The GSM Association recently announced that its Emerging Markets Handset program is exceeding expectations: mobile operators in Bangladesh, China, India, and Russia have already purchased 12 million of its Ultra Low Cost Handsets (ULCH). But will the initiative reach the rest of the three billion unconnected peoples in emerging markets? Under current cost models that is unlikely.
The problem is that even at US$30 the ULCH’s price is too high for at least a billion of this population.
The annual gross per capita income in sub-Saharan Africa is just US$371. It is unrealistic to expect people there to spend 10% of their annual income on a mobile phone. So semiconductor vendors, such as Texas Instruments, Freescale, Philips, and Infineon are continuing to reduce the Bill-of-Materials for ULCH even further, heading towards US$20 and US$15 in the next few years.
But will ULCH markets stall before a low enough price is reached? Alan Varghese, Principal Analyst, Wireless, at ABI Research doesn’t think so. “We may see trends similar to those for the conventional handset in the developed world. In the early years, it was purchased primarily to transact business; it was only when prices had dropped that handsets penetrated the mass market.”
Something similar is starting to happen in the developing world. In South Africa, software vendor Sharedphone enables the use of the ULCH as a mobile payphone. Local entrepreneurs buy this phone and sell airtime at the roadside. For such a “service provider,” the $30 price is not prohibitive; it is far cheaper than setting up a conventional payphone.
Because per-minute call charges are high, most calls are short and businesslike: Where can I get the best price? Is my order ready? Meet me tomorrow. The “mobile payphone” is facilitating commerce even in regions otherwise lacking in high technology.
What does this mean to handset vendors such as Nokia, Motorola, Sony-Ericsson, Samsung, and LG Electronics?
Varghese says, “They have to think about how they can further enable varied uses such as the ‘mobile payphone.’ They could add value, for example, with software to manage the whole transaction: making the call, presenting the consumer with a summary of call-times and charges, and keeping track of repeat customers in order to offer discounts.”