Turning wireless services from novelty to normal has engaged wireless players focusing on the emerging markets in the world.
While advanced economies of North America, Western Europe and Japan grapple with saturation or near-saturation issues owing to preponderant adoption across social classes, emerging markets are stepping to where the advanced countries were decades ago.
The challenges are different here, according to market watchers.
“Population penetration levels in emerging regions are expected to be still under 20 percent by year-end, suggesting a lot of room for subscriber growth,” remarked Ozgur Aytar, director of wireless research at Fast Track Wireless. “But these markets are hindered with the population’s limited purchasing power.”
Industry projects there are more than 2 billion potential wireless subscribers in emerging markets throughout the world.
Many emerging markets are in Asia, Latin America and Middle East/Africa. China has the most potential and has already drawn a huge chunk of investments from both North America and Europe. Elsewhere in Asia, there is great growth potential in India, Indonesia, The Philippines, Taiwan, Pakistan and Bangladesh. In Latin America, Brazil is the clear leader, with other players such as Chile and Mexico also flexing some muscles.
In Africa, the significant countries include Egypt, South Africa, Nigeria, Botswana and Zimbabwe. Some companies have also classified Eastern Europe as embodying some emerging markets like Romania and Russia, where CDMA 450 MHz technology is on the rise. In the Middle East, the countries include Iraq and Saudi Arabia.
Major vendors seeking to capitalize on bringing wireless telephony to emerging countries include L.M. Ericsson, Nortel Networks Ltd., Nokia Corp., Motorola Inc., Samsung Electronics, Siemens AG and Lucent Technologies Inc.
Of the different market categories, Africa has the lowest uptake rate, but tremendous potential going forward, according to Jussi Ware, vice president of marketing and sales at Nokia Networks. He defined emerging markets as countries with between 20- and 30-percent levels of penetration.
“One of the reasons for wireless interest in those markets is that wireline is costly,” said Mark Morell, director of strategic marketing for wireless at Nortel Networks. “It is cost effective from the deployment perspective.” He noted that the difference between the emerging markets and the developed ones in North America, Europe and Japan is that the new markets are not as concerned with efficiency.
The other significant issue is managing large populations within smaller land masses and less population within greater land masses and leveraging them for profit, explained Arun Bhikshesvaran, director of strategic planning at Ericsson.
“It’s about cost-effective capacity and cost-effective coverage,” he said.
Vendors agree that matching disposable income to access is key to achieving success in the markets. Low-cost devices are key factors because disposable income is different in emerging markets, noted Bhikshesvaran.
He relates the story of Bangladesh in which Grameen Phone, a subsidiary of a bank, facilitates access for a whole community. The bank equips a community with a mobile system, using kiosks as centers where inhabitants go to place phone calls.
They target aggregated demand, he said, and they use the efforts of local entrepreneurs. Average revenue per user does not matter here, but return on investment is high as one device is used by 200 to 300 residents.
GSM technology used in most emerging markets, said Ware, explaining that it drives down costs because it offers economies of scale.
In Latin America, operators are moving from TDMA technology to second-generation services, either GSM or CDMA. Some have started migrating to 2.5 generation, 3G and in some cases, GPS services.
Wireless local loop is playing an improved role in advancing markets, especially among users who need communication without much mobility. Ware said it works partly because it requires cheap licenses. India is pushing the technology.
Nokia’s Ware said regulations in most of these markets still favor fixed-line connections. “It has been a hurdle,” he said. “It’s changing, but it’s been the preferred option. It’s our job to demonstrate that mobile provides better cost savings.”
Voice is the main application in the markets, and prepaid services continue to account for the overwhelming experience. Even with voice, carriers have to contend with literacy value issues.
“Without adding new values, we cannot differentiate ourselves,” said Babatunde Kaitell, head of marketing at Globacom, a new operator in Lagos, Nigeria.
Vendors are looking to ensure that the devices are simple to operate both for literate and illiterate users.
