7 Comments

1. 

   Mahesh

   March 6, 2008, 1:49 pm

   Dear Iqbal,

   I assume the fist grpahs explains the ARPU of a low user in different countries.

   Then what does the grpah under the heading of (USD PPP)expain? Does that mean a sri lankan mobile suscriber (low user) is ranked lower ( next to pakistan and bangladesh)interms of purchasing power.

2. 

   Iqbal

   March 6, 2008, 2:44 pm

   Dear Mahesh,

   The first graphs do not give ARPU for low (or medium or high) users in different countries. They show the average monthly prepaid and postpaid mobile costs (inclusive of connection, rental, usage costs and taxes) for the three user levels as identified through the application of tariffs from different countries on the price baskets.

   PPP is defined as purchasing power parity. Based on the numbers calculated, yes, Sri Lanka ranks higher than Bangladesh and Pakistan but lower than India (and the other four countries considered) in terms of purchasing power.

3. 

   Mahesh

   March 7, 2008, 9:43 am

   Dear Iqbal,

   Thanks for your reply.

   Sri Lanka is in better poisition interms of cost of using a mobile phone , probably due to the comparatively lower tarrif structure.

   Why SL is lower interms of PPP. Is it due to the high inflationary environment???.

   Afganistan is 2 times higher than us interms of PPP. Does this mean a subscriber in Afganistan is better off interms of PPP over Sri Lanka or Is this due to the differences in mobile penetration ??

4. 

   Miraj K

   March 20, 2008, 2:31 pm

   The leading english language daily in Bangladesh just published an article based on this LearnAsia study.

   “Bangladeshis spend lowest on mobile phone in South Asia”
   http://thedailystar.net/story.php?nid=28418

   Re: the report, the CEO of the largest mobile operator commented that “affordable prices are a prerequisite to growth” and that mobiles can “deliver growth beyond expectations in a competitive market”.

5. 

   harsha de silva

   March 22, 2008, 9:57 am

   Mahesh

   This is a fairly complicated question even though it seems simple. In economics we say PPP is a method of equalizing the purchasing power of two currencies using what is called the long run equilibrium exchange rate.

   Let us make it a bit simpler. The PPP exchange rate is expected to equalize the purchasing power of different currencies in their home countries for a given basket of goods and services. So economists [and others] use PPP exchange rates to compare ‘standards of living’ of countries. In fact, it is now very much the accepted practice to compare the well being of people living in various countries. You can see the IMF, World Bank, CIA and University of Pennsylvania rankings of countries by PPP adjusted per capita income at http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita.

   For instance the high estimate for Sri Lanka’s PPP adjusted per capita income among the 4 reporting organizations is almost USD 6,000. However, Sri Lanka’s per capita income in 2007 at market exchange rates was not more than about USD 1,650. For Pakistan, the high estimate is almost USD 3,000; but its per capita income using market exchange rates is just under USD 1,000. So the ratio between the market exchange rate and the PPP adjusted exchange rate is about [very roughly] 3.6 for Sri Lanka and about 3 for Pakistan based on the above.

   What does this mean? Well, it looks like 1 USD goes a bit longer in purchasing power than in Pakistan based on the ‘consumption baskets’ used for comparison. Actually a lot depends on the consumption basket. For instance if it has relatively more ‘non-tradable’ items than tradable ones, then in poorer countries that will help a dollar stretch longer; or have greater purchasing power. Say, my consumption basket has only hair cuts; something that cannot be traded between countries [as opposed to say gold], then given the general price level in Sri Lanka I can get a haircut with USD 1, as opposed to in the US where I will need USD 10 for one hair cut. Then, in that case, my PPP ratio will be a multiple of 10. Suppose it cost USD 2 in Pakistan, then the multiple will be 5.

   Now getting back to the Mobile Benchmarks calculation, LIRNEasia using the IMF World Economic Outlook Database available at http://www.imf.org/external/pubs/ft/weo/2007/02/weodata/index.aspx has converted market exchange rates to PPP adjusted exchange rates. Just simply working backwards you can see the nominal price basket in USD is adjusted by a multiple of 3.5 for Sri Lanka and 3.16 for Pakistan. This makes sense with the discussion we had earlier.

   Now to the final point; in the pre-paid case, Sri Lanka costs for low, medium and high user packages were 15 to 20 percent higher than Pakistan in USD terms using market exchange rates. For instance low users spent USD 3.83 in Sri Lanka vs. USD 3.34 in Pakistan. For medium users and high users it was USD 8.12 vs. USD 9.41 and USD 16.92 vs. USD 20.46 respectively. So the PPP conversion magnified the difference to an increase of 26 to 33 percent. But in the post paid case, the differences were very small. While Sri Lanka was 3 percent more expensive than Pakistan, in the medium and high user packages, Sri Lanka was in fact marginally cheaper by about 5 percent. Now, when this is converted to PPP adjusted USD to reflect the general consumption pattern on the two countries, the small difference in price [Sri Lanka lower by 5 percent] turns in to a small increase of 5 percent. This is to be expected because of the difference in the multipliers [3.5 for Sri Lanka and 3.16 for Pakistan].

   In fact this scenario is more pronounced in the case of Sri Lanka and India, where India’s conversion ratio between nominal exchange rates and PPP adjusted exchange rates is higher [around 4] than for Sri Lanka [around 3.5]. Here while Sri Lanka cost is higher in market exchange rates for all user segments by around 2 to 11 percent, they are cheaper in terms of PPP adjusted rates by around 3 to 10 percent.

6. 

   SimPhony

   March 31, 2008, 12:03 pm

   I find this information from a blog site today.

   SimPhony Targets 70% of Sri Lankan Population

   At present Sri Lanka has around 7.9 million mobile phone subscribers which is only a 30% of the total population. A major reason for this less mobile phone usage is the average cost of mobile phone is not feasible enough for a low income earners. As a solution SimPhony, a BOI approved joint venture between Cellnets Solutions (CNS) in Israel and CallONE Networks in Sri Lanka is planning to provide a much cheaper solution for mobile communication.

   The idea behind SimPhony is simple, but very useful and convenient for those who are specially in rural areas where there is no enough GSM or CDMA connectivity. According to the company a plenty of public phones will be made available in the near future which can be used for SimPhony system. Customers will issue a subscribe identification module (SIM) which has it’s own phone number along with some additional value added services(VAS) such as CLI and missed call alert. Customers will be able to use this sim card for making calls or even receiving calls from others.

   According to the company they will use traditional GSM networks as well as CDMA networks for this SimPhony service in Sri Lanka.

   A search for the term ‘SimPhnoy’ also took me to the news story below.

   http://www.dailynews.lk/2007/11/06/bus26.asp

   Any comments?

7. 

   zzainudeen

   April 2, 2008, 9:16 am

   My question is does anyone use public phones anymore? According to 2006 data on the ‘bottom of the pyramid’s use of telecom services in Sri Lanka, less than 15 percent used public payphone booths at all in 2006! Perhaps the target of ’70% of the Sri Lankan population’ is a little too high – even though there are only 30 or so phone connections per 100 population in the country, this doesn’t mean that the other 70 % don’t have access; in fact we find that more than 90% in Sri Lanka actually already have some kind of access to a phone, and this includes access to a fixed phone in one’s own house, access to other peoples’ mobiles in one’s own house, access to public call offices (not the same as public payphones), etc, etc.

   It seems that the justification for this new product, targeted at the low-income segments, is that (a) the cost of getting connected and (b) the cost of using telecom services in Sri Lanka are too high.Granted among the 60% at the BOP who didn’t have their own mobile or a fixed phone in their house in 2006 (according to T@ BOP2 – http://www.lirneasia.net/projects/current-projects/bop-teleuse/), the biggest reason for not being connected was affordability. But what we saw was a large share of these non-owners planning to get their own mobile or fixed phone—even in rural Sri Lanka—despite the problems of affordability (perhaps they planned to save up by mid-2008 for the purchase).

   What is heartening though, is that the amount which can be afforded on monthly telecommunication costs (less than approx USD5) is well in line with what the above benchmark study (http://www.lirneasia.net/wp-content/uploads/2008/03/08-02-baskets-explained-v41.pdf) finds for low-user prepaid mobile use (USD3.38), as well Nokia’s recent Total Cost of Ownership study (http://www.nokia.com/A4425062) which found that Sri Lanka had the lowest TCO in the world, a number below USD 5. Well done Sri Lanka; but there’s always room for improvement!