How Emerging Countries Developed Mobile Economies

A look at the benefits and challenges of skipping straight to mobile in emerging countries.

By on October 29, 2014

Growing economies in places like South America, Africa, and Asia may not have the size and scope of mature nations like the U.S., Europe and Japan, but they are growing quickly and are bringing mobile networks and applications to nations where many people didn't even have phone lines, skipping PCs entirely in the rush to mobile.

Building these markets offers challenges unique to each nation that are very different from what wireless vendors faced in the U.S. There are issues of power, poor existing infrastructure, the extreme first step of startup costs, and political corruption run amuck.

In creating a wireless network for, say, Uruguay or Cameroon, the local vendors often encounter what are called "green fields," or a nation with no infrastructure at all. This is sometimes viewed as a positive, because it means there are no antiquated legacy networks to hamper them. They can deploy the latest and greatest in 3G or 4G technology.

Despite the lack of established infrastructure, these nations have to be judicious and pick a network supported by a wide range of existing hardware. The last thing a country wants is to have a network no one can use. Many phones today sold in the U.S. and Europe support roaming, but the country setting up a network has to make sure it uses a popular spectrum and format so those phones work.

The International Telecommunication Union (ITU), chipset makers and countries are involved in trying to create unity, said Will Stofega, program director for mobile phone research at IDC. Stofega said he has not had problems in places like China, Korea or India. But in some smaller countries there have been issues with bandwidth allocation, like the military getting spectrum commonly used by wireless services. So that requires a workaround.

Not every nation embraces LTE, either, due to its much higher cost than 3G. 3G may be slower, but it's good enough for most services. "You will see 3G around for some time. Some of these countries are investing in it and you can run services quite well and get the job done. You may not be able to watch YouTube videos but it's enough," said Stofega.

 

Skipping PCs

For many people in these areas, their phone, not a PC, will be their introduction to the Internet and it will be how they do business, deal with their health and communicate, so there is some effort to at least get people migrated to smartphones, said Gerry Purdy, chief mobile analyst with Compass Intelligence.

"Operators are migrating these people from feature phones to low-cost smartphones to enable web browsing, local apps and voice services at affordable rates. Text messaging apps like Line, WhatsApp and others are also developing value-added services on top of texting to make the phones more valuable on a local basis, e.g. getting weather via text," he said.

It was the introduction of Android and its low-cost software and hardware stack that made it possible to do this, said Stofega. Unlike the U.S., where you can get your phone at substantial discount, many emerging countries have no subsidy, so you must buy the phone outright, and that could be a month's salary

"Android got all of that moving. For an upstart like Micromax in India, that is a great thing. It lets them focus on the marketing and other parts of it," Stofega said. Micromax was a software company that entered the low-cost Android market in 2008, offering cheaper alternatives than foreign-made competitive products.

And even though the handsets can be pricey, they are still cheaper than a PC, he notes. A mobile phone, or better yet, a “phablet,” gives people everything they need: a big screen, apps, Wi-Fi and cellular all in a package they can carry in their pocket.

 

Building Services

And the services are coming. M-Pesa, a mobile-phone based money transfer service that launched in 2007, began not in the U.S. or Europe but in Kenya. The service was designed by Vodafone for Safaricom and Vodacom, the largest mobile network operators in Kenya and Tanzania. The service is now in South Africa, India and even Afghanistan. This is bringing online banking to nations where banks might be 30 miles away and the journey a dangerous one.

M-Pesa allows users with a national ID card or passport to deposit, withdraw, and transfer money easily with a mobile device. Users can deposit and withdraw money, transfer money to other users and non-users, pay bills and in some markets, transfer money between the service and a bank account.

And if users don't have a national ID card, their phone can handle that, too, said Stofega. "The more these devices become affordable, more people see access to information and bank accounts. In some of those countries, people don't even have identity cards. What a lot of those countries have tried to do is set up an identity service and mobile can help solve that," he said.

Mobile devices have other uses as well, such as education. Distance learning is viable on a phone or phablet, assuming the user can read. This is a significant hurdle in some countries. Others use it for more entertaining reasons. In India, smartphones need a flashlight, a radio, good speakers and must support ABC: Astrology, Bollywood, and Cricket. All three are national obsessions and a must for a phone to sell.

For small businesses, handsets are giving them the same kinds of opportunities that PCs gave SMBs 20-30 years ago. They now have the ability to do basic services like customer relationship management (CRM) or basic inventory management and electronic money transfers that weren't available before. Instead of paper ledgers and records and all-cash transactions, now everything is electronic, which means a lot less time spent managing the business. "What it does is set the stage for new ideas and players to establish themselves to create new sources of wealth and revenue," said Stofega.

It also makes things a little more honest. When Afghanistan adopted it to pay its Afghan National Police instead of with cash, they found 10% of their workforce didn't exist. Their salaries were being pocketed by someone else. Also, officers were shocked at how much they received in payment, Stofega says. That's because under the old model, policemen did not know their true salary and much of it was being skimmed off. The service has since been expanded to other parts of the nation.

The challenge for application developers is their nation's economy and attitude. In India, for example, there is no real app market, said Stofega. Apps are given away because no one will pay for them. So what's an Indian app developer to do to make money? They often have to sell in other markets, usually more advanced economies, where people actually do pay for apps.

So while challenges remain, many emerging markets are slowly building out networks and a market for handsets and apps that will allow them to enter the 21st century, compete with the mature markets, and root out some corruption all at the same time.

Tags: LTE, Mobile Network, IDC, International Telecommunication Union, Compass Intelligence, M Pesa, emerging markets