Friday, June 13, 2008

mServices to Ride in on Next Wave of Emerging-market Mobile Growth

The International Telecommunication Union (ITU) recently reported that mobile phone subscriptions topped 3.3 billion worldwide with global growth reaching 22% annually. Mobile phone users in developing countries are continuing to make communication a priority and are even demanding more advanced features such as multimedia capabilities. Mobile penetration rates exceed 100% of the entire population in nearly 40 countries, including several emerging markets in Asia and Eastern Europe. Other countries that are not saturated, such as India and China, already had a robust population of mobile phone subscribers – 232 million and 547 million respectively – at the end of 2007, with those numbers increasing rapidly every year.

Penetration rates, particularly in emerging markets, continue to amaze industry watchers who, until recently, greatly under-estimated low-income consumers’ willingness and ability to purchase mobile phones. Operators, however, need more than increased subscriber numbers to claim victory in emerging markets. The average revenue per user (ARPU), the primary metric upon which operators are valued, has historically fallen as lower-income consumers adopt mobile technology. But ARPU doesn’t have to suffer in emerging markets. While developing-country consumers may have a limited budget for communications, they do allocate funds for other expenses that are increasingly being provided as mobile applications - healthcare, finance, education and entertainment.

The delivery of mobile-based services that capitalize on expanding mobile phone penetration is key to increasing ARPU in developing countries. In many cases, basic services (e.g., banking and healthcare) are underdeveloped or concentrated in urban areas but could reach far greater markets through mobile platforms. The success of many small mBanking and mCommerce programs indicates that mobile phone users in the developing world are willing to utilize their mobile phones to access value-added services. By providing robust and varied services to address basic needs, mobile companies are helping to transform the mobile phone into a life tool upon which even low-income consumers could be willing to spend a significant percentage of their monthly income. These types of mServices have the potential to counter diminishing ARPU and infuse incremental revenue into the mobile communications industry.

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