooth in PH and TH
Among BOP non‐owner teleusers planning to get connected
HOW WERE OPERATORS ABLE TO SERVE THIS SEGMENT?
10
South Asian operators saw the opportunity and fbrought down total cost of ownership
Monthly total cost of ownership (2007)
Includes:• Calls and SMS• Monthly rentals• 1/36th of connection charges • 1/36th retail cost of cheapest Nokia handset• Direct taxes (handset and service)• Internet premium (2010 onwards)
Source: Nokia, 2007; TCO for 77 emerging economies
...others followed...others followed
Total cost of ownership (2009)Total cost of ownership (2009)
Source: Nokia, 2009; TCO for 77 emerging economies
Monthly TCO compares cost of same bundleMonthly TCO compares cost of same bundle
• Basket of OECD low‐user calls and SMS for prepaidBasket of OECD low user calls and SMS for prepaid user
• Monthly rentalsy
• 1/36th of connection charges
• 1/36th retail cost of cheapest available Nokia handset1/36 retail cost of cheapest available Nokia handset
• Direct taxes (handset and service)
• Internet premium (2010 onwards)Internet premium (2010 onwards)
High EBITDA margins, suggesting new business model
Operators managed to get TCOs down (and f )make profits) by innovation
• The “budget telecom network model”The budget telecom network model
• Innovation driven by intense competition– In spite of poor policy/regulatory environmentIn spite of poor policy/regulatory environment
– Key factor was removal of barriers to market entry (transparent or not) where there are enough players, with
f h l b i illi i di ione of them at least being willing to engage in disruptive competition
– Operators forced out of comfort zones, forced to innovateOperators forced out of comfort zones, forced to innovate
Better utilization of existing networkBetter utilization of existing network
• Increased network utilization levels to accommodateIncreased network utilization levels to accommodate higher traffic volumes– Base‐station software updates to improve utilization
– Network capacity expanded on call attempts/second‐basis, rather than subscriber‐basis
Catering better to consumers with low‐incomes and low, irregular spending patterns
• Prepaid solutions better matched BOP income andPrepaid solutions better matched BOP income and spending patterns
% of BOP mobile owners
Bangladesh Pakistan India Sri Lanka Philippines Thailand
Prepaid connection 99 99 98 95 100 98
d
• Shift away from large‐denomination scratch‐cards
Postpaid connection 1 1 2 5 0 2
Shift away from large denomination scratch cards toward any‐amount micro‐top‐ups
Among BOP mobile owners
Owners spend little, but often; micro‐top‐ups used id lwidely
Bangladesh Pakistan India Sri Lanka Philippines Thailanda g ades a sta d a S a a pp es a a d
Last top‐up (USD) 0.50 0.87 1.71 1.26 0.65 2.49
No. of days expected to l
4 7 13 12 2 11last
4 7 13 12 2 11
Scratch cards vs electronic top‐up usage (% of BOP prepaid mobile owners)
88 879696
74
95
Scratch card Electronic top‐ups
41
65
5
74
23
5238
Bangladesh Pakistan India Sri Lanka Philippines Thailand
Among BOP prepaid mobile owners
Reducing customer acquisition and retention costs
• Distribution costs cut by controlling level ofDistribution costs cut by controlling level of commissions paid out to dealers who acquire customers– E.g., acquisition cost of USD1 in LK; no commission paid unless subscriber stayed on network for certain period.
Concluding thoughts:
EXTENDING THE BTNM, BEYOND ASIA? BEYOND VOICE?
60 BTNM spreading beyond Asia; data costs still hi h i l
50
Monthly total cost of ownership (2010)
high in some places
30
40
onth
20
30
USD
per mo
10
Ave: USD 11.47
Ave with Internet premium: USD 15.05
5
0
angladesh
Sri Lanka
China
Pakistan
India
zbekistan
Kenya
Egypt
Vietnam
Sudan
Iran
Ethiop
iaCambo
dia
Thailand
Ghana
Ugand
aTanzania
Haiti
Indo
nesia
Algeria
hilippine
sTunisia
Bolivia
uatemala
zambiqu
eNigeria
Sene
gal
AVERA
GE
Syria
Hon
duras
te d'Ivoire
azakhstan
Ecuado
r Rep
ublic
Guine
auth Africa
adagascar
Angola
Zimbabw
erkina Faso
DRC
Colombia
Zambia
Malaw
iCh
ileCameroo
nMorocco
Turkey
Chad
Argen
tina
Peru
Brazil
5
Ba U C I Ph GMoz
Côt Ka
Dom
inican Sou
Ma Z
Bur C A
Monthly TCO(USD)
Internet premium(USD) Source: Nokia, 2011; TCO for 50 emerging economies
BOP mobile use mostly voice, SMS and missed calling; mobile Internet and applications yet tocalling; mobile Internet and applications yet to pick up
BD PK IN LK PH TH
Rerly
No
regrly
Rerly
No
regrly
Rerly
No
regrly
Rerly
No
regrly
Rerly
No
regrly
Rerly
No
regrlyegulay ot gulay egulay ot gulay egulay ot gulay egulay ot gulay egulay ot gulay egulay ot gulay
• Too expensiveWh th ' il bl f i th d• When they're available free via other modes
• Insufficient prepaid credit for transactions
Dinn | Automobile mechanic15 years | Jae Hom, Thailand
• Previously subscribed to sports news on his mobile, until he felt that the service was not worth spending on, since the same information is available for free on the TV and Internet.
• Tried using the Internet on his mobile, but he lost all his credit (THB50) in less than 5 minutes. He no longer uses it on his mobile Instead he goeson his mobile. Instead, he goes to a cyber café and downloads ringtones, wallpapers and themes for his mobile and uploads his mobile photos to hi i h i ihis Hi5 page. A two hour visit only costs him THB20.
Some variant of BTNM is what’s likely to work wrt data connectivity
• Depends on, inter aliaDepends on, inter alia– release of 3G frequencies
– Reduction in opex (incl. backhaul costs)
– service pricing
– relevant services
– device pricing
www.lirneasia.net (search term: BOP)
Teleuse@BOP3 dataset available at http://lirneasia.net/projects/2008‐2010/bop‐teleuse‐3/ TCO data: Nokiah lPhotos: CKS Consulting
