In Juniper’s recent report examining the trends and opportunities facing operators and handset vendors alike in the fast-growing low-cost handsets field, we found that one of the key hurdles in getting phones into the hands of those on very low or subsistence-level incomes was the total cost of ownership (TCO) of the phones themselves.
Over the next five, years, we expect that around 1.5 billion new subscribers will join the mobile market. And, as a significant proportion of these new users will hail from markets where discretionary spend on perceived ‘luxuries’ such as mobile phones is likely to be very small, operators and handset vendors alike need to invest now in hardware and software that can be created and delivered at very low cost in order to keep handset TCOs down and therefore attract as many new subscribers as possible.
In our low-cost handset report, we found that Nokia - a key manufacturer of low cost devices – was advocating a monthly handset TCO of $5 or less to encourage adoption of mobile technologies in the poorest – but also the most populous – countries in the world. Typically, penetration in these markets is less than 10%, suggesting that there is considerable room for growth for those players willing to forego the tried and tested business models.
By the end of 2008, only four countries had managed to reduce handset TCO to $5 per month: Bangladesh, India, Pakistan, and Sri Lanka. In these countries, governments, operators and vendors had worked closely to lower licence fees and reduce or abolish sales taxes and import duties on handsets, as well as taxes on value-added services including SIM card activation fees. Such efforts have had a clear impact on mobile penetration in these countries.
And now we can possibly add a fifth country to this list: Ghana.
A study published by the National Communications Authority (NCA) found that average revenue per user (ARPU) had fallen to US$5 per month by March 2009. This included both voice and data usage, as well as the costs of interconnection fees resulting from incoming calls. Market leader MTN (54% of subscribers) had the highest ARPU, at around US$8. It was followed by Millicom-owned Tigo (23% of subscribers) with US$5.30, Kasapa (3%) with US$4.70 and Zain (7%) with US$3.00. Vodafone (13% of subscribers) has not reported ARPU for its Ghanaian operation for some time, but its predominantly prepaid offering suggests that its ARPU would be similar to that of MTN and Tigo. Zain’s ARPU is very low mainly because the company launched in December 2008 and was offering mainly low-priced introductory service packages during the period in question. Glo, the country’s sixth mobile operator, licensed little more than a year ago, launched services in April.
Prepay services are key in getting consumers onto the network in the first place. Revenues and ARPUs will be low, initially, but in time – and as consumers get more familiar with and dependent on their devices – so consumption of more lucrative value-added services will increase.
It’s a long game, but operators must be prepared to play it in order to win.
Tags: ARPU, average revenue per user, Bangladesh, emerging markets, entry level handsets, forecasts, Ghana, Glo, India, Kasapa, low-cost handsets, Millicom, mobile data, mobile devices, mobile handsets, mobile networks, mobile phones, MTN, Nokia, Pakistan, penetration, prepaid, Sri Lanka, subscriber base, TCO, Tigo, total cost of ownership, value-added services, Vodafone, Zain
