Pipeline Publishing, Volume 7, Issue 5
This Month's Issue:
Wireless for Developing Markets
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Beyond the First World: Opportunities and Challenges in Emerging Markets
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By Fareed Khan

What was your experience the last time you ordered a communications service? If you live in a developed market such as North America or Western Europe, ordering a landline service was likely a relatively simple process, either online or via a call center, and your new service was turned on within a few days, at most. For a new mobile service, assuming you weren’t buying a popular device such as the iPhone on the first day of its release, you probably only needed to walk into a wireless retailer, select a phone and your service was activated by the time you left the store.

In an emerging market, the ordering process can be very different. Consumers in parts of Asia, Eastern Europe and Latin America have faced long wait times for landline connections—at one time, it took six years to get a wireline phone. As a result, when wireless phones became available and affordable, demand in these markets skyrocketed, leading to long lines outside stores, potential customers being turned away and long provisioning times.

The average revenue per user (ARPU) in developing markets remains low.

significant challenge—the influx of new competitors attracted by the pent-up demand in emerging markets. Frequently backed by European incumbents with deep pockets, these greenfield operators are typically competing on price, including per- second billing and per-character SMS. Incumbents are responding by introducing value-added capabilities such as variable charging based on location and mobile advertising services, as well as developing more

Nor is this inability to meet demand the only challenge that these emerging regions are facing. Even as operators sign up tens and even hundreds of thousands of new customers each month, the average revenue per user (ARPU) in these developing markets remains low, and in some regions is even on the decline. The average monthly ARPU is around $3 in India, $8 in China and $16 in Latin America – far lower than the ARPU of $50 in the U.S. At the same time, these regions have predominantly prepaid customer bases, making it far easier for subscribers to churn than in more postpaid-leaning markets with service contracts and termination fees.

This level of innovation is also allowing incumbents to counter another

targeted services based on predictive analytics, as Bharti is doing in India.

Urban hubs and mobile villages

Yet the most pervasive challenge that these operators face may well be the diversity of their customer base. While subscribers in urban areas are increasingly demanding the multimedia applications and data services that subscribers in more developed markets have enjoyed for some time, those subscribers represent less than half of the population in most ‘developing’ regions. Rural-to-urban migration is causing an incremental annual rise in urban populations, but most developing countries remain predominantly rural and agrarian.

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