I have never thought of myself as any kind of expert on what is mobile telecoms in the Developing World (and yes, I apologize for the term 'Third World' which is often seen as demeaning, my only reason for using it this once, was to have a play on words with 3G. Regular readers of my books and blogs, know that I always refer to that part of the planet where 5.7 billion people live, which is not 'the industrialized world' as the 'Developing World'. I do understand..
But yes, I wrote books on 3G, the 'next generation' for mobile, earlier in this decade. I was the first published aauthor to discuss the 'fourth generation' ie 4G as far back as in 2002, and when the industry started the early discussions of services for that fourth generation, the CTIA invited me to lead the discussion, literally bbeing the first person alive to talk about 'services and applications for 4G' into the public domain - and yes, please do not write to me, we still don't know. We have barely found the first true killer app for 3G (mobile social networking) so lets not talk 4G here. And yes, to be very clear all that bogus hype about WiMax - cannot be 4G, WiMax is an officially recognized wireless telecoms air interface - for 3G (by the ITU, that is literally the 'last word' on anything relating to international telecoms). Don't bother me with WiMax emails or comments, that is not 4G. The fourth generation specification recommendations were just handed into the ITU earlier this month for future ratification. There is nobody today who 'has 4G' as it has not even been decided yet, what it will be, but definitely absolutely positively it cannot be WiMax, so anyone selling you 4G today is conning you big time.
Sorry about the tirade. Now, back to my topic. I often speak at the leading countries of mobile, in Japan, in Finland, in South Korea, in Sweden, in Taiwan and Austria and Singapore etc. I always thought of myself as focusing on that part of our industry, the 'cutting edge' if you will. So it surprises me, how often when I discuss the industry with experts from the Developing World, they seem to think that I am particularly well tuned into their needs, be they SMS text messaging or basic mobile banking or pre-paid phone accounts or second hand phones. Issues such as literacy, lack of electricity and extreme poverty. Of shared phones etc. And of the economics of how mobile telecoms can be viable even in very poor villages, due to family members in the cities carrying the costs of phone calls to their relatives in the villages, etc.
To me these were always areas where 'I am definitely not the expert' and would seek to deflect discussions to anyone who might be more knowledgable of those markets. But increasingly I have found many customers and contacts talking about the telecoms needs of the Developing World. And increasingly, it seems that I have had good answers and ideas. It seems strange to me, as I am not very comfortable about it, and feel I could easily write a book about money-making with 3G, but not about money-making with mobile in the Developing World...
The national interest into 3G - which often appears some months prior to 3G licenses being awarded in a given country - has recently brought me to many countries in the Developing World which are at that threshold. And by accident, I have also recently had several speaking opportunities with other markets that happen to be in the Developing World. This year I have spoken in public in Argentina, Brazil, Chile, Colombia, Egypt, Indonesia, Mexico, Pakistan and Venezuela. By coincidence, that covers Developing World countries on each of the four continents where they exist. Obviously I have many further clients who operate in the Developing World and they often use me for private workshops and seminars, or customer events. The recent heavy exposure to this market area has given me an exceptional exposure to what is on the minds of experts in these countries. What will be the role of smartphones in these markets? How about application development? Mobile banking? Is the phone the fourth screen or actually the first screen, in these markets where mobile phone penetration rates far exceed those of PCs, the traditional internet, banking accounts, newspaper circulations, and even TV sets. Is mobile advertising a viable opportunity, etc etc etc.
As I have been obsessing about the overall mobile opportunity, and collecting the numbers, increasingly I have become inundated with stats and facts about that part of the world, the Developing World, and their mobile needs. And lets put this in context a little bit. Ten years ago, 1999, we, the mobile industry, celebrated 20 years of mobile telecoms and the world had 500 milllion mobile phone subscribers. This year, 2009, we ADDED 500 million NEW subscribers, as the world approaches 4.6 billion mobile subscriptions. The total 'Western World' or more accurately Industrialized World of Europe, the US and Canada, Japan and Industrialized Asia (South Korea, Taiwan, Singapore, Hong Kong etc) and Australia and New Zealand, have pretty exactly 1 billion people. One in seven people on the planet. The other six in seven people - yes 5.7 billion people - live in the Developing World, China has 1.3 billion, India 1.1 billion, and then countries like Indonesia, Russia, Brazil etc have couple of hundred million people each, etc. Africa is another billion.
So we in the Industrialized World have had 'full' mobile phone penetration rates in every country except Canada (they are almost there), which is usually defined at 85% per capita. In reality over 60 countries have passed 100% per-capita penetration rates and in Western Europe there are about 1.5 mobile phone subscriptions per person across the whole continent, and even the USA is nearing 100% per capita penetration rates. When counted against the total planet population, of the people in the Industrialized World, the mobile phone penetration rate is at 109% per capita. That means that most of the growth of the industry is not to Europeans or Americans or Japanese or Australians. It is to the Developing World. Out of the 500 million new subcriptions this year, the vast majority were first-time subscripitions to the Developing World, and then the second biggest part is second subscriptions... to the Developing World (yes, that is a global phenomenon too) and the smallest part is second subscriptions to the Industrialized World (oh, and yeah, a million or two to the few Canadians who didn't have a cellphone yet).
That helps explain why the sudden interest. The Europeans are not adding new subcribers, new users; they are only adding new subscriptions, often without even a second phone - as prepaid accounts - to help optimize their phone traffic costs and take advantage of pricing plans, free minutes etc. The growth is now in India, Africa, China, Brazil etc. Even Russia is already at 130% penetration rates, so Russia has 'grown past its peak opportunity' and is now adding primarily third subscriptions to those who want it..
How about the money? Very roughly speaking mobile telecoms was an 800 billion dollar global industry last year, when only measuring the mobile telecoms service revenues. If we add mobile phone handsets and infrastructure etc income, we would hit 1 Trillion. This year even with the economic decline, I am expecting our total revenues to grow, so service revenues will hit something like 850 billion dollars or so, But yes, lets look at the even 800 billion dollar number. Almost half of that last year came from the Developing World. So 1 billion people in 'the West' paid about 400 billion for their services on mobile, and the other 3 billion in the Developing World paid the other 400 billion. The revenue per subscription (not per user) in the West delivers about 33 dollars per month - so for example for the half of Europeans who have two subcriptions, this is 2x that amount or 66 dollars per month, and when averaged across all Europeans by users to get the industry average "average revenue per user' rather than per subscription, it is pretty much the same level as the Japanese and Americans who mostly tend to still have only one phone account, ie 50 dollars per month.
The revenue per subscription in the Developing World is about 11 dollars per month. Yes, that is the average. It means that essentially every new subscription added today anywhere in the Developing World is now far under that average, and we talk of new customers typically in the 5 dollars per month spending level. Imagine building a business at that kind of economics? These are all prepaid customers, and there is no viable opportunity to offer them an iPhone on a 2 year contract haha, they would be hard pressed to even buy a one dollar app from the Apps Store, as many new first-time phone owners in Africa live on incomes of one dollar per day - yet they sign up to phone accounts. What kind of phones do they have? Most new customers now have used phones, hand-me-down phones from richer relatives, or second-hand phones moved in from richer markets such as Europe and the Middle East. Nokia, Samsung and SonyEricsson GSM phones that are about 2 years old... If they buy new phones, they tend to cost about 50 dollars or less... Bear in mind, the real unsubsidised cost of an iPhone or a Nokia N97 of a Blackberry Bold is about 700 dollars. If you don't get a monthly contract, that is what you have to pay. They have no viable mass market in the Developing World, only for the few ultra-rich that every country does have of course.
We see numbers like in India 30% of mobile phone users never originate voice calls - they may send SMS text messages, but will not make calls. They do accept calls - ie these are then billed to the caller obviously. It brings new opportunities such as the Call Me service I have talked about recently, form Vodacom in South Africa, which is a free text message you can send to your friends or family, and they then call you. It is advertising sponsored and a huge hit in South Africa.
Talking about advertising and media, in India 80% of mobile phone subscribers receive advertising of some kind. This is legitimately not the fourth screen, it is literally the first screen. In anywhere in the Developing World, it is reasonable to treat mobile as the first mass media, not the 7th, as it is by far the widest reaching mass media channel. Vital Analytics measured the Indian market this year and found that 21% of all mobile phone owners in India use paid news services or sports services on their phones. This is more than the total newspaper circulations in the country. No wonder the Economist was using mobile phones as their primary marketing channel to sell the weekly magazine and its subscriptions.
Meanwhile, in China, if we switch from one media type, news, to another, music. A massive 90% of Chinese listen to some kind of music on their phones according to LM McCann. Most of that is 'side-loaded' ie not on an over-the-air download, and usually not paid (pirated music is huge in China), but... 39% of Chinese mobile phone owners have downloaded (paid for) music on their phones. In fact one third of the total Chinese music market is already sold to mobile phones according to the IFPI. What is the most popular music type on Chinese phones? The ringback tone (ie waiting tune).
But mobile telecoms in the Developing World has more issues that have particular needs. Literacy. The UN estimates there are 800 million illiterate people of reading age on the planet. They are almost all in the Develoing World. And what of electricity? Many parts of where mobile telecoms is now going, there is not reliable 24 hour electricity, in parts of their markets, there is no electricity. So customers appreciate big battery lives, spare batteries (removable batteries obviously) and the local mobile operator/carrier stores have many rechargers that customers can use for free to recharge their phones. Some walk for miles to come to a store weekly, just to recharge their phones. Imagine running a business in this kind of environment.
And the lack of other infrastructure. There is no viable landline telecoms environment in most of the cities of that world. There are few personal computers, which are not all connected to the internet. Most internet connections are patchy and unreliable dial-up connections (when did you last test your website for dial-up access haha, did you assume the whole planet has broadband?) and yes, traditional wired broadband, is rare, expensive and unreliable (and slow, and often congested). But mobile broadband is spreading like wildfire to the wealther parts of that world. Mobile broadband? I mean 3G of course, in the wealthier parts of the cities, not WiMax or WiFi.
Banking? Many prospective customers do not have drivers' licences or passports or actually any reliable forms of identification. They don't have regular jobs with registered employers, and often do not even have regular addresses - they may live with relatives as guests, or be migrants or immigrants (legal or illegal) or refugees. So how do you get them 'banked' under traditional banking rules? No way. But suddenly if you offer mobile banking, you can bring banking services to the poorer parts of society, like we saw pioneers Smart Money and G-Cash do for this whole decade in the Philippines. In Kenya in only two years, M-Pesa has cannibalized 46% of the total banking accounts in the country, or in reality, spreaded banking to essentially twice the customer base that the traditional city-based conventional 'real banks' had been able to.
I have many thoughts circling in my head, and many more I need to blog about, from various discussions with friends that I have recently had. Obviously I am running a series of blogs about mobile in the Developing World, including The Gambia and Bangladesh. But if you the reader wanted a short summary of the main issues and statistics about mobile in the Developing World, I have just written another of my "Thought Pieces" - as always, only 2 pages in length, loaded with stats and facts, it summarizes this issue. You can have the pdf file for free, if you write to me at tomi (at) tomiahonen (dot) com.
But yes, I wrote books on 3G, the 'next generation' for mobile, earlier in this decade. I was the first published aauthor to discuss the 'fourth generation' ie 4G as far back as in 2002, and when the industry started the early discussions of services for that fourth generation, the CTIA invited me to lead the discussion, literally bbeing the first person alive to talk about 'services and applications for 4G' into the public domain - and yes, please do not write to me, we still don't know. We have barely found the first true killer app for 3G (mobile social networking) so lets not talk 4G here. And yes, to be very clear all that bogus hype about WiMax - cannot be 4G, WiMax is an officially recognized wireless telecoms air interface - for 3G (by the ITU, that is literally the 'last word' on anything relating to international telecoms). Don't bother me with WiMax emails or comments, that is not 4G. The fourth generation specification recommendations were just handed into the ITU earlier this month for future ratification. There is nobody today who 'has 4G' as it has not even been decided yet, what it will be, but definitely absolutely positively it cannot be WiMax, so anyone selling you 4G today is conning you big time.
Sorry about the tirade. Now, back to my topic. I often speak at the leading countries of mobile, in Japan, in Finland, in South Korea, in Sweden, in Taiwan and Austria and Singapore etc. I always thought of myself as focusing on that part of our industry, the 'cutting edge' if you will. So it surprises me, how often when I discuss the industry with experts from the Developing World, they seem to think that I am particularly well tuned into their needs, be they SMS text messaging or basic mobile banking or pre-paid phone accounts or second hand phones. Issues such as literacy, lack of electricity and extreme poverty. Of shared phones etc. And of the economics of how mobile telecoms can be viable even in very poor villages, due to family members in the cities carrying the costs of phone calls to their relatives in the villages, etc.
To me these were always areas where 'I am definitely not the expert' and would seek to deflect discussions to anyone who might be more knowledgable of those markets. But increasingly I have found many customers and contacts talking about the telecoms needs of the Developing World. And increasingly, it seems that I have had good answers and ideas. It seems strange to me, as I am not very comfortable about it, and feel I could easily write a book about money-making with 3G, but not about money-making with mobile in the Developing World...
The national interest into 3G - which often appears some months prior to 3G licenses being awarded in a given country - has recently brought me to many countries in the Developing World which are at that threshold. And by accident, I have also recently had several speaking opportunities with other markets that happen to be in the Developing World. This year I have spoken in public in Argentina, Brazil, Chile, Colombia, Egypt, Indonesia, Mexico, Pakistan and Venezuela. By coincidence, that covers Developing World countries on each of the four continents where they exist. Obviously I have many further clients who operate in the Developing World and they often use me for private workshops and seminars, or customer events. The recent heavy exposure to this market area has given me an exceptional exposure to what is on the minds of experts in these countries. What will be the role of smartphones in these markets? How about application development? Mobile banking? Is the phone the fourth screen or actually the first screen, in these markets where mobile phone penetration rates far exceed those of PCs, the traditional internet, banking accounts, newspaper circulations, and even TV sets. Is mobile advertising a viable opportunity, etc etc etc.
As I have been obsessing about the overall mobile opportunity, and collecting the numbers, increasingly I have become inundated with stats and facts about that part of the world, the Developing World, and their mobile needs. And lets put this in context a little bit. Ten years ago, 1999, we, the mobile industry, celebrated 20 years of mobile telecoms and the world had 500 milllion mobile phone subscribers. This year, 2009, we ADDED 500 million NEW subscribers, as the world approaches 4.6 billion mobile subscriptions. The total 'Western World' or more accurately Industrialized World of Europe, the US and Canada, Japan and Industrialized Asia (South Korea, Taiwan, Singapore, Hong Kong etc) and Australia and New Zealand, have pretty exactly 1 billion people. One in seven people on the planet. The other six in seven people - yes 5.7 billion people - live in the Developing World, China has 1.3 billion, India 1.1 billion, and then countries like Indonesia, Russia, Brazil etc have couple of hundred million people each, etc. Africa is another billion.
So we in the Industrialized World have had 'full' mobile phone penetration rates in every country except Canada (they are almost there), which is usually defined at 85% per capita. In reality over 60 countries have passed 100% per-capita penetration rates and in Western Europe there are about 1.5 mobile phone subscriptions per person across the whole continent, and even the USA is nearing 100% per capita penetration rates. When counted against the total planet population, of the people in the Industrialized World, the mobile phone penetration rate is at 109% per capita. That means that most of the growth of the industry is not to Europeans or Americans or Japanese or Australians. It is to the Developing World. Out of the 500 million new subcriptions this year, the vast majority were first-time subscripitions to the Developing World, and then the second biggest part is second subscriptions... to the Developing World (yes, that is a global phenomenon too) and the smallest part is second subscriptions to the Industrialized World (oh, and yeah, a million or two to the few Canadians who didn't have a cellphone yet).
That helps explain why the sudden interest. The Europeans are not adding new subcribers, new users; they are only adding new subscriptions, often without even a second phone - as prepaid accounts - to help optimize their phone traffic costs and take advantage of pricing plans, free minutes etc. The growth is now in India, Africa, China, Brazil etc. Even Russia is already at 130% penetration rates, so Russia has 'grown past its peak opportunity' and is now adding primarily third subscriptions to those who want it..
How about the money? Very roughly speaking mobile telecoms was an 800 billion dollar global industry last year, when only measuring the mobile telecoms service revenues. If we add mobile phone handsets and infrastructure etc income, we would hit 1 Trillion. This year even with the economic decline, I am expecting our total revenues to grow, so service revenues will hit something like 850 billion dollars or so, But yes, lets look at the even 800 billion dollar number. Almost half of that last year came from the Developing World. So 1 billion people in 'the West' paid about 400 billion for their services on mobile, and the other 3 billion in the Developing World paid the other 400 billion. The revenue per subscription (not per user) in the West delivers about 33 dollars per month - so for example for the half of Europeans who have two subcriptions, this is 2x that amount or 66 dollars per month, and when averaged across all Europeans by users to get the industry average "average revenue per user' rather than per subscription, it is pretty much the same level as the Japanese and Americans who mostly tend to still have only one phone account, ie 50 dollars per month.
The revenue per subscription in the Developing World is about 11 dollars per month. Yes, that is the average. It means that essentially every new subscription added today anywhere in the Developing World is now far under that average, and we talk of new customers typically in the 5 dollars per month spending level. Imagine building a business at that kind of economics? These are all prepaid customers, and there is no viable opportunity to offer them an iPhone on a 2 year contract haha, they would be hard pressed to even buy a one dollar app from the Apps Store, as many new first-time phone owners in Africa live on incomes of one dollar per day - yet they sign up to phone accounts. What kind of phones do they have? Most new customers now have used phones, hand-me-down phones from richer relatives, or second-hand phones moved in from richer markets such as Europe and the Middle East. Nokia, Samsung and SonyEricsson GSM phones that are about 2 years old... If they buy new phones, they tend to cost about 50 dollars or less... Bear in mind, the real unsubsidised cost of an iPhone or a Nokia N97 of a Blackberry Bold is about 700 dollars. If you don't get a monthly contract, that is what you have to pay. They have no viable mass market in the Developing World, only for the few ultra-rich that every country does have of course.
We see numbers like in India 30% of mobile phone users never originate voice calls - they may send SMS text messages, but will not make calls. They do accept calls - ie these are then billed to the caller obviously. It brings new opportunities such as the Call Me service I have talked about recently, form Vodacom in South Africa, which is a free text message you can send to your friends or family, and they then call you. It is advertising sponsored and a huge hit in South Africa.
Talking about advertising and media, in India 80% of mobile phone subscribers receive advertising of some kind. This is legitimately not the fourth screen, it is literally the first screen. In anywhere in the Developing World, it is reasonable to treat mobile as the first mass media, not the 7th, as it is by far the widest reaching mass media channel. Vital Analytics measured the Indian market this year and found that 21% of all mobile phone owners in India use paid news services or sports services on their phones. This is more than the total newspaper circulations in the country. No wonder the Economist was using mobile phones as their primary marketing channel to sell the weekly magazine and its subscriptions.
Meanwhile, in China, if we switch from one media type, news, to another, music. A massive 90% of Chinese listen to some kind of music on their phones according to LM McCann. Most of that is 'side-loaded' ie not on an over-the-air download, and usually not paid (pirated music is huge in China), but... 39% of Chinese mobile phone owners have downloaded (paid for) music on their phones. In fact one third of the total Chinese music market is already sold to mobile phones according to the IFPI. What is the most popular music type on Chinese phones? The ringback tone (ie waiting tune).
But mobile telecoms in the Developing World has more issues that have particular needs. Literacy. The UN estimates there are 800 million illiterate people of reading age on the planet. They are almost all in the Develoing World. And what of electricity? Many parts of where mobile telecoms is now going, there is not reliable 24 hour electricity, in parts of their markets, there is no electricity. So customers appreciate big battery lives, spare batteries (removable batteries obviously) and the local mobile operator/carrier stores have many rechargers that customers can use for free to recharge their phones. Some walk for miles to come to a store weekly, just to recharge their phones. Imagine running a business in this kind of environment.
And the lack of other infrastructure. There is no viable landline telecoms environment in most of the cities of that world. There are few personal computers, which are not all connected to the internet. Most internet connections are patchy and unreliable dial-up connections (when did you last test your website for dial-up access haha, did you assume the whole planet has broadband?) and yes, traditional wired broadband, is rare, expensive and unreliable (and slow, and often congested). But mobile broadband is spreading like wildfire to the wealther parts of that world. Mobile broadband? I mean 3G of course, in the wealthier parts of the cities, not WiMax or WiFi.
Banking? Many prospective customers do not have drivers' licences or passports or actually any reliable forms of identification. They don't have regular jobs with registered employers, and often do not even have regular addresses - they may live with relatives as guests, or be migrants or immigrants (legal or illegal) or refugees. So how do you get them 'banked' under traditional banking rules? No way. But suddenly if you offer mobile banking, you can bring banking services to the poorer parts of society, like we saw pioneers Smart Money and G-Cash do for this whole decade in the Philippines. In Kenya in only two years, M-Pesa has cannibalized 46% of the total banking accounts in the country, or in reality, spreaded banking to essentially twice the customer base that the traditional city-based conventional 'real banks' had been able to.
I have many thoughts circling in my head, and many more I need to blog about, from various discussions with friends that I have recently had. Obviously I am running a series of blogs about mobile in the Developing World, including The Gambia and Bangladesh. But if you the reader wanted a short summary of the main issues and statistics about mobile in the Developing World, I have just written another of my "Thought Pieces" - as always, only 2 pages in length, loaded with stats and facts, it summarizes this issue. You can have the pdf file for free, if you write to me at tomi (at) tomiahonen (dot) com.
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