The Adoption of Mobile Phones in
Emerging Markets—Global Diffusion
and the Rural Challenge
Kas Kalba, Ph.D.
6th Annual Global Mobility Roundtable
Center for Telecom Management
University of Southern California
Marina Del Ray, CA
June 2, 2007
Agenda
1. Examine Selected Adoption and Diffusion
Issues in Emerging Markets
2. Explain Differences and “Anomalies”
–
–
High-fixed China vs. leapfrogging India
Ageing Eastern Europe vs. youthful Latin America
3. Address the Rural Challenge Ahead
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Some Adoption Indicators/Drivers
•
•
•
•
Disposable income
Legacy service ?
Income distribution ?
Proximity to highadoption markets ?
• Demographics
• Traffic/crime/climate?
• Culture?
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• Competition (no. of
operators)
• Prepaid and CPP
• Asymmetric
interconnection fees
• Technical standards?
• Population density
• Spectrum allocation?
Emerging vs. Developed Market
Factors
Developed: Adoption
Developed: Diffusion
1. Income per cap., yes
2. Legacy service, yes
3. Income distribution,
maybe
4. Extreme climate, maybe
1. No. of competitors ??
2. Population density?
3. Tower permits?
Emerging: Adoption
Emerging: Diffusion
?
?
Adoption Issues in Emerging Markets
• Does the income effect decline?
• Does “legacy” become irrelevant?
• What is the role of prepaid?
• Do more operators equal more adopters?
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Income still a big factor
Mobile Adoption and Income: Emerging
Markets, 2006
10000
GDP per capita
8000
6000
4000
2000
0
0
20
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40
60
80
mobile penetration
100
Data Source: ML
120
The more legacy, the more mobile
Mobile vs. Fixed Penetration in Emerging
Markets
fixed penetration
35
30
25
20
15
10
5
0
0
20
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40
60
80
mobile penetration
100
120
Data Source: ML
Legacy effect in low-income
markets-Mobile vs. Fixed Penetration,
African Markets
fixed per 100 capita
35
30
25
20
15
10
5
0
0
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20
40
60
mobile per 100 capita
80
Data Source: ITU, 2005
Prepaid is inverse to income
Figure 4: Prepaid and Income, Developed and
Emerging Markets, 2006
120
% prepaid
100
80
60
40
20
0
0
20000
40000
60000
80000
GDP per capita
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Data Source: Merrill Lynch
HH size is inverse to adoption
Mobile Adoption and HH Size in Selected
Emerging Markets
8
HH size
7
6
5
4
3
2
0
10
20
30
40
50
60
mobile penetration
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Data Source: Merrill Lynch and UN
More operators = more adopters?
Mobile Adoption and Level of
Competition in Emerging Markets, 2006
80
mobile penetration
70
60
50
40
30
20
10
0
2
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3
4
no. of operators
5+
Data Source: ML
Why China Has Led India
China
• 35% mobile, end of 2006
• High economic growth—and
lower prices
But..
• Govt.-owned operators (2+)
• Extensive fixed lines: 26.6%
• High savings rate
• Older population
• No CPP (until 2007)
•
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India
•
•
•
•
•
13.2% mobile, 2006
Large “middle class”
More young people
Private operators (up to 6)
Few fixed lines: 3.8%
But..
• Low GDP per capita
• Only recent reduction of prices
HH size is inverse to adoption
Mobile Adoption and HH Size in Selected
Emerging Markets
8
HH size
7
6
5
4
3
2
0
10
20
30
40
50
60
mobile penetration
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Data Source: Merrill Lynch and UN
Latin America vs. Eastern Europe
Eastern Europe
Latin America
• Ageing population (c.20% >60)
• High legacy phones (c.30%)
Twice as many young people—
half as many older
• Asymmetric regimes
But..
• High mobile: Poland 94.3%,
Russia 103.8%, 2006
• Proximity to explosive W.
Europe markets and regulation
• Positive geography?
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But..
• < 55% mobile (Brazil and
Mexico, 2006)
• Larger households
• Fewer legacy phones (c.20%)
The Rural Challenge
The Situation
• 3 billion of world’s 6.7B inhabitants live in rural areas
• Limited progress since Maitland Commission
Supply Challenge
• Low density, remote, rugged topography, etc.
• High rollout and maintenance costs
Demand Challenge
• Rural populations often much poorer than urban
• Over 1B have never held a mobile phone (guestimate)
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The Rural Promise
The Promise:
• Increasing rural coverage in Africa; India starting to work on
the problem
• Output-Based Aid (OBA) projects being organized across the
globe
• Cheaper technology: $10 phone/$1 ARPU, WiMAX?
The Bottom line:
Will the global market continue to grow new subscriptions by
25%, as it has in recent years, in which case the whole world
could be mobile by 2010—or will it take a decade or more to
roll out the infrastructure and attract adopters in the rural
areas of the developing world??
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