Everyone is talking about the mobile revolution in emerging markets, and for a good reason.
According to GSMA Intelligence, the world will have over 1 billion new phones by 2020, and most of them will be in emerging markets - but the fact that it’s a growing market has significant implications for the telco industry.
On one hand, these markets create great opportunities, offering scalability with huge potential. But on the other hand, emerging markets are infamous for having an extremely low ARPU and an extremely low credit card penetration rate. In fact, 95% of telco subscribers in emerging markets use prepaid options.
How Do Top Mobile Trends in Emerging Markets Impact Telco Strategies ?
Some telecom trends in emerging markets are not that different from trends in Western countries, such as:
- An increase of OTT app usage and a decrease of traditional services, such as voice and text.
- Telecom operators are challenged by the fact that the revenue they get from charging for Whatsapp data is much lower than the revenue they get for SMS, where they directly charge for each text message. For example, according to MyBroadband, the lowest rate for 1 SMS in South Africa is 21 cents, but “if mobile operators in South Africa price SMS like they do data, a message would cost 0.03 cents.”
- Since consumers prefer the more cost effective option and since the number of consumers is growing, telecom operators are investing more in next gen broadband.
But this isn’t where adjustments stop. As we said before, unlike Western markets, the vast majority of people in emerging markets don’t have credit cards. After years of discussions, telecom operators are starting to adopt solutions: letting these markets pay with mobile payments, and leveraging the power of the point of sale.
The Importance of the Point of Sale and Mobile Payments in Emerging Markets
Small retail stores have lost their golden place in the Western world telecom sales. In the Western world, consumers can go online and purchase sim cards and even phones online with their credit cards. While people still go to brick and mortar stores to make telecom purchases, telco retail stores have become less critical in the sales process.
That’s not the case in emerging markets. Without credit card availability, telco retail stores are still the main focal point for consumers to purchase phones and subscriptions in emerging markets. That’s also where consumers go to reload their prepaid balance for telecom services and VAS (value added services).
We foresee that operators will invest in comprehensive solutions that will enable their retail stores to sell more effectively and, more importantly, increase revenues with mobile payments. On the back end, these operators will have to implement solutions to increase their local partners network (including small businesses, such as hair dressers, coffee shops, etc.) that will join the digital payment age – but with a mobile payment option instead of credit cards.
Low ARPU Requires Low TCO
Telecom operators want to keep providing Western services, but they must remember that in emerging markets these services must be in Eastern prices. With such low ARPU, operators must take the TCO into consideration. They must be creative and choose solutions that ensure that, at the end of the day, they will stay profitable.
Revital Libfrand is the VP Cloud Solutions of MIND CTI.