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Mobile telecommunications in developing countries part 3
 

Mobile telecommunications in developing countries part 3

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Part 3 of 3: a panel discussion on "Mobile telecommunications in developing countries" at Warwick Business School 08/10/2007...

Part 3 of 3: a panel discussion on "Mobile telecommunications in developing countries" at Warwick Business School 08/10/2007

Gabriel Solomon; Senior Vice President, GSM Association, Public Policy

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  • Let me start by giving you a status update on what the mobile industry has achieved to date: More than X billion people, 80+% of the world’s population, have access to mobile services 2.5 billion, x% of the worlds population people are currently connected The industry is adding more than 1 million subscribers per day and continuing to build out coverage By 2010 we expect more than 90% pupation coverage and more than x% penetration
  • Employment: Last week Engineer Ernest Ndukwe said that the mobile industry in Nigeria employed more than 1 million people. Not bad for a country that only licensesd operators 5 years ago. Assuming that penetration is a key variable in calculating employment numbers, well there would be no jobs without subscribers, there may be more than 5.5 million Africans that are employed on this continent in this industry. Now let’s look at GDP. You may be familiar with Professor Waverman’s widely quoted findings that a 10% increase in mobile penetration can lead to a 0.59% increase in GDP in a typical developing economy. I believe this number to be extremely conservative. We just launched a study with McKinsey and they found that mobile contributed 7.5% of GDP in the Philippines, 4.5% in China and close to 2% in India. The higher GDP numbers are directly correlated with GDP; all stakeholder therefore should be incentivied to connect the unconnected. Mobile operators are also the top corporate tax payers and contribute additional funds through license fees, spectrum fees, number range fees etc. In this regard they contribute substantial sums to the national budget that can be put to wider use. Moreover mobile networks are being leveraged to provide data services to schools, universities and hospitals. SMS messages are frequently used to increase the effectiveness of health and programmes. And who would have thought it, but mobile operators are the largest ISPs. And mobile customers are benefiting from access to financial services for the first time as they use their mobile phone as a virtual bank. Higher mobile penetration really does increase the governance, social capital and economic activity of nations. I gave a similar presentation to the Minsters of Kenya, Rwanda and Tanzania this summer. They each agreed with our position, calling the industry heroic, having done more for the poor than any charity. They also agreed that mobile is a democratic aid, eliminating many opportunities for corruption and vote rigging.
  • Employment: Last week Engineer Ernest Ndukwe said that the mobile industry in Nigeria employed more than 1 million people. Not bad for a country that only licensesd operators 5 years ago. Assuming that penetration is a key variable in calculating employment numbers, well there would be no jobs without subscribers, there may be more than 5.5 million Africans that are employed on this continent in this industry. Now let’s look at GDP. You may be familiar with Professor Waverman’s widely quoted findings that a 10% increase in mobile penetration can lead to a 0.59% increase in GDP in a typical developing economy. I believe this number to be extremely conservative. We just launched a study with McKinsey and they found that mobile contributed 7.5% of GDP in the Philippines, 4.5% in China and close to 2% in India. The higher GDP numbers are directly correlated with GDP; all stakeholder therefore should be incentivied to connect the unconnected. Mobile operators are also the top corporate tax payers and contribute additional funds through license fees, spectrum fees, number range fees etc. In this regard they contribute substantial sums to the national budget that can be put to wider use. Moreover mobile networks are being leveraged to provide data services to schools, universities and hospitals. SMS messages are frequently used to increase the effectiveness of health and programmes. And who would have thought it, but mobile operators are the largest ISPs. And mobile customers are benefiting from access to financial services for the first time as they use their mobile phone as a virtual bank. Higher mobile penetration really does increase the governance, social capital and economic activity of nations. I gave a similar presentation to the Minsters of Kenya, Rwanda and Tanzania this summer. They each agreed with our position, calling the industry heroic, having done more for the poor than any charity. They also agreed that mobile is a democratic aid, eliminating many opportunities for corruption and vote rigging.
  • Employment: Last week Engineer Ernest Ndukwe said that the mobile industry in Nigeria employed more than 1 million people. Not bad for a country that only licensesd operators 5 years ago. Assuming that penetration is a key variable in calculating employment numbers, well there would be no jobs without subscribers, there may be more than 5.5 million Africans that are employed on this continent in this industry. Now let’s look at GDP. You may be familiar with Professor Waverman’s widely quoted findings that a 10% increase in mobile penetration can lead to a 0.59% increase in GDP in a typical developing economy. I believe this number to be extremely conservative. We just launched a study with McKinsey and they found that mobile contributed 7.5% of GDP in the Philippines, 4.5% in China and close to 2% in India. The higher GDP numbers are directly correlated with GDP; all stakeholder therefore should be incentivied to connect the unconnected. Mobile operators are also the top corporate tax payers and contribute additional funds through license fees, spectrum fees, number range fees etc. In this regard they contribute substantial sums to the national budget that can be put to wider use. Moreover mobile networks are being leveraged to provide data services to schools, universities and hospitals. SMS messages are frequently used to increase the effectiveness of health and programmes. And who would have thought it, but mobile operators are the largest ISPs. And mobile customers are benefiting from access to financial services for the first time as they use their mobile phone as a virtual bank. Higher mobile penetration really does increase the governance, social capital and economic activity of nations. I gave a similar presentation to the Minsters of Kenya, Rwanda and Tanzania this summer. They each agreed with our position, calling the industry heroic, having done more for the poor than any charity. They also agreed that mobile is a democratic aid, eliminating many opportunities for corruption and vote rigging.
  • Employment: Last week Engineer Ernest Ndukwe said that the mobile industry in Nigeria employed more than 1 million people. Not bad for a country that only licensesd operators 5 years ago. Assuming that penetration is a key variable in calculating employment numbers, well there would be no jobs without subscribers, there may be more than 5.5 million Africans that are employed on this continent in this industry. Now let’s look at GDP. You may be familiar with Professor Waverman’s widely quoted findings that a 10% increase in mobile penetration can lead to a 0.59% increase in GDP in a typical developing economy. I believe this number to be extremely conservative. We just launched a study with McKinsey and they found that mobile contributed 7.5% of GDP in the Philippines, 4.5% in China and close to 2% in India. The higher GDP numbers are directly correlated with GDP; all stakeholder therefore should be incentivied to connect the unconnected. Mobile operators are also the top corporate tax payers and contribute additional funds through license fees, spectrum fees, number range fees etc. In this regard they contribute substantial sums to the national budget that can be put to wider use. Moreover mobile networks are being leveraged to provide data services to schools, universities and hospitals. SMS messages are frequently used to increase the effectiveness of health and programmes. And who would have thought it, but mobile operators are the largest ISPs. And mobile customers are benefiting from access to financial services for the first time as they use their mobile phone as a virtual bank. Higher mobile penetration really does increase the governance, social capital and economic activity of nations. I gave a similar presentation to the Minsters of Kenya, Rwanda and Tanzania this summer. They each agreed with our position, calling the industry heroic, having done more for the poor than any charity. They also agreed that mobile is a democratic aid, eliminating many opportunities for corruption and vote rigging.
  • Employment: Last week Engineer Ernest Ndukwe said that the mobile industry in Nigeria employed more than 1 million people. Not bad for a country that only licensesd operators 5 years ago. Assuming that penetration is a key variable in calculating employment numbers, well there would be no jobs without subscribers, there may be more than 5.5 million Africans that are employed on this continent in this industry. Now let’s look at GDP. You may be familiar with Professor Waverman’s widely quoted findings that a 10% increase in mobile penetration can lead to a 0.59% increase in GDP in a typical developing economy. I believe this number to be extremely conservative. We just launched a study with McKinsey and they found that mobile contributed 7.5% of GDP in the Philippines, 4.5% in China and close to 2% in India. The higher GDP numbers are directly correlated with GDP; all stakeholder therefore should be incentivied to connect the unconnected. Mobile operators are also the top corporate tax payers and contribute additional funds through license fees, spectrum fees, number range fees etc. In this regard they contribute substantial sums to the national budget that can be put to wider use. Moreover mobile networks are being leveraged to provide data services to schools, universities and hospitals. SMS messages are frequently used to increase the effectiveness of health and programmes. And who would have thought it, but mobile operators are the largest ISPs. And mobile customers are benefiting from access to financial services for the first time as they use their mobile phone as a virtual bank. Higher mobile penetration really does increase the governance, social capital and economic activity of nations. I gave a similar presentation to the Minsters of Kenya, Rwanda and Tanzania this summer. They each agreed with our position, calling the industry heroic, having done more for the poor than any charity. They also agreed that mobile is a democratic aid, eliminating many opportunities for corruption and vote rigging.
  • Employment: Last week Engineer Ernest Ndukwe said that the mobile industry in Nigeria employed more than 1 million people. Not bad for a country that only licensesd operators 5 years ago. Assuming that penetration is a key variable in calculating employment numbers, well there would be no jobs without subscribers, there may be more than 5.5 million Africans that are employed on this continent in this industry. Now let’s look at GDP. You may be familiar with Professor Waverman’s widely quoted findings that a 10% increase in mobile penetration can lead to a 0.59% increase in GDP in a typical developing economy. I believe this number to be extremely conservative. We just launched a study with McKinsey and they found that mobile contributed 7.5% of GDP in the Philippines, 4.5% in China and close to 2% in India. The higher GDP numbers are directly correlated with GDP; all stakeholder therefore should be incentivied to connect the unconnected. Mobile operators are also the top corporate tax payers and contribute additional funds through license fees, spectrum fees, number range fees etc. In this regard they contribute substantial sums to the national budget that can be put to wider use. Moreover mobile networks are being leveraged to provide data services to schools, universities and hospitals. SMS messages are frequently used to increase the effectiveness of health and programmes. And who would have thought it, but mobile operators are the largest ISPs. And mobile customers are benefiting from access to financial services for the first time as they use their mobile phone as a virtual bank. Higher mobile penetration really does increase the governance, social capital and economic activity of nations. I gave a similar presentation to the Minsters of Kenya, Rwanda and Tanzania this summer. They each agreed with our position, calling the industry heroic, having done more for the poor than any charity. They also agreed that mobile is a democratic aid, eliminating many opportunities for corruption and vote rigging.
  • In Africa, the story is equally, if not more, impressive. Population coverage has grown from about 10% in 1999 to over 60% today. In the same time period penetration has jumped from 1% to 18%. Some 350 million African have mobile coverage but remain unconnected.
  • If we look at the cost of each of these networks in rural versus urban areas, the radio cost are about the same but transmission, power and distribution cost all increase exponentially the remote you go
  • So how do USF perform? In the main, quite poorly. More than $6 billion dollars had been taken out of the industry with only $1.6 billion thus far returned. Mobile operators contributed 34% of the $6 billion and received back only 4% despite being the most efficient access technology according to the World Bank, 1/10 th the cost of fixed for example. Where is the other $4.5 or so billion? If the missing $4.5 billion was spent on increasing mobile coverage, as additional 450 million more people in rural areas would be covered.
  • Our regulation study showed that best practise regulation would Increase sector investment by 25%, $5 billion – the sum of MTN and Celtel’s CapEx; Increase penetration by 30% And boost regional GDP by $1 bn

Mobile telecommunications in developing countries part 3 Mobile telecommunications in developing countries part 3 Presentation Transcript

  • Mobile in the Developing World Gabriel Solomon Senior Vice President, Public Policy
  • Agenda
    • Market briefing
    • Africa
  • Global Coverage and Penetration Source: Wireless Intelligence, Intelecon Research, Paul Hamilton
  • Where Are We Today? Source: GSMA Estimates Wireless coverage, not connected est. 3 bn 3 billion Wireless Subscribers No wireless coverage est. 1.2bn Annual Per Capita Income >$20,000 $1,500 - 20,000 <$1,500 75-100 million 1,500-1,750 million Population Mode of Connection Post Pay Pre Pay Shared Access
  • Mobile v Fixed Source: Wireless Intelligence 000s
  • Market Penetration Penetration by Region Q2 07 Source: Wireless Intelligence
  • Bearer Technology Market share of mobile technologies Q2 07 Source: Wireless Intelligence
  • SAQ Subscriber Acquisition Costs Source: Wireless Intelligence USD $
  • Effective Price Per Minute Source: Wireless Intelligence US Cents
  • Economies of Scale Average Selling Price (ASP) of low-end GSM handset Source: Arete Rapid growth of next generation networks ASP of low-end GSM handset ASP ASP of silicon for low-end GSM handset WCDMA Blended ASPs WCDMA High-tier Prices WCDMA Mid-tier Prices WCDMA Entry-tier Prices
  • Digital Divide Trends Source: 2002: The Digital Divide: ICT Development Indices 2004; United Nations NB: Gini Coefficient is a measure of equality, the closer to 0, the greater the level of equality; the closer to 1, the greater the divide. Gini Coefficient (0 = Perfect Equality; 1 = Perfect Inequality)
  • Agenda
    • Market briefing
    • Africa
  • Africa Coverage and Penetration
  • Annual Coverage Growth Source: Paul Hamilton
  • Access & Services
    • Investment decisions balanced between:
    • Services
      • Increasing penetration/ capacity in existing areas
      • Payphones
      • Affordability
        • Lower scratch card values
        • E-refill
        • Per second billing
        • Tariffs
    • Access
      • Increasing coverage
    &
  • Operators Build 4 Networks
    • Radio
        • Towers, Base Stations
    • Transmission
        • Microwave, Satellite or Fibre
      • Power network
        • Generators, and the means to supply them
      • Distribution network
        • Distribute Pre Paid Cards, collect revenue
    2 1 3 4
  • The Problem 928,412,606 Africa 30,343,551 Africa 3,505,505,679 Total 30,244,721 Total 1,321,851,999 301,139,947 1,110,396,035 727,700,000 40,301,927 4,115,771 China USA India Europe Argentina New Zealand 9,604,733 9,370,705 3,290,251 4,940,999 2,763,139 268,894 China USA India Europe Argentina New Zealand POPULATION AREA IN SQUARE KMs
  • Infrastructure Not too much available….
  • Example: Celtel Nigeria
    • Power
    • 80mm liters of diesel
    • 14000 tanker truck loads
    • Thousands of generators most operating 7/24
    • Security
    • 7 battalions (5,000 guards)
    • Most in service 7/24
    • Job creation+, P&L-
    Power and Security: over 75% of site maintenance costs Keeping the network running is a challenge in itself… Nigerian industry will consume 400 mm liters in 2007 NCC: 10k BTS today. 2010, 50k BTS…2,000 mm litres of diesel
  • Rural v Urban Economics
    • Urban Site
      • Costs
        • Power Grid?
        • Local Transmission to switch
        • Easy to reach for site engineers
      • Revenue
        • Mostly outgoing calls
          • Uneconomic if interconnect is high
        • High site utilisation
        • Distribution relatively easy
    • Rural Site
      • Costs
        • High Fuel Cost
        • High Transmission Cost
          • Especially on satellite
        • Costly to maintain
      • Revenue
        • Mostly incoming calls
          • Uneconomic if interconnect is low
        • Low site utilisation
        • Distribution is difficult
  • Example: Safaricom Kenya Payback period CapEx
  • Example: Safaricom Kenya
      • 60% of total national population covered is rural
      • 24% of total traffic (hence revenue) originates from rural areas
  • Kenya: Impact of Mobile
    • The mobile industry delivered more than 5% of Kenya’s GDP in 2006 and employed close to 200,000 people
    Source: Deloitte analysis, CCK, ITU, Wireless intelligence Teledesnity per 100 pop Mobile GDP contribution
  • Population V Geography
    • The old question:
      • How do we get communications across Africa?
    • The fact is:
      • 60+% population coverage today, around 90% by 2010
    • The new question:
      • How can government and industry partner to connect the unconnected?
    • 350 million sub-Saharan Africans already have mobile access but are not connected…
    0% 20% 40% 60% 80% 100% Population Coverage 0% 20% 40% 60% 80% 100% Geographic Coverage
  • Consumer Taxes
    • East African consumers pay the highest taxes
    Note: Rwanda has yet to impose a 10% excise duty 1
  • Key Findings
    • In 2006, the mobile industry generated 3.5% - 5% of East Africa’s GDP
      • Around 500,000 people were in employed
    • Lowering excise duty will:
      • Increase penetration and usage of mobile services by 4% - 8% above base line growth
      • Increase total tax receipts in Kenya, Tanzania and Uganda in the medium term
        • In Rwanda, tax receipts will decrease if excise duty is levied
      • Accelerate economic growth
        • Increasing penetration by 10% can boost annual GDP by 1.2%
    2 3
  • Universal Service Funds? US$ Millions Collected Disbursed Mobile 34% Fixed 34% Fixed 95% Mobile 5% The unused US$4.5 billion could provide access to 450 million people in rural areas
  • The Status of International Gateway Liberalisation, Sub-Saharan Africa Source: Balancing Act Voice and Data Bandwidth Forecasts 2006 – 2011 www.balancingact-africa.com/subforecasts.html 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Sierra Leone Benin Zimbabwe Central African Republic Attempts to reassert monopoly 2007
  • Key Findings
    • Following liberalisation:
      • International call prices fall by up to 90%
      • Traffic volumes double as innovative pricing plans are offered
      • Access improves with increased telecoms investment
    • Where monopolies are maintained, up to 60% of international traffic can be lost to the grey market (VoIP and VSATs)
    Download the study on www.gsmworld.com/gateway
  • Example: Kenya
  • Thank You
    • Contact : Gabriel Solomon
    • Job title : Senior Vice President, Public Policy
    • email: [email_address]