Mobile phones, toothbrushes and good times.
For years, farmers in Maharashtra, a state in western India, struggled to get a fair price for their produce because they were unaware of locations where they could sell for the best price. Shrewd middlemen coaxed them to sell for less and in turn made a tidy profit by selling to buyers at a higher price. The farmers remained poor, and gained little from India’s economic growth.
That changed in 2007 with the launch of Reuters Mobile Light (RML), a mobile messaging-based service. Encouraged by government policies, the service spread quickly. In 2010, a grape grower in the state began exporting to Russia where prices were higher. A maize grower received information about spread of bird flu in parts of India where most of his customers were located. He stored his produce and waited till he could sell for a higher profit. In 2013, the RML had over 1.3 million subscribers in an estimated 50,000 villages in 13 states. It delivers customized and localized information such as weather forecasts, local crop prices, agricultural news, and other relevant data. Individual farmers have earned over $4,000 in additional profit based on information they got through RML.
Such examples of change are found all over the world. Today, people own more mobile phones than toothbrushes. For example, in Russia there are 179 mobile phones for every 100 citizens. The number of registered SIMs is higher still, at 234 million, according to Itar-Tass, Russia’s official information agency.
Plunging prices of mobile devices and cheaper call plans have accelerated the spread of mobile phones to 7 billion subscribers globally. Mobile penetration in developed countries is 128%, or more than one mobile for each person. Mobile operators have continued to reduce tariffs to gain more customers, which means that adding new subscribers does not necessarily mean higher profits. Paris-based Bouygues SA, France’s third largest mobile operator, saw a 23% drop in first quarter earnings this year, amid a price war. Companies are more concerned about retaining high-value customers than gain new ones that move on quickly. The good news for operators is that data usage, which is more profitable, is rising in popularity in emerging economies as more people migrate to smartphones.
Despite an intensely competitive environment, telecommunications has been growing at a fast clip. In China, the industry grew 40%, a rate other traditional industries can only wish for. In Africa, mobile phones have changed the way people bank, shop and transfer money. Kenya, where daytime robbery used to be common capital Nairobi, mobile payments proved to be an effective solution. Today a quarter of Kenya’s GNP flows through the M-Pesa mobile money system. In South Africa, 33 percent of the population does not have access to a bank account. Almost all of them own a mobile phone. SAP developed a mobile banking app for Standard Bank to bring banking to the people. Earlier, people in rural areas had to travel anywhere between 25-40 miles to a bank branch. Now they can open an account right at home. The service is very popular, and over a million new customers have signed up since its launch last year.
While telecommunications operators might be feeling the heat in some markets, the rise of mobile phones has been a boon for its users and for businesses that use it as the primary medium to reach their audience. Studies have shown that introducing 10 new mobile phones per 100 people in the developing world can add between one half to one percent to a country’s GDP growth rate. Operators have offered innovative services as they bid to retain high-spending customers who use profitable 3G/4G services and consume far more data than those on 2G networks. In the developed countries, widespread availability of broadband as allowed television channels to offer live programming through their mobile apps. In the US, most millennials watch less TV than their parents and instead like to access it on mobiles and tablets. This has led to a spike in subscriptions for services like Netflix, HBOGo and Hulu. Streaming music app Spotify has over 10 million paying customers, while sales of DVDs have slowed.
People in far-flung rural areas use mobile phones to have access to reliable information. For such service, voice and messaging services and enough. Also, operators have adapted modern technology so that it can be used in places that have poor internet connectivity, or in regions where apps like Twitter are restricted. For example, when social media was banned during protests in Istanbul, mobile networks made it possible for people to voice their opinion on Twitter through SMS. In Kenya, people transact money through M-Pesa that does not require broadband.
As developed markets such as the US and Western Europe reach saturation, developing nations have quickly emerged as growth drivers. Last year, North America grew less than 1 percent, while Latin America grew at 5 percent. Broadband mobile data, or 3G and 4G LTE networks, will spread wider around the world as governments invest in mobile technologies to spur growth. Operators can then make profits and offer better services, which in turn will attract more users. In regions that had poor landline connectivity, mobiles allowed people to leapfrog and the same might happen with data services. In Colombia, spread of broadband allowed people to watch TV programs with a higher level of customization that would have been possible with a regular cable connection. Operators are also offering shared data plans, freeing customers to be online on multiple devices under the same payment plan.
We can expect more of such choices to explode in popularity in emerging economies as they become richer, services become cheaper, and citizens demand more from their leaders. As one politician said during India’s recently concluded general elections, “Good times are ahead.”