John Paul

The Impact of Low-cost Handsets

A number of articles appeared this week that trumpeted both the success and growth of mobile telephony in emerging economies. The first gives an update from the Emerging Market Handset Programme (EMHP), highlighting GSMA’s six month extension of its endorsement of Motorola as the program’s official vendor. The article credits the program as being the catalyst which encouraged handset vendors to seriously begin to examine base of the pyramid (BOP) markets.

The arrival of these so-called Ultra-Low Cost Handsets (priced at or below $50) has brought price competition to the mobile sector. The second article points out that to compete with the new offerings, official handset retailers, as well as black market, second hand and refurbished retailers were obliged to reduce their prices across all tiers. “The redirection of vendor strategy towards the growing low and ultra-low cost segments is increasing competition in these segments, obliging further handset cost reductions. This impact has made all handsets in the market more affordable and has even encouraged higher-end handset customers to change their phone, making them available in turn to be refurbished.”

As handset prices fall, the size of the potential market grows. In India, for instance, 70 percent of the country’s population lives in rural areas that account for only three percent of mobile penetration. Encouraged by a supportive regulatory environment, Indian operators are now actively looking at how to address the rural market.

The last article, a well written dispatch from the BBC, highlights the impact these mobile phones are having in Africa. Whether by increasing jobs and entrepreneurship (“the mobile phone companies have done more to tackle youth unemployment than any government project”), spreading information faster (“however hard authorities try to sit on the news, the cell phones start buzzing immediately”), or reducing traffic jams (“in the days when you could not call anyone, you just had to get on the road and go to their office”), it’s apparent that the rapid growth of mobile telephony is noticeably affecting cultural and economic development in a variety of ways.

The story is not as interesting as the speed in which it’s developing. In just a few short years, rural markets have become the driving force in the mobile industry with the resulting innovations also impacting top tier markets worldwide. The secondary benefits of increased telephony are both immediate and abundant, and contribute significantly to this virtuous cycle of innovation, cost reduction and growth. An excellent example of the win-win outcomes that can result when companies view the BOP as a market opportunity, and not just a CSR obligation.