Markets Grow up so Fast These Days

All eyes were on the Mobile World Congress in Barcelona last week. The annual event has become a critical showcase for new technologies and a premier forum for lively discussions about all aspects of global mobile markets. All the key players are present - operators, handset manufacturers, platform and content companies, government and NGO representatives.

There were a number of hot topics at MWC 2015. Last-mile connectivity initiatives like Internet.org and Google's Loon never fail to garner attention, even though, as Facebook CEO Mark Zuckerberg pointed out, 90% of the world's population already has access to mobile Internet coverage on their phones. Social media and “over the top” (OTT) apps are shifting operator revenues from voice and SMS to data, though some of the most prominent service providers are pushing for free access. (The money will come later, we promise!) Demand for smartphones continues to skyrocket, and low-cost models are flooding markets from Jo'berg to Jakarta. Creative partnerships and service bundles are blossoming in some countries, turning narrow service apps into potentially powerful, multi-industry platforms. And everyone from handset makers to app developers is going hyper-local, offering different languages, content, and business models to meet the quirky demands of local regulators, partners, and specific user groups.

Segmentation and hyper-localization are signs of market maturity, even though the global mobile market has a lot of growing up to do. This year's MWC featured a lot of jockeying for position in anticipation of a market full of people with smartphones, universal mobile broadband connectivity, and a broad range of mobile-based services. It was the digital equivalent of mourning a child's loss of innocence, while eagerly waiting for the day when he has his driver's license and you don't have to drive him around all day. The opportunity for philanthropic organizations in this environment is to facilitate the transition to maturity, especially in ways that are not obviously profitable for enterprise partners - training, capacity building, public service tie-ins to for-profit or OTT platforms, partner-driven initiatives, match-making, and entrepreneurial support. This is a critical role for the development community, aiding both end users and the companies that serve them. Jumping into maturity (or being dragged into it) can be traumatic, and every driving student can use a good co-pilot.

“All you can eat data” going on a diet

by Karen Coppock

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During the Mobile World Congress in Barcelona last week one thing became clear, the days of flat rate data plans will soon be coming to an end. This shouldn’t be a surprise to anyone in the industry; it simply isn’t a sustainable model for operators. The challenge, however, is to develop new pricing models, which make financial sense and are also acceptable (and understandable) to customers. During the session Strategies for Growth - Segmentation & Pricing, at least one panelist suggested volume-based pricing. But how much of the general public really understands bytes and should they even have to? The panel acknowledged that they would need to educate the consumer, but is that really optimal?

An alternative approach was suggested by an Alcatel-Lucent executive in a session on LTE later that week - price per experience. He noted that consumers can judge the value of downloading a song, watching a video or live TV broadcast or viewing an email message much easier than trying to figure out the quantity of bytes consumed or downloaded. This approach will also require consumers to associate prices with individual activities or items, which also may not be optimal.

Operators will likely experiment with a wide variety of models, the one exception being unlimited data...

mHealth Interview at Mobile World Congress

Brooke Partridge and Karen Coppock were interviewed about mHealth by Karma Peiro Rubio of 3cat24 - the information service for Catalunya based in Barcelona.

Click here to read the interview in Catalan (you can use Google translate to read it in Spanish or English, although the English-language translation is a bit rough).

Vital Wave Consulting at Mobile World Congress

Vital Wave Consulting will be at the Mobile World Congress in Barcelona next week - come by one of our sessions and say hello.

Monday, Feb. 15th - Launch event for “Women & Mobile: A Global Opportunity”, the first global market sizing report of its kind highlighting the gender disparity in mobile ownership and usage in low and middle income countries. Report is authored by Vital Wave Consulting and sponsored by the GSMA Development Fund and the Cherie Blair Foundation for Women. Vital Wave Consulting's CEO, Brooke Partridge, will be a speaker. (invitation only)

Wednesday, Feb. 17th - mEducation - Liberating the Classroom, 2:00 - 3:30 pm. Vital Wave Consulting's VP of Consulting, Karen Coppock, will be a panelist.

Thursday, Feb. 18th - mHealth – Collaborating for Universal Care, an mHealth Insight developed with the mHealth Alliance, 2:00 - 3:30 pm. Vital Wave Consulting's CEO, Brooke Partridge, will be a panelist.

Hope to see you in Barcelona!

Mobile Services May Act as “Customer Glue”

In the two weeks since the Mobile World Congress, there has been surprisingly little coverage of an important research initiative by GSMA and CGAP (the World Bank’s independent policy and research center) on “Mobile Money for the Unbanked.” Some accounts focused on the Gates Foundation’s promise of $12.5 million to promote mobile banking among the world’s poor. But Vital Wave Consulting attendees wonder whether the writers of these accounts missed the Mobile World session in which GSMA, McKinsey and CGAP representatives discussed the preliminary results of their research on the nascent mMoney industry. According to their study, mBanking will grow to a $5 billion industry within 3 years – a noteworthy figure that got some attention. But one of the most intriguing findings was that mMoney services may increase “stickiness” among mobile customers.

Mobile carriers in all markets are concerned with churn (i.e., customers who leave their service for another). “Stickiness” is that elusive quality – part pricing, part quality of service, and part brand loyalty – that all carriers desire. The idea that a particular service may convince consumers to stick with a particular operator is not new, but evidence that this is true for mBanking customers in emerging markets is particularly important. After all, there are around 1 billion people in the world (nearly all in developing countries) who own a mobile phone but do not have a bank account. Among these consumers, churn is a major problem, exacerbated by a liberalizing mobile industry with new carriers and lower prices, as well as the introduction of new, multi-functional handsets and stronger networks. According to CGAP, when a subscriber is also a user of mMoney services provided by the operator, client stickiness goes up considerably and churn goes down.

Though the GSMA research focused on mobile financial services, it may be safe to assume that stickiness will result from other mobile services as well. This presents a critical opportunity (or perhaps an imperative) for carriers, service providers and application developers. As new subscribers become harder to find and emerging markets reach saturation points on par with mature-market countries, client retention will be the name of the game. Distinct mobile services and unique functionality will be the glue that binds customers with a particular operator (and/or handset). Telecommunications companies that invest now in the relationships and technology required to expand the utility of the common handset will attract and retain more customers as the market around them grows to maturity.

Bandits, Drug Traffickers, and other Barriers to Entry

Last week in Barcelona at the Mobile World Congress (the conference formerly known as 3GSM), attendees got a taste of what it really means to bring technology to frontier markets. Karim Kohja, CEO of Afghanistan telecom operator Roshan, described the challenges of expanding into rural Afghanistan. He woke up his audience with the story of his unexpected entry into the “financial services industry” when he had to carry boxes of cash into bandit-infested mountains. Kohja quickly learned that, if reaching remote customers was easy, they would already be subscribers.

While the Afghanistan telecom example is extreme, it is not unique. Barriers to entry are typically segment- and geography-specific, and mature-market experience does not necessarily help a company prepare for them. Vital Wave Consulting field researchers know this well – before conducting interviews or taking photos of technology usage in the favelas of Rio de Janeiro, they must request permission from local drug traffickers. Oftentimes the more remote the region or poor the market, the greater the challenge. But, emerging-market expansion is not always so treacherous. Many, for instance Eastern European countries, can look and act more like developed markets than their least developed counterparts such as those in Sub-Saharan Africa. And the least developed markets can also offer unexpected advantages. Markets that have not yet been penetrated by technology have fewer barriers to entry (e.g., no legacy systems to upgrade, less competition).

Companies eager to find growth opportunities in emerging markets must balance their appetite for risk with the urgency to grow. Businesses may chose to work with partners to share the risk or to avoid the most extreme situations. Others may chose to embrace the risks and hedge against them with business rigor, including tested business models, credible market and business intelligence, and reliable supply chains. Businesses with such a toolkit will mitigate emerging-market risks and gain a reliable measure of potential rewards. These are the firms most likely to effectively tackle the unique barriers to entry in new markets.

Also in the news:

• $20 mobile phones coming to India
• The marriage of music and handsets
• Low-cost notebook round-up