This document discusses business model innovations that have helped connect lower-income consumers to mobile networks. It notes that while over 75% of the world's population is covered by mobile networks, most companies focus on higher-income segments. Two key barriers to universal access have been affordability and availability of infrastructure. Some companies have adopted shared-use models to provide access, but individual ownership models using installment plans and micro-financing have also proven effective. Competition in densely populated markets like India has driven operators to innovate through ultra-low pricing, electronic recharges, and technologies to reduce infrastructure costs and expand coverage.
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Mobile Business Model Innovation for Serving the Poor
1. Serving the Poor: Drivers of
Business Model Innovation in
Mobile
By
Yogesh Garg
11EMPDM21
4
BIMTECH
2. Introduction
This case focuses the light on the importance of connecting the lower
income consumers by mobiles
There are more than 2.5 billion people at the bottom of pyramid. Of
those, more than 1 billion people have per capita income of less than
$1 per day.
A study by London Business School found that, in a typical
developing country, a rise of 10 mobile phones per 100 people boosts
GDP growth by 0.6 percentage points.
World Bank estimation: 75% of World’s population are in Mobile
networks coverage
But Most companies choose to focus on Upper & middle income
segments of Developing World
Two perceived reasons of Universal access gap: Affordability &
Availability
• Actions to fill Universal access gap: Universal access funds &
Subsidies for Infrastructure
investment
3. Beyond shared-Use Models
Many have applauded shared use models adopted by Grameen
phone in Bangladesh and Vodacom in SA.
Providing Telecommunication to Community that could not afford
individual ownership
Fundamental Question: Why can’t poor afford such services?
Barriers: Cost of Mobile Phone
But research in Brazil and china
Penetration of refrigerators : 68% in E segment and 88% in D
segment
Penetration of television : 72% in E segment and 90% in D
segment
Mobile ownership in Brazil : 80 million individuals in 2006
Reasons: Innovation in consumer credit ( Installment payments)
4. Business model innovation: Beyond Voice to
financing
Relinace Infocomm in India: Adopted Handset
installment plan in a risk sharing arrangement
Mansoon Hangama offer: A handset worth $120 for
only $10 upfront and $4 per month for 36 months
Share of net adds: <20 % to >50%
Market Share : from nothing to more than 20%
Worked with insurance company to insure handset
Redesigned dealer incentives
Engaged in massive marketing efforts
Built an elaborate collections infrastructure to control
bad debt
Aggressive tariff packages
5. Individual Handset ownership
Handset financing models
New handsets are getting cheaper by the
introduction of ultra low cost handsets
Availability of second-hand handsets
So handsets affordability has not been the key
barrier to penetration in developing markets
6. Do firms really wants to serve the
people?
are more concerned with the threat of cannibalising
their high-margin A & B segment consumers than in
realising the “opportunity” of serving the poor through
novel tariff and distribution approaches
Model in India: Price:$0.02 per minute on almost all
networks and highest minutes of use per month in the
world
Same model was adopted by Smart Communications
Inc. in the Philippines
7.
8. Competition: A drive for
Innovation
India: A lot number of players
Hyper competitive market : 22 circles with 4-6 players in
each circle
revenues per minute are low in India
per-minute usage now the highest in Asia
Smart approach electronic recharge and micro-top-ups
village-level micro-finance organizations
Innovation in Technology
innovations such as GSM extension technology – quite
simply attaching a long aerial to a mobile handset to
extend range from 15 kilometres to 30 kilometres or more
– that can reduce CAPEX and OPEX for operators.