Over the last fortnight number of announcements have been made that I think are worth examining in the context of Juniper’s recently-published report on low-cost handsets and how we expect operators and vendors to concentrate on this potentially massive market.
Pakistan has just reduced the mandatory SIM Activation Tax from Rs500 per connection to Rs250, while ‘regulatory duty’ has been abolished and custom duties (importation of foreign-made handsets) have been cut in half to Rs250 per device. The country’s mobile network operators believe that the cuts will give them more scope to compete on pricing of services and handsets and help push their brands and services even further into less affluent customer segments, particularly in rural areas.
More than 40% of Pakistan’s mobile subscribers use low-cost handsets and tariffs. This number can only increase as the total cost of ownership (TCO) of handsets falls rapidly, making mobile communications more affordable for Pakistan’s poorest consumers. Tellingly, mobile penetration stood at under 50% in 2008.
I can also report on a similar story in Kenya, where the government has just abolished the import duty (around 16% value-added tax) on new handsets. Vendors such as Nokia believe that the number of illegally-imported handsets and unregistered SIMS should now fall as ‘the playing field is now level for all’. Nokia believes that penetration (approximately 37% in 2008) can now double, and boost overall levels of gross domestic product (GDP). Nevertheless, a 10% tax on airtime vouchers remains in place, so the cost of calls and SMSs will not change.
I touched on this in my last blog. Lowering the TCO is a vitally important factor in helping financially-constrained people in many emerging markets gain access to mobile communications devices and services that can help them improve their lives in a variety of different ways, from offering them their first channels to banking and organising finances, to helping them educate themselves, and accessing information that can help them better run their small businesses.
Nokia is proactively lobbying governments around the world to lower sales taxes and import duties that otherwise push the cost of handsets beyond the reach of many consumers in emerging markets. The argument is that, if more people have access to mobile services, governments can earn more revenues from service and sales taxes and also benefit from the increased productivity of the workforce.
Nokia’s Life Services suite took a major step forward last week, with the Finnish company saying that it will now roll out these services across the whole of India. Previously, Life Services have been available only in selected regions on a pilot basis, but there is now a strong business case for accelerating the commercial roll-out of the package, which includes educational, messaging, and entertainment services that can be accessed on a growing range of low-cost handsets.
I look forward to seeing similar schemes take shape in other emerging markets, particularly in Africa and the Indian Sub-Continent. This should be aided by the growing availability of low-cost handsets from suppliers such as Nokia, ZTE, Samsung, and TCL.