Mobile Phone Industry Targets The Third World

The mobile phone industry is turning to the Third World and asking the heads of developing countries to lift regulatory barriers.

February 16, 2006

3 Min Read
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BARCELONA, Spain — With a saturated market in Western Europe and North America and a user base adopting costly new third-generation features at a seemingly glacial pace, the mobile phone industry is turning to the Third World and asking the heads of developing countries to lift regulatory barriers.

According to Motorola CEO Ed Zander, addressing a forum at the 3GSM World Congress here Wednesday (Feb. 15), mobile phone penetration is a powerful engine for economic growth. He said, “Every time you have ten more phones per 100 people, you have an increase in GDP (gross domestic product) of 0.6 percent.”

Zander’s company is a leader in providing ultra-low cost (less than $40) handsets to poor countries, shipping at a rate of 31,000 phones a day.

He said, "We stand on the brink of a new world where mobile communications will help people overcome poverty and realize their potential." But he said that countries that continue to impose taxes on handsets, and other restrictions on mobile operators, will delay or even deny the economic benefits from “connecting the unconnected.”

Zander struck a theme common to this year’s 3GSM gathering, where thrift has supplanted the race to add handset features and maximize ARPU (average revenue per user). Zander was among several panelists in a session on developing markets who cited the economic virtue of deregulating mobile telephony in countries like Bangladesh, Nigeria, the Philippines, parts of Russia and dozens of other countries that represent the potential of 3 billion new subscribers by 2010.He cited a study projecting additional sales of 1 billion handsets in 50 countries if they were to exempt mobile phones from all value-added taxes and customs fees. Seconding Zander’s view was Tarek Kamel, Egypt’s minister for commerce and IT, whose country’s mobile phone penetration stands at only 19 percent, but whose demand for service has overwhelmed its two licensed operators.

Egypt released a request for proposals for a third mobile operator, further opening its telecommunications market to likely investment—and competition— from outside the country. This prospect seemed not to daunt Kamel, who boasted Egypt’s recent repeal of taxes on mobile phones from other countries. "The more we deregulate, the more we re-regulate in the right direction," he said, "we get more growth."

Kamel also cited the potential of mobile phones to disseminate news, medical information, education and emergency services to vast numbers of unserved people in poor, rural areas. He called this promise a "real revolution."

But, as Kamel added, the phones and services have to be cheap. "The more we reduce the price, this drives growth and this brings opportunity."

Panel member Babar Khan, president of Pak Telecom Mobile of Pakistan, summed up the promise and the dilemma of the mobile phone industry in the developing world this way: "We’re in a very low ARPU market. We have to find creative ways of making money. Unless we get volume out of it, it will be very difficult.”The last word on the issue came from Mohamed Ibrahim, chairman of Celtel and one of Africa’s most celebrated entrepreneurs. "There’s a lot of wealth at the bottom of the pyramid,” and we mean to tap it."

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