The next billion customers

Ayesha Zainudeen
zainudeen@lirne.net

www.lirneasia.net
LIRNEasia Media Workshop: Singapore 28 February 2007
fieldwork by funded by IDRC
Agenda
 Research methodology & key findings:
 Harsha de Silva
 The SMS story and others
 Lorraine Carlos Salazar

www.lirneasia.net
 The next billion customers
 Ayesha Zainudeen
 Recap…low levels of ownershhip
Ownership and GDP per capita (USD, PPP)

90% 9,000
80.70%
80% 76% 8,000

GDP per capita, USD (PPP)

% at bottom of pyramid

70% 63.60% 7,000

59.00% 60%
60% 6,000
50% 5,000
38.00%
40% 4,000

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30% 23%
3,000
22% 23% 22.70%

20% 18%
14% 2,000
11%
9%
7%
10% 1,000
0% 0
Pakistan India SriSri
Lanka Philippines
Philip- Thailand
Pakistan India Thailand
Own a mobile
Lanka Own a fixed
pines phone
Total number Own nothing (but use something) Per Capita GDP PPP (US $)
of phones 29.4 13.4 36.6 45.4 56.7
per 100 pop.
Notes: India on an April – March reporting period ; Pakistan on a July – June reporting period; Other countries follow Jan – Dec (calendar year)
(2006
reporting periods. Sources: India-COAI, Q4)
TRAI; (2006 Q1)
Thailand–Company (2006 Q4) Philippines–NTC;
Reports; Pakistan–PTA; (2005 Q4)Sri Lanka- (2005 Q4)onwards from
TRC; 2000
company reports; World Bank (2006); CIA Fact Book (2005)
Those who own a phone, chose to do so
for convenience rather than cost
Primary reason for choosing to own a phone

100%

80%
% of phone owners

60%

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40%

20%

0%
Pakistan India Sri Lanka Philippines Thailand

The convenience (accessibility at any time) It is cheaper

For privacy So I don't have rely on other people
Other
But those who do not, are held back
by affordability
Reasons for not owning a phone

2%
100%
7% 8% 7% 7%
90% 16%
% of non-owners at BOP

18% 15% 15%

80% 19%
70%

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60%
50%
40% 82% 77% 77%
75% 72%
30%
20%
10%
0%
Pakistan India Sri Lanka Philippines Thailand

I cannot afford it Don't need one Other

Affordability as big a problem for
urban as rural
Cannot afford to own a phone
100%
% of non-owners at BOP

79% 81%
75% 72% 75% 72%
80% 73% 73%

60%
Urban
40% 35% 38%

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Rural
20%

0%
Pakistan India Sri Lanka Philippines Thailand
The expected cost of getting
connected is high…
Expected cost of a new phone by non-owners

100%
90%
>USD 176
% of non-owners at BOP

80%
USD 146-175
70%
USD 116-145

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60%
USD 86-115
50%
USD 56-85
40%
USD 26-55
30%
<USD 25
20%
10%
0%
Pakistan India Sri Lanka Philippines
…compared to the cost that can be
afforded
Initial cost that prospective owner can afford
100%
% of prospective owners at the BOP

90%

80%

70%

60%

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50%

40%

30%

20%

10%

0%
Pakistan India Sri Lanka Philippines

Less than USD 10 USD 10 - 30 USD 31 - 50 USD 51 - 70 More than USD 71

 Expectations & affordability are
more in-line re monthly charges
Expected monthly charges by non-owners

100%
90%
% of non-owners at BOP

80%
above USD20
70%
USD16-20

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60%
USD11-15
50%
USD5-10
40%
below USD5
30%
20%
10%
0%
Pakistan India Sri Lanka Philippines
 Monthly charges that prospective owners can afford
100%
% of prospective owners at the BOP

90%
80%
USD 16 - 20
70% USD 11 - 15

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60% USD 5 - 10
Less than USD 5
50%

40%
30%

20%
10%

0%
Pakistan India Sri Lanka Philippines
The next billion?
Non-owners who plan to buy a phone in the next two years
60% 53% 53%
50%
% of non-owners

42%
38% 38%
40%

30%

20%

10%

0%
Pakistan India Sri Lanka Philippines Thailand

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plan to buy a phone in the next tw o years
South Asia South-east Asia
Pakistan India Sri Lanka Philippines Thailand
Vertical growth, millions
(HH obtaining additional 4 21 0.3 3 0.1
connections)
Horizontal growth, millions
(non-owners joining 26 80 1 7 1
market)
Possible new
connections at BOP, 30 101 1 10 1
millions, next 2 years
Higher % of new connections in
urban IN, PH and TH
Those who plan to buy a phone in the next two years: Urban vs. rural

80% 73%
% of non-owners at BOP

70%
60% 53% 52% 55%
52%
49% 47%
50% 45%
37% 39% Urban

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40%
Rural
30%
20%
10%
0%
Pakistan India Sri Lanka Philippines Thailand

Telecom-transport trade-off?
Males more certain about purchase in
coming two years… esp. in PK, LK & TH
Those who plan to buy a new phone during next two
years

80%
% ofnon-owners at BOP

70%
70% 64%

60%

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52%
47%
50% 43% 43% 41%
39% Male
40% 36%
28% Female
30%
20%
10%
0%
Pakistan India Sri Lanka Philiphines Thailand
Prospective owners are heavier
users
Average number of
calls (out + in) for the
month

Not
planning
Planning to obtain
to obtain phone

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phone

Pakistan 21.6 16.3

India 40.0 31.6

Sri Lanka 15.0 8.7

Philippines 15.3 9.3

Thailand 30.4 35.8 Except in Thailand

Source: Diary
Prospective owners are heavier
users
Average number of calls for the month: prospective owners
vs. non-owners
45
40.0
40
average number of calls

35.8
35 31.6 30.4
30

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25 21.6
20 16.3 15.0 15.3
15
8.7 9.3
10
5
0
Pakistan India Sri Lanka Philippines Thailand

Planning to obtian phone Not planning to obtain phone

 Most would use phone for keeping in
touch & emergency communication
What respondent would use the phone for if given one at an affordable
rate

90% 84%

80%
69% To keep in touch with family and
70% friends

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% of respondents

57% 58% Only in an emergency

60%
52%
50%
50% 44% For networking
40%
To enhance my income
30% 26%
21%
18% 17%
20% 13%
Other
10% 11%
10% 5% 3%
2% 1% 2% 1%
0%
Pakistan India Sri Lanka Philippines
 Growth mainly mobile

Type of phone prospective owners would buy

100% 4% 1%
9% 7%
90%
80%
70% 40%

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60% 67%
68% Not decided yet
91%
50% Mobile
40% Fixed phone
30%
52%
20%
29%
10% 23%
8%
0%
Pakistan India Sri Lanka Philippines
 Fixed phone growth since
liberalization
Fixed sector growth - post liberalisation (Year 0 onwards)

50
Fixed phones per 100 inhabitants

45
40
35 Pakistan
30

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India
25 Sri Lanka
20 Sri Lanka Philippines
CAGR = Thailand;
15 Thailand
India Pakistan 18.8% CAGR 10.3%
10 CAGR =CAGR =11%
9.5%
5 Philippines;
0 CAGR=11.1%
Ye 0

Ye 1

Ye 2

Ye 3

Ye 4

Ye 5

Ye 6

Ye 7

Ye 8
Ye 9

Ye 10

Ye 11

Ye 12

Ye 13

Ye 14
15
ar

ar

ar

ar

ar

ar

ar

ar

ar

ar
ar

ar

ar

ar

ar

ar
Ye
 Mobile phone growth since
liberalization
Mobile sector growth - post liberalisation (Year 0 onwards)

50
Mobile phones per 100 inhabitants

45
Philippines;
40 CAGR=68.8%
35 Pakistan
30

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Thailand; India
25 CAGR = Sri Lanka
49.6%
20 Philippines
India
15 Pakistan CAGR = Thailand
Sri Lanka
10 CAGR =109% 87.8% CAGR =
5 50.8%

0
Ye 0

Ye 1

Ye 2

Ye 3

Ye 4

Ye 5

Ye 6

Ye 7

Ye 8
Ye 9

Ye 12

Ye 13
Ye 10

Ye 11

Ye 14
15
ar

ar

ar

ar

ar

ar

ar

ar

ar

ar
ar

ar

ar

ar

ar
ar
Ye
Higher preference for fixed phones
in rural areas, except Philippines
Kind of phone prospective owner would buy: urban vs. rural

100%
% of prospective owners

90%
80%
70%
Have not decided yet
60%
50% Mobile Phone

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40%
Fixed Line phone
30%
20%
10%
0%
Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural

Pakistan India Sri Lanka Philippines Thailand

Preference for fixed phones among
females in PK and LK
Type of phone prospective owner would buy

100%
% of prospective owners at BOP

80%

60%

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40%

20%

0%
Male Female Male Female Male Female Male Female

Pakistan India Sri Lanka Philiphines

Fixed Mobile not decided

 Recap… Females more reliant on household
fixed phones & other peoples’ phones
Most frequently used phone: Someone else's phone
Most frequently used phone: Household fixed phone (neighbor, friend, family, work)

80% 80%
70% 70%
60% 60%
48%
50% 50%

% at BOP
% at BOP

Male 39% Male

40% 40% 34%33%
Female Female
30% 27%
23% 30%

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19%
20% 16%
20% 16%
11% 12% 13% 13%12%
9% 10% 8%
10% 3% 4% 4% 10%
0% 0%
Pakistan India Sri Lanka Philiphines Thailand Pakistan India Sri Lanka Philiphines Thailand
A phone is possible on incomes of
USD2 per day
Income distribution of prospective owners

100% 1%
9% 9%
90%
28%
80%
% of prospective owners

44%
70%
48% 56%
60% USD151-500

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50% USD51-150
40% 64% Below USD50
30% 55%
20% 35%
27%
10%
0% 5%
Pakistan India Sri Lanka Philippines
The addressable market does not stop at USD100 per
month; it goes down further.
Internet…

Pakistan India Sri Lanka Philippines Thailand

Use the 2% 0% 1% 9% 10%

Internet
Internet use

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16%
14%
14%
12%
12%
10%
% at BOP

7% Male
8%
6% Female
6% Large gender
4% 3%
2%
divide, even in
2% 1% 0% 0% 1% South East Asia
0%
Pakistan India Sri Lanka Philiphines Thailand
…what internet??
Have not heard about the Internet before

80% 72%

60%
% at the BOP

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40% 36% 36%
29%

20% 14%

0%
Pakistan India Sri Lanka Philippines Thailand
BOP in summary
 Almost everyone can afford to use a phone, but not to
own one
 Benefits of ownership (direct access) are known
 Perceived as improving efficiency and income in India
 Phones are highly valued for emergency communication and
keeping in touch
 High price expectations drive a cost-cutting culture

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 BUT, this is not a bad thing: it seems to be driving
affordable access at the bottom of the pyramid
 Next Billion: affordability is a key barrier
 140m at the BOP in IN, PK, LK, PH, TH in next 2 years
 The addressable market does goes below USD100 a month
 Individual use is still very low; Internet far far away
To think about…
 Telecom operators
 Leverage benefits of direct access
Security, friends & family
Particularly in India: cost saving + income
enhancing

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 Increase awareness on efficiency  economic gain
Collaborate on meaningful content
 SMS based services vs. Bollywood movies
To think about…
 Handset manufacturers
 Affordable handsets with local language
SMS capability
 Ultra low-cost phones with “warranty”?
 Installments?

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 Thank you

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