Posts Tagged ‘mobile phones’

2017 is the Year Mobile Service Operators Became Banks

South African business headlines read MTN takes on Vodacom for title of Africa’s biggest digital bank and usher in a whole new era for banking and finance on the mobile platform. Having watched this space impatiently for more than a decade, seeing this was a landmark worth noting.

The number of mobile-money customers in the region (Africa) is growing rapidly, having surpassed the number of traditional bank accounts in 2015 to reach 277 million by the end of last year, according to GSMA. ~ Moneyweb, 3rd November 2017

Here’s a curated selection of my journey watching the phone become a bank:

Photograph of Nairobi billboard taken January 2016 by Niti Bhan

Blowin’ in the Wind – perspective, May 2007

A User Centered Approach to Banking the Unbanked in Rural India (PDF, entire process) – January 2007

Pondering the Mobile Innovation Divide – perspective, December 2007

African Potential meets Indian Experience – perspective, May 2008

The Telco and the Bottom of the Pyramid – perspective, January 2009

Systems Thinking Applied To Why M-Pesa’s Economic Impact and Wealth Creation Lessons Affects the Entire Ecosystem – Afrinnovator, March 2012

What is The Prepaid Economy anyway? – 14.7.14, in response to Michael Kimani

Banking Opportunities in Africa – The Banker’s Association of South Africa, 2014

A bank meets a telco – how mobile banking is changing the landscape of financial services in Africa – The Prepaid Economy: African Edition, January 2016

The end of an era: Where next for the big smartphone brands of today?

mobiles ericson

Africa’s marathon to catch up with the rest of the world in terms of connectivity and access is now a sprint to the finish line. Ericsson’s latest report shows penetration rates on the continent have overtaken India.

The market we began our careers in has now, not only matured, but is expected to cross 100% penetration within 5 years. I’d say that is conservative guess, based on what I’ve seen over the past 10 years that I’ve been watching mobiles in emerging markets and the erstwhile bottom of the pyramid.

Market forces are simultaneously creating another perfect storm. This time, its the handset makers and the big brands we’ve become accustomed to watching. Their time in the sun is over, as the market maturity curve shows a downward trend.

The smartphone industry grew at a single-digit rate this year for the first time, according to data from IDC. Just two years ago, the industry was expanding at a breakneck 40 per cent.

Two years ago, I predicted this day. I wonder if any of the manufacturers had the foresight to change gears back then, given the amount of time it takes to get new products, developed from scratch, to market.

Second, first-time buyers in emerging markets will power growth. Handset shipments in the Middle East and Africa rose 50 per cent year on year in 2015, IDC estimates. Chinese groups Xiaomi and Huawei — which catapulted to third place in shipments this year — have just entered those markets selling budget phones. Fierce battles are also playing out in India, where locals Micromax and Intex are fighting Samsung.

There are two paths that I can see happening. One will be the predictable one as foreseen by these analysts and trend watches – budget brands and low margin markets. This is the same path that mobiles took in the pre-smartphone era. A product category emerges, it sells like hotcakes, then growth slows as the last mile of market saturation is mopped up over time. Remember the netbook?

The other path, is that of the long tail of mobile phone design. Instead of top down market domination by the ginormous global brands like Apple and Samsung (Anyone remember those pioneers of the frontier – Motorola and Nokia?), it will be customized handsets for the discerning customer who wants something more than the oligopoly of iOS and Android.

The Linux of mobiles are already out there, geared up for downloadable personalized solutions. Handsets are commodities. Its a matter of time before one can buy a handheld device and download a customizable “phone” of choice, as the era of big boxes ends.

Ps. I notice that my posts looking over mobile industry trends were each written 24 months or so, apart. Is that the timeline for change in rapidly transitioning markets?

Tsunami of change – design, brands, marketing and the mobile phone

In the 10 short months since I wrote on the market forces influencing the global mobile phone market, and the implications of the democratization of innovation whose early, weak signals I could already foresee, matters have come to a head. I had written:

The locus of innovation in handset design, product planning and market strategy has moved its center away from the erstwhile first world to the former developing world i.e. India and China.

And along with this re-centering, ideas on business models and profit margins have changed to reflect those prevalent and appropriate for these new operating environments. Just look at this statement from Xiaomi’s Hugo Barra from an interview last week:

“Innovation is not a luxury item. Innovation is for everyone.”

The implications of this positioning are enormous, particularly given the conventional wisdom currently prevalent in the industry that the latest, greatest, cutting edge technology is a much sought after premium piece of hardware.

What are the current manifestations of this seismic shift in the source and diffusion patterns of innovation?

The era of the Apple product/pricepoint strategy is over for everyone, including Apple. Big ticket flagship devices released to much fanfare and  the lining up around corners by fanbois may still continue to work for Apple but even for them the size of this target market has reached its limit. That is, they’ve captured all they could of the share of the market  likely to rush out to buy the latest, greatest shiny at whatever price.

IDC’s latest forecast for smartphone sales until 2019 has this little snippet tucked in:

Markets with the biggest growth opportunity are extremely price sensitive, which IDC believes will not change, and this is the main reason Apple will be challenged to take Android share throughout the forecast. Even if Apple were to introduce another low-cost iPhone (e.g., C version), IDC believes the price will struggle to compete with Android OEMs that are focused on portfolios aimed at price points of $200 and less. This isn’t to suggest that Apple’s success with the iPhone won’t continue, and IDC believes its efforts to maintain significantly higher margins compared to its competitors are much more valuable than chasing share.

The implication is that new entrants should focus on the “cheap smartphone for poor Africans or Indians” shtick. But this would be the biggest mistake any self respecting brand could make. The entry level segment is completely saturated with Shenzen makes, refurbs, grey market boxes, and a hodge podge of low end models from all and sundry. This is the commodification we saw coming 6 years ago.

Here is where I see an opportunity for a maverick like Xiaomi to capitalize on Hugo Barra’s statement that innovation is not a luxury but for everyone.

The growth markets might be price sensitive but they’re neither stupid nor resigned to their fate. Whether it was the poor man’s car – the Tata Nano, or the slew of wellmeaning first worlder’s introducing frugal low cost technology for the social and economic wellbeing of the downtrodden, the downtrodden have turned up their noses to it all.

Not since Nokia’s heydays has any brand succeeded by flaunting its low cost solution as its USP – and Nokia never flaunted their affordability, they just ran a truck over their phones and let you make a call after. You couldn’t help but realize it was worth the price, offering the biggest bang for your buck. Many of us still reminisce over teh good old days of long lasting battery power and rugged Finnish engineering.

In the past 10 years, everything has been changed by the rise of the internet and proliferation of social media. The connected consumer’s aspirations have found their own level, like water, on a global scale.

People have learned that affordable phones don’t feel necessarily cheap

There is no tradeoff to be made if you’re in the market for a new smartphone. This is the result of the democratization of design, exemplified by Xiaomi, and the result of the race to the bottom of the pyramid. Growth markets are part of the prepaid economy, and the considerations around brand positioning, price point and marketing strategy are not what you have been led to expect.

Here are most demanding customers on earth, operating in the most challenging environment. The mass majority for mobile phones isn’t localized anymore, not even on a regional or continental level – its global. And this is tailor made for affordable innovation, a customer experience that makes you feel as special and as unique as any fanboi without the accompanying price tag.

Only two to three years ago, Xiaomi was just a copycat. Ignoring Xiaomi’s ambitions is a big reason why Samsung is now facing a crisis.

Now, we have to ask serious questions: “Who are you, Xiaomi?” and “Where are you going?” Only when we figure out the answers will we know where we will be heading, too.

JoongAng Ilbo, July 27, Page 32

Just a quick search to see where they’re going offers up such tidbits as ordering a new Xiaomi phone online to be delivered by Uber. Who they are is what their competition isn’t – an opportunity seeking conglomerate leveraging gaps in the innovation ecosystem. Business models, marketing, distribution, design planning – they are re-inventing the conventional to suit the flexible, social, frugal world of the prepaid economy’s connected consumers. Its a whole new ballgame. As I said 10 months ago, the era of big brand cellphones manufacturers is over.

 

The Big Shift for Device Design

  • The market is global, local, social
  • Aspirations will drive purchase decisions
  • Innovation is not a luxury
  • Experience has a price tag

Introducing The Global Prepaid Economy

This week, that venerable newspaper The Financial Times, published an original piece of writing on the World Economic Forum’s Agenda blog. Its not a reprint from their own publication. It proposes the end of “Emerging Markets” (EM) as we know them:

Now, commentators say, it is the world’s mental map that is in dire need of an overhaul, particularly when it comes to the practice of categorising countries as “emerging” or “developed” markets.

The current economic hierarchy, which places emerging nations at the periphery and developed markets at the core of world affairs, no longer accurately describes a world in which EM countries contribute a bigger share to global gross domestic product than their developed counterparts, when measured by purchasing power parity. Nor does the capacious category, which lumps together countries of such diverse economic strengths as China and the Czech Republic, serve to illuminate crucially different realities between these nations.

“The EM term has outgrown its usefulness,” says Michael Power, strategist at Investec, a fund management company. “The term today embraces big and small, developed and under-developed, industrialised and agrarian, manufacturing and commodity-based, rich and poor, deficit runners and surplus runners, and I could go on,” he adds. At issue are not merely the niceties of symmetry and order.

As someone who has been looking at emerging markets, one way or another, for the past 10 years, both in my writing as well as in my work, this comes as a welcome relief. These markets can’t still be emerging, I thought, when I was in New Delhi at the beginning of June this year.

Yet, in some ways, we need the conceptual means to capture their dynamic potential, as they’re still in motion. As the article concludes:

These contradictions threaten to consign the term emerging markets to the dustbin. But if it follows the likes of “third world” into virtual extinction, its passage will raise the question of what, if anything, should replace it.

prepaid-globalgsma-2011-2013

The Global Prepaid Economy. (Data: GSMA Intelligence)

In November 1996, Vodacom South Africa was the first network in the world to introduce prepaid airtime on an Intelligent Network platform, which made it possible to debit customers’ accounts while they were speaking. Two years later, they went on to win the Global Mobile Award for the “Best GSM Service” for the VodaGo prepay system. Less than twenty years later, prepaid airtime is the dominant business model across the entire planet.

And, interestingly, if you look at the map above, the economies where the prepaid business model dominates are more or less those which were formerly known as emerging markets, frontier markets, developing countries and/or the majority of the erstwhile third world.

2014 prepaid data gsmaAcross emerging markets and developing countries, the preference for prepaid mobile services cuts across income range, socio-economic class or type of employment. Choosing to pay as you use seems to have little or nothing to do with regular paychecks, bank accounts, credit cards or age.  So vast is it that one can consider it an economic characteristic in its own right.

The global Prepaid Economy.

What do all the regions where the prepaid business model dominates have in common?

  • Cash intensive
  • Informal sector employs more than the formal
  • Still developing
  • More volatile
  • Higher uncertainty
  • Less social safety nets
  • Faster growth

What does the prepaid business model do for the customer?

It empowers them. Control over how much to spend (the amount), and its timing (the frequency and periodicity of purchases) is in the hands of the end user, the mobile subscriber. There’s no bill at the end of the month, to be paid by a deadline, for an as yet unknown amount. That is, there are no surprises.

Why does this matter?

In cash intensive operating environments, where expenses must be managed within the constraints of cash available on hand, the prepaid model offers manageable access to voice, text and data. Where the informal sector might be the source of employment for a greater majority of the population, uncertainty is a defining characteristic as incomes may be irregular, unpredictable and/or seasonal. That is, there is a greater degree of volatility to be managed. And, where there are fewer social safety nets to rely on, surprises in the form of a bill at the end of the month might make the difference between going hungry to bed or putting meat on the table.

In this series of articles, I’ll be taking a look at the nature of the prepaid economy and characteristics common across many geographies. Next part will look at the relationship between Time and Money.

How I Use My Phone – Extracting consumer insights from purchasing patterns

The Mobile Experience Center of the Co-Creation Hub in Lagos, Nigeria conducted a survey series – How I Use My Phone – where they looked at phone use among university students, white collar professionals, blue collar workers and market traders*.  I’ve screen-capped the section on airtime purchase patterns from each infographic to analyze a little further.

*Before we proceed, an observation that the survey on traders is the smallest sample (around 50 people) and only one market, while the rest of the segments have a population sample in the thousands. Still, theirs are the most interesting patterns and to me, the most significant. I’m also hampered by the fact that each infographic is unique and every survey is not the same i.e. some show salary or income, some don’t etc – I’m mentioning this upfront and won’t refer to these discrepancies further on.

studentNGairtimepatterns

Nigerian University Students

Some context to set the scene: @prepaid_africa Not exactly! Most Nigerians have a daily budget of between N1000 – N2000. This covers recharge, transportation & feeding.

— Area_Boy (@EUgwu) June 23, 2015

bluecollarNGairtimepatterns

Nigerian blue collar workers

We can see the similarities between students and blue collar workers – both on limited budgets – the majority of weekly recharges for both fall in the lowest bracket of 100 to 500 Naira, and the preferred voucher amount is 200 Naira. Most people are not topping up their mobile airtime everyday, though students are spending a bit more.

whitecollarNGairtimepatterns

Nigerian White Collar Professionals

Professionals are definitely adding more value to their airtime every week, and broadly speaking the preference for recharge amounts is equally split between higher and lower values.

markettraderNGairtimepatterns

Nigerian Market Traders

Here we can see an interesting difference after I convert these numbers into a percentage of mobile owners – 52 is the total.

20= 38%  10 = 19% 17 = 33% 4 = 8% and 1 = 2% – grossly rounded & totalling 100%.

Without converting, the first thing we note is that nobody purchases recharge denomination above 200 naira and the preference is more or less equally split between the lowest two values. Even the blue collar workers had some who purchased 400 naira of airtime, while a similar percentage of students purchased amounts other than 100 or 200.

We find that unlike the other segments who preferred these smaller denominations, more traders spent more each week. That is, they tended to very frequently top up with small amounts. While their total weekly purchasing pattern in terms of weekly recharge resembles the white collar professionals, their choice of denomination is significantly an outlier.

What does this mean? Low margins, high volumes

Even with all the disclaimers on sample size, consistency and quality of the data gathered, one can see quite clearly the cash flow patterns of the traders in the informal market. Small denominations, high frequency.

While every trader in the market may not be doing the same volume of business, there’s enough of a suggestion that there is a dynamic aspect of trade. Its made visible by the not insignificant number of traders whose total weekly expenditure on airtime recharge is 10 or 20 times the denomination value of the recharge coupon. They are most definitely topping up more than once a day. And on the phone, “doing business”.

Trade – in the informal economy sense of the word, not the formal container ships of industrialized goods – happens by negotiation, haggling, bargaining, brokering, mediating and communicating. Biashara, in this sense is a better word, for the marketplace as a bazaar, not a cathedral. Markets are conversations, to unearth a cliche, and the pattern of mobile phone use, coupled with the pattern of recharge, is an indicator of informal trade.

The implications of these surveys validating a hypothesis are immensely useful for design planning for the informal market.

 

Impact of mainstreaming and commodification of cyber cafe services

Around 2007, the urban cyber cafe industry began to display signs of maturing as the market saturated and the services specific to internet access underwent a process of commodification.  As it came to be perceived as no different a business than setting up a corner kiosk or hot dog stand, there was a shift in the profile of owner/operators. Many employed professionals such as doctors, teachers, accountants et al purchased going concerns as a means to increase their income streams, considering it no different from owning any other type of  shop which could be manned and run by employees during the day.  While computer literate, few in this new segment of owners were the computer savvy technical specialists or hobbyists who’d originally set up internet operations as a business nor were their employees for the most part.

Given this context, Mathew, who runs a thriving cyber cafe business spread over three towns a couple of hours north of Nairobi, articulated three reasons why many cybers were seen to have shuttered their business:

1. Gaining a reputation for unreliability – Inexperience and/or lack of knowledge on basics like virus management, maintenance or even not knowing how to make all the equipment work meant that systems were often down or not working properly quickly leading to customers avoiding the shop.

2. Quality and training of staff – There would be a difference in operations if the owner were to check in with the business and dealt with issues as they arose rather than showing up once a week for example. Finding qualified people to manage the cafe in the meantime, ensuring that at least one person with the requisite technical knowledge was at hand or on call was imperative to ensure the smooth running of the operations and gaining customer confidence regarding the quality of services offered.

3. Customer relationship management – Thus, building relationships with customers, ensuring loyalty and repeat returns over the long term was of importance to sustain the business.  Mathew himself had a sophisticated customer loyalty program in use across his three cafes – a smart card which could be purchased for differing amounts in advance and printed with the customer’s photograph. He had set up a system by which his staff could monitor and track minutes used by this user base across the three different locations. It ensured loyalty as well as provided an upfront cash payment that is one of the benefits of a prepaid business model.

Perhaps this was why the decline was being seen so obviously in urban locations accustomed to having a cyber at every corner. In Mombasa, one of our interviewees mentioned that it felt like there was one in every building.  The urban industry had matured to the point that a cyber was as ubiquitous as an MPesa dealer or Coca Cola kiosk with the subsequent assumption by many that it could be run as easily as any other business. This aspect does not diminish the impact of other market forces such as internet enable mobiles and affordable data plans and modems but does help explain why we kept hearing that business was growing whenever we stepped out of the city.

As technology diffuses outward from the urban metros, the cybers are seen in ever smaller market towns and highway crossroads, that is, the industry is still in its growth phase, though certainly not in its infancy. A short conversation with a small town mobile shop assistant informed us that they were selling an average of 5 broadband modems a month and she herself found it cheaper and more convenient to browse via her phone. Another young man employed by a national operator observed that education was a critical factor as well – not in terms of the basics, as the region he supported had a very high literacy rate, but in terms of locales where more young people were going off to college and university, being exposed to the potential of this new technology then bringing it back home for it to spread further.

What this seems to imply is that its the casual or social browser – the chatting on IM, the Facebooking, the occasional email – who seems to have cut down on their cyber visits, and this is often the largest segment of people going online. The hard core enthusiasts, the business users or anyone who has not yet invested in their own set up but prefers the “comp” to quote one young man, aren’t abandoning their trips.

What is happening however to the industry as a whole is a natural evolution. In the city, its the innovators who are thriving even as the basic shops decline – a case of may the fittest survive. None among the knowledgeable IT savvy owner operators ever even considered the mobile as a threat to their business, perceived or otherwise. The only constant response to the subject was that of the pricing plans mentioned earlier.

While the answer to the question of whether its mobiles that are pushing the cyber cafes out of business seems to increasingly be a No, our exploration of market forces acting on the industry is still throwing up factors that we had not taken into consideration when we began.

The role of the cyber cafe: Assisted entry ramp onto the information superhighway to use a cliche

Monica’s cyber in the small town of Maai Mahiu, a market for a primarily rural area, is now the only such facility available. There was another cyber on the other side of the main highway, she said, but it closed within its first year of operation.  Internet access in this locale is available only through 3G and its a poor signal with spotty data performance.  JamFram Cyber Cafe offers the town its only source of business support services – photocopy, lamination, binding, secretarial services as well as 6 desktop computers networked on a 3G router.  When we were there, the electricity was out across the town and she was happy to talk while waiting for the lights to come back. In the half hour we were there, only two customers walked in – one asking for a photocopy, the other to check on his documents given for typing.  The cyber business was slow though she’d noted that mobile requests were increasing – the local phone dealer sending new owners of data enabled phones down to her to help them set up an email account and a Facebook page as well as the settings to permit browsing.

So why would the townspeople call her when she took a slightly longer Christmas holiday earlier this year, making her cut short her intended holiday until the middle of January and return to open shop by the 3rd? Why were they concerned that she might have decided to shut shop like the other cyber which gave up after 5 or 6 months? We were left with the impression that the townspeople would support her business bureau’s continued existence than lose access to her range of services.
We found that the cyber cafe has a role to play in the local community beyond the simple service of walk in to browse the internet.

Broadly the roles can be clustered under these main categories:

The cyber as intermediary across the digital divide (ICT)


In people’s minds, ‘Internet’ was associated with the cyber cafe. We heard this over and over from cyber cafe staff that various telco dealers would send across customers facing challenges with the setup of their data enabled phone over to the cyber for help. Or after making the purchase of an internet enabled phone, people would come over to the cyber first – since you cannot set up an email account then make a Facebook page without a computer. Even someone like Jacqueline in Kagumo who was working at the local phone dealer and was saving up for her own laptop and browsed primarily through her phone had to visit the cyber first.

In Malindi, a significant proportion of Salmatech’s customers were the beachboys whom market forces (their international tourist clientele) were forcing onto the internet via email, Skype and Facebook. Necessity drove them to learn how to use the basics of the computer enough so that they could respond to inquiries, communicate and make bookings in advance of the high season – this was critical enough that they would often trade off topping up airtime minutes on their mobiles in order to have money for the cyber’s minutes of use. Here, the cyber was the go to place, even if some of them already owned laptops gifted by tourist friends, to learn and be informed about the hardware, the software and critically, the utility of the internet.

Most cybers offered customers the Kenyan Revenue Authority (KRA) online services for a fee – the facility to get PINs and submit VAT returns online being one of the first egovernment services rolled out nationally. Other such services offered were US Greencard lottery applications, visa application services, registrations for national examinations, even bus ticket bookings when offered online.
But the mediation was not simply between the customer and the internet. Cyber cafes whose operators had a technical background also tended to be full of spare parts and supplies, many offering maintenance and support for hardware in addition to basic services like virus removal, software updates and configuration.

We also found some cybers, particularly those with fixed unlimited access (such via WiMax or DSL), acting as micro ISPs – running cables out to their neighbours for a fixed monthly rate (usually much lower than what the service cost) in order to mitigate the risk of being unable to cover the cost since incomes were otherwise irregular and often unpredictable. But this behaviour, imho, has less to do with their role as an intermediary – though in fact that is what it could said to be – and more to do with coping mechanisms to help manage expenses on volatile cash flows.

The cyber as a training ground

Whether its formal classes offered in basics of computer use or simply the help received from a friendly generous cyber cafe staff or owner, the cyber is most often where learning and practice both online and on the computer takes place.

The cyber as a social place

Primarily seen in locations where there were many young college students, the cyber seems to have become the local hangout. Boy and girls were seen waiting outside for their turn at email or Facebook, chatting with friends, relaxing and mingling with no hurry to get anywhere or do anything in particular. One newish cyber in Kilifi even had an ice cream parlour with cozy tables and chairs in the front half of the spacious store, all decorated in bright colours and visuals.

The cyber as a business bureau

The majority of cybers tend to offer at minimum printing services along with scanning and photocopying depending on their choice of equipment. Most however offer lamination, binding, a variety of typing and basic typesetting services as well. Photo printing, passport photos and mPesa or airtime sales can also be added to increase sources of income but the basic concept of support services tend to default to the local cyber. This role perhaps explains why Monica’s clients were concerned enough to encourage her return to work even if browsing the internet may not have always been their choice of service.

Typesetting or typing services have expanded to include helping students with their research online in some cases, and in places where the internet was not a popular enough service, this facility offered the opportunity to develop a regular clientele of small businesses, local government offices and students to sustain the business.

The pros and cons of Kenya’s role as technology pioneer and East African frontier market

Rural Kenyan schoolhouse, somewhere near Kisii, March 2012

Only two years have passed since the publication of the Emerging Africa series of articles for Dirk Knemeyer’s GoInvo blog starting in February 2011. Since then I’ve had a much closer look at Kenya’s current state of the art when it comes to internet diffusion, renewable energy and of course, the mobile platform technology. I spent most of the time from September 2011 to August 2012 in Kenya, immersing myself at the cutting edge of what tomorrow would bring for some of us.

The emerging global middle classes, that the OECD described as being very different from the middle class as understood in Europe, can however be said to be exemplified by the aspiring, ambitious Kenyan. Where everyone seeks to be the next president, and why not, they dream, after all, it was within one of Kenya’s grandsons.

Just a quick *ahem* Google search on technology and Kenya brings to light such delicacies as Eric Schmidt, Google’s own CEO, proclaiming Nairobi to be the next global tech hub (though I do wonder what it means that the visit is to Kenya after North Korea or are the trips alphabetically planned? ;p) and the groundbreaking ceremony for Konza high tech city on the outskirts of Nairobi. The scent of rain in the air that Will Mutua once sensed as he wrote A Quiet Storm is brewing on Afrinnovator’s About pages only 3 or so years ago has become the sounds of a torrential thundershower.

Very quickly, Kenya has become the bellweather of tech innovation for Sub Saharan Africa. Though now I’d like to discuss the challenges acting as market forces upon the East African region.  If we take Kenya as the path where technology will trend towards in 1-2 years time for East Africa, followed by 3 or more for the rest of Sub Sahara, what is the downside of this framework?

The only danger that I can see would be that the other countries in the region do not ape Kenya’s model without assessing which aspects and factors fit within their own cultures and which need adaptation for local needs and relevance.

Airtel Africa has already faced this problem after Bharti bought out Zain in 16 or 17 Sub Saharan countries. Not only does the Indian model not port over directly but each country really needs its own market creation strategy.

Segmentation of the vast and undifferentiated “next billion” is critical if we are to refine and improve our business models and market entry strategies. Unlike India and China where their “next billion” markets are in their own backyards, thus not entirely unfamiliar, Sub Saharan Africa’s vast emerging middle classes are unique creatures in their own right, but for some similarities in household financial management. After all, its not fluke that 96% of all the mobile subscriptions across the entire continent is pay as you go or prepaid. And where better than Kenya, home of critical mass MPesa, that allows for testing innovation at enterprise and social levels, but with the caveat that results are not really generalizable.

That’s the unpredictable aspect for multi-country plans based on just a local sampling here and there, unless they are in a unique situation like mobile phone manufacturers. Even for something as basic to the household as a solar lantern, business models themselves had to adapt to the local operating environment.

Kenya is easily the most competitive market in the region with a legion of savvy, informed and heavily networked afripolitans ready to voice their opinion on the world stage. Erik Hersman once wrote that if it works in Africa, it will work anywhere. The mobile operators of the EU are yet to figure this out but the one that does will create a whole new market.

Intel has taken the decision to launch their first smartphone called Yolo through an alliance with Safaricom while HCL Infosystems has brought in a range of Android tablets in the 10,000 Ksh price band. Will the Yolo do better than the IDEOS? Only time (duration of the battery ;p) will tell.

Questioning the narrative of extreme affordability for mobile phones


Yesterday I had a long conversation with someone whose job is related closely to mobile phone design. You’d recognize his employer’s name very easily. He asked me about extremely affordable phones for the low income segment in emerging markets. Late in the year of 2012, I found myself hesitating before answering immediately with a resounding “Yes” to support the concept of low cost mobile phones for the BoP customer in India, Africa or wherever.

That was enough to make me reflect on why I hesitated. After all, wasn’t this the default aspirational outcome for these demanding customers?

It was, indeed. But the narrative has not yet caught up with the reality on the ground. For citations, lets go to Alexis Madrigal’s article on The Phone of 2022, where he mentions:

No one has tracked these market shifts better than Horace Dediu at Asymco. He’s documented what he calls “a tale of two disruptions,” one from above in Apple and one from below in cheap Chinese and Indian manufacturers. In just the last five years, Nokia, LG, and RIM have seen their market shares and profits collapse due to this pincer movement.

This disruption from below has changed the mobile phone landscape for the lower income segments everywhere. Suddenly, their aspirations are affordable and the trade offs they make are now between a cheap fake with all the trimmings and a more expensive brand with less features, not between a phone and no phone at all.

For branded manufacturers of mobile phones, going after this low cost segment simply does not make sense anymore. Their own cost structure will never support what a Bird or a Tecno is able to provide for quite the same price. The low end mobile phone market is now a commodity market, where even the repairmen tell you that people don’t bother to get their phones fixed anymore because a Chinese replacement is cheaper than the branded spare parts. Furthermore, mobiles are a personal asset and one worth saving up for – why not aspire to the best possible you can afford?

Thus you’ll find a taxi driver in Nairobi flashing his iPhone or the security guard with Blackberry curve. The “smart” aspect of the phone may not always have to do with the innards of the device.

Human beings are aspirational. This shift in the consumer’s perception and choice in response to the larger shifts as documented in the snippet above includes the reality of increased choice. Even 4 years ago, it was difficult for a poor farmer to contemplate the purchase of a mobile, seeming as it did a shiny shiny way outside his grasp. Today’s market forces have brought it home to him, well within his reach, as any beachboy surfing Facebook will inform you.

The old emerging market for mobile phones narrative is a dangerous one for the big global brands. The emerging stories are now the Tecno’s and the MicroMax’s. Yes, there is a lowest income bracket or those 2 remaining families without a phone, but that market has now spun out of reach. The digital divide is being bridged by names you’ve never heard of and the discards of those who’ve gone on ahead.

Far better to take a step back from the fray and think about where the dots are with regard to the mass majority markets of the world. The internet experience. The window to the wider world. The global social network. The aspirations that the commodities cannot fulfill as easily. Far, far better to offer a stairway up than a dumbing down. Nobody aspires to be the bottom of anything.

The ubiquitious rural computer

Market Woman in rural Rwanda, July 2012 Photo Credit: Niti Bhan

Bargaining for bananas in rural Rwandan market could not have been completed without the use of the mobile phone’s calculator function. While a combination of broken Swahili, Kinyarwanda and English was used by the customer and the shopkeeper, the transaction’s clarity was increased by piling goods on the table and then using the clear numerals offered by the phone.