Wednesday, September 19, 2007

Mobile Phones as Productivity Tools for the Poor

Business Week recently reported what telecommunications companies and industry watchers have known for years - that mobile technology is helping developing-country entrepreneurs dramatically improve their businesses. It is clear that clever people are using their mobile phones to order supplies, check prices and find buyers. These efficiencies, the article states, are contributing to its rapid uptake of mobile technology among the world’s poor. In India, for example, there are six million new subscribers every month, and some are paying an entire month’s paycheck even for a low-end handset.

Press accounts do an admirable job of chronicling the mobile phone market’s expansion. Anecdotes of phone-wielding farmers finding the best crop prices before traveling to market could almost lull telecommunications investors into thinking that nothing could stop this spectacular growth. However, many handset manufacturers are already beginning to learn that new customers who come from ever-lower economic segments are making it harder to maintain high adoption rates and stay ahead of competitors.

The near-term handset market is comprised of 1.5 billion potential buyers living at or slightly above the subsistence level. The utility of a mobile phone may be clear to Business Week readers, but an upcoming research report by Vital Wave Consulting suggests that a mobile phone is still largely perceived as a luxury, or non-essential purchase, by would-be handset buyers in emerging markets. The report describes an opportunity for the mobile industry to re-position mobile phones as essential productivity tools, making them more appropriate targets for financing. Prospective buyers would be more willing to take on a loan to purchase a mobile phone if it was perceived as an integral part of their livelihood. Formal and informal lenders would also be more inclined to issue debt, believing recipients will repay loans with incremental income earned by using phones for business efficiencies and better customer outreach. Through appropriate marketing and the inclusion of various, existing financing mechanisms in their business models, sellers of mobile phones can accelerate and capture a larger share of the near-term handset market in developing countries.

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