Category Archives: Current Issues

The Economist: Mobile marvels

Sep 24th 2009

From The Economist print edition

BOUNCING a great-grandchild on her knee in her house in Bukaweka, a village in eastern Uganda, Mary Wokhwale gestures at her surroundings. “My mobile phone has been my livelihood,” she says. In 2003 Ms Wokhwale was one of the first 15 women in Uganda to become “village phone” operators. Thanks to a microfinance loan, she was able to buy a basic handset and a roof-mounted antenna to ensure a reliable signal. She went into business selling phone calls to other villagers, making a small profit on each call. This enabled her to pay back her loan and buy a second phone. The income from selling phone calls subsequently enabled her to set up a business selling beer, open a music and video shop and help members of her family pay their children’s school fees. Business has dropped off somewhat in the past couple of years as mobile phones have fallen in price and many people in her village can afford their own. But Ms Wokhwale’s life has been transformed.

Ms Wokhwale prospered because being able to make and receive phone calls is so important to people that even the very poor are prepared to pay for it. In places with bad roads, unreliable postal services, few trains and parlous landlines, mobile phones can substitute for travel, allow quicker and easier access to information on prices, enable traders to reach wider markets, boost entrepreneurship and generally make it easier to do business. A study by the World Resources Institute found that as developing-world incomes rise, household spending on mobile phones grows faster than spending on energy, water or indeed anything else.

The reason why mobile phones are so valuable to people in the poor world is that they are providing access to telecommunications for the very first time, rather than just being portable adjuncts to existing fixed-line phones, as in the rich world. “For you it was incremental—here it’s revolutionary,” says Isaac Nsereko of MTN, Africa’s biggest operator. According to a recent study, adding an extra ten mobile phones per 100 people in a typical developing country boosts growth in GDP per person by 0.8 percentage points.

In 2000 the developing countries accounted for around one-quarter of the world’s 700m or so mobile phones. By the beginning of 2009 their share had grown to three-quarters of a total which by then had risen to over 4 billion (see chart 1). That does not mean that 4 billion people now have mobile phones, because many in both rich and poor countries own several handsets or subscriber-identity module (SIM) cards, the tiny chips that identify a subscriber to a mobile network. Carl-Henric Svanberg, the chief executive of Ericsson, the world’s largest maker of telecoms-network gear, reckons that the actual number of people with mobile phones is closer to 3.6 billion.

But exact numbers are hard to come by, not least because of the continued rapid growth in the global number of subscribers. In the year to March 2009 an additional 128m signed up in India, 89m in China and 96m across Africa, according to TeleGeography, a telecoms consultancy. Numbers in Indonesia, Vietnam, Brazil and Russia also grew rapidly (see chart 2). China is the world’s largest market for mobile telephony, with over 700m subscribers. India is adding the biggest number each month: 15.6m in March alone. And Africa is the region with the fastest rate of subscriber growth. With developed markets now saturated, the developing world’s rural poor will account for most of the growth in the coming years. The total will reach 6 billion by 2013, according to the GSMA, an industry group, with half of these new users in China and India alone.

All this is transforming the telecoms industry. Within just a few years its centre of gravity has shifted from the developed to the developing countries. The biggest changes are taking place in the poorest parts of the world, such as rural Uganda.

Not the usual suspects

Three trends in particular are reshaping the telecoms landscape. First, the spread of mobile phones in developing countries has been accompanied by the rise of home-grown mobile operators in China, India, Africa and the Middle East that rival or exceed the industry’s Western incumbents in size. These operators have developed new business models and industry structures that enable them to make a profit serving low-spending customers that Western firms would not bother with. Indian operators have led the way, and some aspects of the “Indian model” are now being adopted by operators in other countries, both rich and poor. This model provides new opportunities, especially for Indian operators. The spread of the Indian model could help bring mobile phones within reach of an even larger number of the world’s poor.

The second trend is the emergence of China’s two leading telecoms-equipment-makers, Huawei and ZTE, which have entered the global stage in the past five years. Initially dismissed as low-cost, low-quality producers, they now have a growing reputation for quality and innovation, prompting a shake-out among the incumbent Western equipment-makers. The most recent victim was Nortel, once Canada’s most valuable company, which went bust in January. Having long concentrated on emerging markets, Huawei and ZTE are well placed to expand their market share as subscriber numbers continue to grow and networks are upgraded from second-generation (2G) to third-generation (3G) technology, notably in China and India.

The third trend is the development of new phone-based services, beyond voice calls and basic text messages, which are now becoming feasible because mobile phones are relatively widely available. In rich countries most such services have revolved around trivial things like music downloads and mobile gaming. In poor countries data services such as mobile-phone-based agricultural advice, health care and money transfer could provide enormous economic and developmental benefits. Beyond that, mobile networks and low-cost computing devices are poised to offer the benefits of full internet access to people in the developing world in the coming years.

This special report will examine each of these three trends in turn. Each one is significant in itself but also has consequences for rich as well as poor countries. Together they could start a second wave of mobile-led economic development as powerful as that prompted by the original launch of mobile phones. Their spread in poor countries is not just reshaping the industry—it is changing the world.

via A special report on telecoms in emerging markets: : Mobile marvels | The Economist.

The Economist: The power of mobile money

Sep 24th 2009
From The Economist print edition

ONCE the toys of rich yuppies, mobile phones have evolved in a few short years to become tools of economic empowerment for the world’s poorest people. These phones compensate for inadequate infrastructure, such as bad roads and slow postal services, allowing information to move more freely, making markets more efficient and unleashing entrepreneurship. All this has a direct impact on economic growth: an extra ten phones per 100 people in a typical developing country boosts GDP growth by 0.8 percentage points, according to the World Bank. More than 4 billion handsets are now in use worldwide, three-quarters of them in the developing world see our special report. Even in Africa, four in ten people now have a mobile phone.

With such phones now so commonplace, a new opportunity beckons: mobile money, which allows cash to travel as quickly as a text message. Across the developing world, corner shops are where people buy vouchers to top up their calling credit. Mobile-money services allow these small retailers to act rather like bank branches. They can take your cash, and (by sending a special kind of text message) credit it to your mobile-money account. You can then transfer money (again, via text message) to other registered users, who can withdraw it by visiting their own local corner shops. You can even send money to people who are not registered users; they receive a text message with a code that can be redeemed for cash.

By far the most successful example of mobile money is M-PESA, launched in 2007 by Safaricom of Kenya. It now has nearly 7m users—not bad for a country of 38m people, 18.3m of whom have mobile phones. M-PESA first became popular as a way for young, male urban migrants to send money back to their families in the countryside. It is now used to pay for everything from school fees (no need to queue up at the bank every month to hand over a wad of bills) to taxis (drivers like it because they are carrying around less cash). Similar schemes are popular in the Philippines and South Africa.

Banking on it

Extending mobile money to other poor countries, particularly in Africa and Asia, would have a huge impact. It is a faster, cheaper and safer way to transfer money than the alternatives, such as slow, costly transfers via banks and post offices, or handing an envelope of cash to a bus driver. Rather than spend a day travelling by bus to the nearest bank, recipients in rural areas can spend their time doing more productive things. The incomes of Kenyan households using M-PESA have increased by 5-30% since they started mobile banking, according to a recent study.

Mobile money also provides a stepping stone to formal financial services for the billions of people who lack access to savings accounts, credit and insurance. Although for regulatory reasons M-PESA accounts do not pay interest, the service is used by some people as a savings account. Having even a small cushion of savings to fall back on allows people to deal with unexpected expenses, such as medical treatment, without having to sell a cow or take a child out of school. Mobile banking is safer than storing wealth in the form of cattle (which can become diseased and die), gold (which can be stolen), in neighbourhood savings schemes (which may be fraudulent) or by stuffing banknotes into a mattress. In the Maldives many people lost their savings in the tsunami of 2004; it hopes to introduce universal mobile banking next year.

Financial innovation has a bad reputation at the moment, because exotic derivatives were one of the causes of the credit crunch. But mobile money and other new ideas that could help the poor (see article) provide a useful reminder that financial innovation in itself is not always a bad thing.

Given all of its benefits, why is mobile money not more widespread? Its progress has been impeded by banks, which fear that mobile operators will eat their lunch, and by regulators, who worry that mobile-money schemes will be abused by fraudsters and money-launderers. In many countries mobile money has been blocked because operators do not have banking licences and their networks of corner-shop retailers do not meet the strict criteria for formal bank branches. And some mobile-money schemes that have been launched, such as one in Tanzania, failed to catch on. As recently as a year ago people wondered whether M-PESA’s success was a fluke.

Out of Africa, always something new

But in recent months there have been some more hopeful signs. Kenya’s success story has demonstrated mobile money’s potential, and its benefits are starting to be more widely appreciated. More enlightened regulators are no longer insisting that these services meet the rigid rules for formal banking. Some banks, meanwhile, have come to see mobile money not as a threat but as an opportunity, and are teaming up with operators. And phone companies have studied Kenya closely to learn how to establish and market a successful mobile-money scheme. MTN, Africa’s biggest operator, has launched a mobile-money service in Uganda in conjunction with Standard Bank; it appears to be doing well. MTN is fine-tuning its service in Uganda before rolling it out across Africa.

Banks and regulators elsewhere should take note. Instead of lobbying against mobile money, banks should see it as an exciting chance to exploit telecoms firms’ vast retail networks and powerful brands to reach new customers. Tie-ups between banks and operators will help reassure regulators. But they, too, need to be prepared to be more flexible. People who want to sign up for mobile-money services should not, for example, have to jump through all the hoops required to open a bank account. Concerns about money-laundering can be dealt with by imposing limits (typically $100) on the size of mobile-money transactions, and on the maximum balance. And inflexible rules governing the types of establishments where cash can be paid in and taken out ought to be relaxed.

Mobile money presents a shining opportunity to start a second wave of mobile-led development across the poor world. Operators, banks and regulators should seize it.

via Telecoms: The power of mobile money | The Economist.

Iranian consumers boycott Nokia for ‘collaboration’

by Saeed Kamali Dehghan
Tuesday 14 July 2009 21.22 BST

The mobile phone company Nokia is being hit by a growing economic boycott in Iran as consumers sympathetic to the post-election protest movement begin targeting a string of companies deemed to be collaborating with the regime.

Wholesale vendors in the capital report that demand for Nokia handsets has fallen by as much as half in the wake of calls to boycott Nokia Siemens Networks (NSN) for selling communications monitoring systems to Iran.

There are signs that the boycott is spreading: consumers are shunning SMS messaging in protest at the perceived complicity with the regime by the state telecoms company, TCI. Iran’s state-run broadcaster has been hit by a collapse in advertising as companies fear being blacklisted in a Facebook petition. There is also anecdotal evidence that people are moving money out of state banks and into private banks.

Nokia is the most prominent western company to suffer from its dealings with the Iranian authorities. Its NSN joint venture with Siemens provided Iran with a monitoring system as it expanded a mobile network last year. NSN says the technology is standard issue to dozens of countries, but protesters believe the company could have provided the network without the monitoring function.

Siemens is also accused of providing Iran with an internet filtering system called Webwasher.

“Iranians’ first choice has been Nokia cellphones for several years, partly because Nokia has installed the facility in the country. But in the past weeks, customers’ priority has changed,” said Reza, a mobile phone seller in Tehran’s Big Bazaar.

“Since the news spread that NSN had sold electronic surveillance systems to the Iranian government, people have decided to buy other company’s products although they know that Nokia cellphones function better with network coverage in Iran.”

Some Tehran shops have removed Nokia phones from their window displays. Hashem, another mobile phone vendor, said: “I don’t like to lose my customers and now people don’t feel happy seeing Nokia’s products. We even had customers who wanted to refund their new Nokia cellphones or change them with just another cellphone from any other companies.

“It’s not just a limited case to my shop – I’m also a wholesaler to small shops in provincial markets, and I can say that there is half the demand for Nokia’s product these days in comparison with just one month ago, and it’s really unprecedented. People feel ashamed of having Nokia cellphones,” he added.

News of the boycott has appeared on the front page of Iranian pro-reform papers such as Etemad-e Melli, owned by the reformist candidate Mehdi Karroubi. Hadi Heidari, a prominent Iranian cartoonist, has published an image of a Nokia phone on a No Entry traffic sign.

A Nokia spokeswoman refused to comment on the company’s sales in Iran.

The Iranian authorities are believed to have used Nokia’s mobile phone monitoring system to target dissidents. Released prisoners have revealed that the authorities were keeping them in custody on the basis of their SMS and phone calls archive, which was at officials’ disposal.

One Iranian journalist who has just been released from detention said: “I always had this impression that monitoring calls is just a rumour for threatening us from continuing our job properly, but the nightmare became real when they had my phone calls – conversations in my case.

“And the most unbelievable thing for me is that Nokia sold this system to our government. It would be a reasonable excuse for Nokia if they had sold the monitoring technology to a democratic country for controlling child abuse or other uses, but selling it to the Iranian government with a very clear background of human rights violence and suppression of dissent, it’s just inexcusable for me. I’d like to tell Nokia that I’m tortured because they had sold this damn technology to our government.”

NSN spokesman Ben Roome said: “As in every other country, telecoms networks in Iran require the capability to lawfully intercept voice calls. In the last two years, the number of mobile subscribers in Iran has grown from 12 million to over 53 million, so to expand the network in the second half of 2008 we were required to provide the facility to intercept voice calls on this network.”

In other sectors, state-run TV has also been targeted by protesters who have listed products advertised on its channels and urged supporters to join a boycott. Companies are running scared, and viewers have noticed the number of commercials plummet.

“We don’t have many choices to show and continue our protests. They don’t let us go out, they have killed many, we are threatened to text people or distribute emails, they have summoned people who shout Allahu Akbar [‘God is great’] on rooftops at nights, so we need to look for new ways,” said Shahla, a 26-year-old Iranian student.

“I can obviously see on the TV that they are facing an [advertising] crisis. This at least shows them how angry people are,” she added.

The SMS boycott, meanwhile, has apparently forced TCI into drastic price hikes. The cost of an SMS has doubled in recent days. Protesters view the move as a victory.

via Iranian consumers boycott Nokia for ‘collaboration’ | The Guardian.

Buying and Selling on Mobile Phone: Market Women and Farmers Connect for Less

A story found at the Liberianmasthead. Written by Oona Burke, guest columnist; published on 19 June, 2009.

The Ministry of Commerce and Industry in collaboration with Geneva based NGO, International Trade Center has recently completed the test phase of “Trade At Hand”, a cell phone based system that helps connect market women to more competitive prices for the goods they buy. The cell phone based system works similarly to posting goods for sale in a newspaper advertisement or online (Craigslist, etc). Farmers around Liberia are able to advertise their goods for sale (for example, pepper) and market women on the system are then able to check their phones for all the advertisements of pepper for sale from farmers around the country that day. On the system, market women have access to offers organized by products, and are able to exchange reciprocal offers and match each other’s demands for the sale and purchase of goods.

A market woman and farmer work on Trade at Hand
A market woman and farmer work on Trade at Hand

Thus far the test group includes the training of 50 market women across several Monrovia based markets, and 50 farmers in various counties.  Market women on the project are extremely excited about the system and are anxious to expand the number of products available to buy.

Currently the system includes pepper, okra, bitter ball, cassava, plantain, greens, palm oil /nut, and several others. With some market women on the system reporting that they usually spend as much as $35 a month on scratch cards to communicate with sellers of goods, Trade at Hand, allows market women to also reduce their communication costs by viewing a larger number of offers on their telephones, for a price lower than the cost of one telephone call.

Two market women show their excitement in practicing using the system at Ma Kebbeh compound,  Red Light Market
Two market women show their excitement in practicing using the system at Ma Kebbeh compound, Red Light Market

Trade at Hand enables market women to carry out their business in a way that increases their chances of accessing better quality and better priced produce.  In turn, farmers are also enabled to better off-load their produce, and minimize produce wastage. The system also helps market women develop their price intelligence, because they have access to a variety of prices for the same products.

Once the system is tested with the pilot group of market women and farmers, it is hoped that the system can be made available to a larger number of market women and farmers.

Trade at Hand is similar to Cell Bazaar, a telephone based buying and selling system in Bangladesh, that currently has 20 million users.

Talking about Movirtu’s MXShare

On Friday, 23 May Mr. Guy Collender  published through the Guardian, Society an opinion piece considering how mobile technology is benefiting some of the world’s poorest. Left at that, this is not a rare piece of writing to come by these days. But what made the story “Talking about a revolution” conspicuous for me was the fact that it featured Movirtu‘s MXShare — a fascinating technology I came across recently at the Africa Gathering in London.

Katine farmer Dan Ekongu with his mobile phone, which he uses to communicate about agriculture via Talking about a revolution. Photograph: Dan Chung.

I completely agree with Mr. Collender that, “At first glance it is a peculiar and nonsensical idea: owning a mobile phone number, but not a mobile phone.” And even though the immediate benefits of the idea are that it could enable the bottom billion (i.e. the 1 billion people living on less than $2 a day) “to enjoy the benefits associated with a mobile phone number, such as receiving messages and remittances,” I think it could have much wider and far-reaching consequences.

The MXShare concept, installed in the core of a mobile network, enables individuals to share a mobile phone while maintaining separate identities, including a phone number, list of contacts, etc. MXShare makes this possible by creating a virtual mobile system, embedded within an operator’s switching centre.

MXShare’s obvious caveat is that it is not operator agnostic. Many people working in development would consider this an insurmountable drawback, particularly because mobile phone information systems tend to be implemented on a fairly small scale, by NGOs and development organisation, who find it a challenge to get the interest and collaboration of large (read popular) GSM operators.

Although I can see MXShare’s operator dependance as a hindrance to its adoption, I personally am much more intrigued by the possibilities and challenges which the technology concept opens up.

The possibilities stem from the prospect of attaching a fixed identity to mobile phone users. Identifying people is still a challenge in the online world of the Internet but increasingly users of various online services are identified only by their email address and a password. Movitu’s MXShare opens the door to similar solutions to the identification problem in the world of mobiles, a world which is currently hyping about mobile-Web integrated services. Besides allowing people who live on less than $2 a day to receive remittances, the technology can be used as a gateway for the introduction of mobile-Web enabled devices in the developing world. And needless to say, alongside the better devices will come the better services — better m-health, better m-learning, and last but not least, better m-commerce.

For mobile market information services, particularly ones relying on user-generated content, the possibilities offered by identification are considerable. The ability to trace back to its author content of the “classified ad” style, submitted to user-generated content services will increase their appeal. Moreover, it could lead to improvements in the legal framework which would give legitimacy to agreements reached via mobile phone.

Kenya’s Safaricom takes a pasting. Has economic contagion finally reached the booming markets of Africa?

Below I am reprinting a news report by Martyn Warwick , published at TelecomTV | News on 22 May 2009. The report covers thereduction of profits by 23%, announced by Kenya’s and Africa’s biggest mobile operator Safaricom. Alongside with the reduction in profits, the story mentions the significant annual growth in the number of registered users for Safaricom’s M-Pesa mobile money transfer service. The number of registered users for M-Pesa increased from 2.1 million to 6.1 million. Both of these news from Safaricom in Kenya indicate the relevance and timeliness of the revenue opportunities offered to African mobile operators by mobile market services.

safaricomlogoMore evidence today that the recession is a truly global phenomenon. While in the developed economies of North America, Europe, Japan and Australasia ARPU has been falling and sales of handsets are in decline, over in the burgeoning markets of Africa, (Egypt, Nigeria, South Africa and Kenya, for example) the mobile industry has continued to roar ahead -until today. Martyn Warwick reports.

But today comes news that, for one carrier at least, the economic downturn has now hit home and profitability is on the wane at Safaricom of Kenya, Africa’s biggest mobile carrier.

Mobile penetration in Africa has roared ahead in recent ayears and some industry observers had opined that companies like Safaricom might continue to grow despite the recession. It seems now that this has more to do with wishful thinking than dispassionate analysis.

Figures released this morning show that Safaricom’s full-year profits slid by 23 per cent – mainly because of the prevailing economic conditions but increased competition and increased costs of servicing debt have also played their part.

For the financial year ended 31 March Safaricom made a profit of 15.3 billion Kenyan Shillings – that’s about £126 million Sterling. For the previous year ended march 31, 2008, the company made 19.9 billion Shillings in profit.

Perhaps more worrying is that although the operator’s total revenues were up 15 per cent year on year, ARPU (globally accepted as being a major indicator of performance) is in serious decline have fallen by a massive 23 per cent to 475 Shillings a month.

Over the past 12 months Kenya has suffered remarkably high inflation as the national currency has weakened and the costs of basic foodstuffs, fuel and transport have rocketed. Kenyan consumers, the vast majority of whom are far from wealthy, have less disposable discretionary income than they did 12 months ago and they are using their phones less.

Confidence was also severely dented by the ethnic violence that followed the results of the disputed 2008 general election and that has had a long-term effect on the economy.

Safaricom has been one of Africa’s great success stories. It is the biggest company in East Africa, is valued at in excess of £1 billion, has 2,300 employees and 13 million subscribers. The company is 40 per cent owned by Vodafone, 25 per cent by both private and institutional investors and 35 per cent owned by the Kenyan state.

It has a market share of 79 per cent and has increased its customer base by 31 per cent over the course of 18 months.

However, the market is changing and Safaricom faces increased competition from a raft of rivals including Essar telecom’s “Yu”, Zain of Kuwait and the Orange network of the incumbent, Telkom Kenya. As a result of this intense competition mobile tariffs have fallen by 40 per cent in just a year.

mpesaCommenting on the results, Safaricom’s CEO, the amiable and approachable Michael Joseph said, “It was probably our most challenging year in terms of operating environment. But it’s not all gloom, we have delivered strong results despite the difficult economic conditions and there has been strong growth in the popular M-Pesa money transfer services, with 6.2 million registered users now compared to the 2.1 million of the previous year.”

The CEO added that Safaricom will continue to invest in its network and will also look to acquisitions to maintain its strategy for consistent growth. Mr. Joseph said, “Our capital expenditure is expected to remain high over the next few years as we continue the roll out of our data infrastructure and continue to invest in the capacity, coverage and quality of our network.”

Meanwhile, Richard Hurst, a senior telecoms analyst at research house IDC commented, “In the past, Safaricom has been quite a solid operator, usually coming up with some decent numbers, so it is a bit of a surprise,” and added that Safaricom will have to spend big money on enhancing and expanding its infrastructure if it is to fend off competition and maintain its Number One position.

Hurst believes though that the overall African telecoms will continue to grow at rates higher than in other markets. He says, “We’ve still got some quite substantial growth to go, it’s [the African market] not as saturated as the European, North American or even Asian markets. I think this is just a blip.”

Let’s hope so. New figures from Nigeria expected to be published in the coming weeks may show whether this is indeed a “blip” confined to one company in one country or if the malaise is spreading across Africa.