Mobile telecommunications in developing countries part 3

Copyright GSM Association * All GSM Association meetings are conducted in full compliance with the GSM Association’s anti-trust compliance policy

Mobile in the Developing WorldMobile in the Developing World

Gabriel SolomonGabriel Solomon

Senior Vice President, Public PolicySenior Vice President, Public Policy

Copyright GSM Association

AgendaAgenda

1. Market briefing

2. Africa


Global Coverage and Penetration

0%

20%

40%

60%

80%

100%

1999 2000 2001 2002 2003 2004 2005 2006 2007 E

Area (GSM) Wireless Penetration Population (GSM)

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

Po

st Pa

y

Pre

Pa

y

Sh

ared A

cce

ss


Mobile v Fixed

Source: Wireless Intelligence

0

500

1000

1500

2000

2500

3000

3500

4000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Mobile Fixed

000s


Market Penetration

Penetration by Region Q2 07


0%

20%

40%

60%

80%

100%

120%


Bearer Technology

Market share of mobile technologies Q2 07


0%

10%20%

30%

40%50%

60%

70%

80%90%

100%

CDMA x GSM WCDMA Other


SAQ

Subscriber Acquisition Costs


050

100150200250300350400

2001 2002 2003 2004 2005 2006 2007

US

D $


Effective Price Per Minute


US

Cen

ts

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45 Bangladesh

Belgium

Canada

Chile

China

Czech Republic

Finland

France

Germany

Greece

India

Japan

Korea, South

Malaysia

Netherlands

Norway

Portugal

Russian Federation

Sweden

Turkey

United Kingdom


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.

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

11995 1996 1997 1998 1999 2000 2001 2002 2003e 2004e 2005e 2006e 2007e 2008e 2009e 2010e

Internet hosts Internet users PCs Mobile Subscribers Telephone mainlines

Gin

i Coe

ffic

ient

(0 =

Per

fect

Equ

ality

; 1

= P

erfe

ct I

nequ

ality

)


AgendaAgenda

1. Market briefing

2. Africa


Africa Coverage and PenetrationAfrica Coverage and Penetration

0%

20%

40%

60%

80%

100%

1999 2000 2001 2002 2003 2004 2005 2006 2007 E

Area (GSM) Wireless Penetration Population (GSM)


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

AREA IN SQUARE KMs POPULATION

ChinaUSAIndiaEuropeArgentinaNew Zealand

9,604,7339,370,7053,290,2514,940,9992,763,139

268,894

ChinaUSAIndiaEuropeArgentinaNew Zealand

1,321,851,999301,139,947

1,110,396,035727,700,00040,301,9274,115,771

Total 30,244,721 Total 3,505,505,679

Africa 30,343,551 Africa 928,412,606


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

-

50,000

100,000

150,000

200,000

250,000

300,000

City

Mic

roce

ll

Mun

icip

ality

Roa

d

Rur

al

Tow

nC

ounc

il

Cos

t per

site

($)

City Microcell Municipality Road Rural Tow n Council

CapEx

7

28

9

36

25

12

0

5

10

15

20

25

30

35

40

City

City

Micr

ocell

Munic

ipality Ro

ad

Rura

l

Town

Coun

cil

Payb

ack i

n Mon

ths

City City Microcell Municipality Road Rural Town Council

Payback period


Example: Safaricom Kenya

Covered Population

Urban40%

Rural60%

Traffic/Revenues

Urban76%

Rural24%

– 60% of total national population covered is rural60% of total national population covered is rural– 24% of total traffic (hence revenue) originates from rural areas24% 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

Tel

edes

nity

per

100

pop

Mob

ile

GD

P co

ntri

buti

on

02468

101214161820

2003 2004 2005 2006

0%

1%

2%

3%

4%

5%

6%

Mobile Penetration Fixed Penetration % Mobile GDP Contribution

Source: Deloitte analysis, CCK, ITU, Wireless intelligence


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?

0%

20%

40%

60%

80%

100%

Po

pu

lati

on

Co

ve

rag

e

0% 20% 40% 60% 80% 100%

Geographic Coverage

• 350 million sub-Saharan Africans already have mobile access but are not connected…


Consumer TaxesConsumer Taxes

• East African consumers pay the highest taxes

0%5%

10%15%20%25%30%35%

VAT on services Other taxes on services (including excise tax on usage)

Note: Rwanda has yet to impose a 10% excise duty

1


Key FindingsKey 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?

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

US

$ M

illio

ns

Collected Disbursed

Mobile34%

Fixed34%

Fixed95%

Mobile5%

The unused US$4.5 billion could provide access to 450

million people in rural areas

1996

SSA Intl Voice Traffic, 1995 - 2011

-

5

10

15

20

25

30

Min

ute

s (B

illio

n)

-

5

10

15

20

25

30

35

40

% A

nn

ual

Ch

ang

e

Africa Intl Voice Traffic, 1995 - 2011

-

5

10

15

20

25

30

35

40

45

Min

ute

s (B

illio

n)

-

5

10

15

20

25

30

35

% A

nn

ual

Ch

ang

e

1997


-

5

10

15

20

25

30

Min

ute

s (B

illio

n)

-

5

10

15

20

25

30

35

40

% A

nn

ual

Ch

ang

e


-

5

10

15

20

25

30

35

40

45

Min

ute

s (B

illio

n)

-

5

10

15

20

25

30

35

% A

nn

ual

Ch

ang

e

1998


-

5

10

15

20

25

30

Min

ute

s (B

illio

n)

-

5

10

15

20

25

30

35

40

% A

nn

ual

Ch

ang

e


-

5

10

15

20

25

30

35

40

45

Min

ute

s (B

illio

n)

-

5

10

15

20

25

30

35

% A

nn

ual

Ch

ang

e

1999


-

5

10

15

20

25

30

Min

ute

s (B

illio

n)

-

5

10

15

20

25

30

35

40

% A

nn

ual

Ch

ang

e


-

5

10

15

20

25

30

35

40

45

Min

ute

s (B

illio

n)

-

5

10

15

20

25

30

35

% A

nn

ual

Ch

ang

e

2000


-

5

10

15

20

25

30

Min

ute

s (B

illio

n)

-

5

10

15

20

25

30

35

40

% A

nn

ual

Ch

ang

e


-

5

10

15

20

25

30

35

40

45

Min

ute

s (B

illio

n)

-

5

10

15

20

25

30

35

% A

nn

ual

Ch

ang

e

2001


-

5

10

15

20

25

30

Min

ute

s (B

illio

n)

-

5

10

15

20

25

30

35

40

% A

nn

ual

Ch

ang

e


-

5

10

15

20

25

30

35

40

45

Min

ute

s (B

illio

n)

-

5

10

15

20

25

30

35

% A

nn

ual

Ch

ang

e

2002


-

5

10

15

20

25

30

Min

ute

s (B

illio

n)

-

5

10

15

20

25

30

35

40

% A

nn

ual

Ch

ang

e


-

5

10

15

20

25

30

35

40

45

Min

ute

s (B

illio

n)

-

5

10

15

20

25

30

35

% A

nn

ual

Ch

ang

e

2003


-

5

10

15

20

25

30

Min

ute

s (B

illio

n)

-

5

10

15

20

25

30

35

40

% A

nn

ual

Ch

ang

e


-

5

10

15

20

25

30

35

40

45

Min

ute

s (B

illio

n)

-

5

10

15

20

25

30

35

% A

nn

ual

Ch

ang

e

2004


-

5

10

15

20

25

30

Min

ute

s (B

illio

n)

-

5

10

15

20

25

30

35

40

% A

nn

ual

Ch

ang

e


-

5

10

15

20

25

30

35

40

45

Min

ute

s (B

illio

n)

-

5

10

15

20

25

30

35

% A

nn

ual

Ch

ang

e

2005


-

5

10

15

20

25

30

Min

ute

s (B

illio

n)

-

5

10

15

20

25

30

35

40

% A

nn

ual

Ch

ang

e


-

5

10

15

20

25

30

35

40

45

Min

ute

s (B

illio

n)

-

5

10

15

20

25

30

35

% A

nn

ual

Ch

ang

e

2006


-

5

10

15

20

25

30

Min

ute

s (B

illio

n)

-

5

10

15

20

25

30

35

40

% A

nn

ual

Ch

ang

e


-

5

10

15

20

25

30

35

40

45

Min

ute

s (B

illio

n)

-

5

10

15

20

25

30

35

% A

nn

ual

Ch

ang

e

Sierra LeoneBenin

Zimbabwe

Central African Republic

Attempts to reassert monopoly 2007


-

5

10

15

20

25

30

Min

ute

s (B

illio

n)

-

5

10

15

20

25

30

35

40

% A

nn

ual

Ch

ang

e


-

5

10

15

20

25

30

35

40

45

Min

ute

s (B

illio

n)

-

5

10

15

20

25

30

35

% A

nn

ual

Ch

ang

e

Source: Balancing Act Voice and Data Bandwidth Forecasts 2006 – 2011

www.balancingact-africa.com/subforecasts.html

The Status of International Gateway Liberalisation, Sub-The Status of International Gateway Liberalisation, Sub-Saharan AfricaSaharan Africa

http://www.balancingact-africa.com/subforecasts.html


Key FindingsKey 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: KenyaExample: Kenya


Thank You

Contact : Gabriel Solomon

Job title : Senior Vice President, Public Policy

email: [email protected]

Mobile telecommunications in developing countries part 3

Technology

wireless coverage

wireless intelligence

wireless subscribers

global coverage

penetration source

bn annual

intelecon research

public policy