Service/Wireless Device Bundles Have Potential in Emerging Markets

The two largest carriers in the United States, Verizon and AT&T, are ramping up efforts to woo more 3G-service customers by subsidizing already low-cost netbooks. This weekend, Verizon began offering the $300 HP Mini 1151NR for $200 after a mail-in rebate and a 2-year service plan. Service plans range from $40 per month for 250MB monthly download, up to $60 per month for 5GB of downloads. The plan is similar to AT&T’s, which will offer similar deals starting this summer. AT&T and Sprint Nextel (service provider for the Kindle reader) have both created new business units to expand their networks through new wireless devices.

Companies that have attempted to bundle services with wireless devices, both in mature and developing countries, are working hard to find the right business model. In the US, consumers may balk at committing to $1000 to $1,500 in service plans over two years to save $100 on a machine that connects readily (and at no cost) to public Wi-Fi signals, albeit for lower data speeds. In emerging markets, companies like MTS (Russia), Telefonica (Latin America), and Orange, Vodafone, and T-Mobile (Asia and Eastern Europe) have had to find willing, reliable subscribers among consumers with a shallow credit history and a preference for pre-paid mobile phone services.

Nevertheless, several factors make service/wireless device bundles an attractive opportunity in emerging markets. First, the wireless infrastructure in many urban areas is maturing rapidly due to continued investment and a strong competitive landscape, prompting increased demand for mobile web-enabled devices. Second, a comparatively low monthly service charge is a proven method of overcoming high initial capital costs and the lack of easy financing and credit faced by many emerging-market consumers. A decade ago, Telmex radically increased Internet penetration in Mexico by bundling PCs with fixed-line Internet services. And consumers in countries like Brazil and Mexico have amply demonstrated a willingness to buy consumer electronics in installments through retail outlets like Casas Bahia and Grupo Elektra. These retailers are leading candidates for partnership with service providers and device manufacturers, since they have already invested heavily in credit and payment tracking systems. Finally, hardware and software companies may also be supportive of service/device bundles if they get legitimate, branded versions of their products into the hands of a particularly wired sub-segment of the market. Operators will still have to do their homework to identify the right markets and craft pricing and partnership agreements that make everyone happy. But a well-conceived service/wireless device model may be a winning idea for many companies with the goal of increasing their revenues in emerging markets.

Social Entrepreneurs Can Help Build Emerging-Market Portfolio

April 11, 2007

This week’s news coverage of the world’s largest conference for social entrepreneurs lamented the lack of funds for developing-country projects. Entrepreneurs at the Skoll World Forum said fundraising and courting corporate partners is their biggest challenge.

“I believe corporations, especially ICT companies, should be actively investing in these enterprises,” said Kevin Jones, a principal with Good Capital and self-described serial entrepreneur. “Given the strong growth in emerging markets, all types of investors should see the advantages of partnering with international social entrepreneurs.”

Vital Wave Consulting understands the hesitancy of corporations. In many socially-oriented partnerships it is difficult to align incentive structures or demonstrate ROI. With social entrepreneurs, however, successful partnerships are more likely as both parties share the profit motive. Social entrepreneurs who do their homework and present a bullet-proof business case with an effective business model are certain to reduce the challenge of finding investors.

Corporations stand to benefit from these partnerships, as well. Social entrepreneurs can deliver expertise in target geographies, deep understanding of user needs and usage models, and in-country relationships. Successful social ventures are also excellent acquisition targets – for talent, technology and business models. Such partnerships could help speed the transition of emerging-market activities from the corporate social responsibility brochure to the company’s annual report.

Also in the news this week

• China Mobile adds 53M subscribers in 2006 for a total of 301 million

• Emerging markets capitalize on VoIP trends

• Innovation gets outsourced to “Chindia”

ICT Companies Should Aim for Near-term Growth Markets

March 21, 2007

ICT Companies Should Aim for Near-term Growth Markets

The World Resource Institute (WRI) and International Finance Corporation (IFC) took a step this week toward addressing the business community’s biggest concern about “bottom-of-the-pyramid” initiatives – the lack of quantifiable data to assess the market. With their latest report, The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid, WRI/IFC present new market data for doing business with the world’s poor, who represent a market opportunity of $5 trillion annually.

For multinational companies, however, the more immediate opportunity is the 1.5 billion people at the middle of the economic pyramid – those who earn between $3,000 - 20,000 annually and represent a $12 trillion opportunity. Though it is distinct from mature markets and requires a new approach to market research and business planning, this market segment can be captured with smaller adjustments to existing solutions and business models. The value of this market is therefore easier to “sell” internally, and more in line with a company’s core strengths.

ICT Companies with deep understanding of the characteristics of near-term growth markets will see more immediate returns and be better positioned to develop appropriate solutions further down the economic pyramid.

Also in the news this week

• Intel offers solid state flash memory drives – part of the evolution of low-cost, ruggedized laptops for developing countries
• Affordable 3G LG phones to hit world market - low cost, high battery life makes appeal high for emerging market customers
• Ericsson goes deep into emerging markets - GSM base station helps operators reduce costs 30%