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By
Fareed Khan
What was your experience the last time you ordered a communications service? If
you live in a developed market such as North America or Western Europe, ordering
a landline service was likely a relatively simple process, either online or via
a call center, and your new service was turned on within a few days, at most.
For a new mobile service, assuming you weren’t buying a popular device such as
the iPhone on the first day of its release, you probably only needed to walk
into a wireless retailer, select a phone and your service was activated by the
time you left the store.
In an emerging market, the ordering process can be very different. Consumers in
parts of Asia, Eastern Europe and Latin America have faced long wait times for
landline connections—at one time, it took six years to get a wireline phone. As
a result, when wireless phones became available and affordable, demand in these
markets skyrocketed, leading to long lines outside stores, potential customers
being turned away and long provisioning times.
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The average revenue per user (ARPU) in developing markets remains low. |
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significant challenge—the influx of new
competitors attracted by the pent-up
demand in emerging markets.
Frequently backed by European
incumbents with deep pockets, these
greenfield operators are typically
competing on price, including per-
second billing and per-character SMS.
Incumbents are responding by
introducing value-added capabilities
such as variable charging based on
location and mobile advertising
services, as well as developing more
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Nor is this inability to meet demand the only challenge that these emerging
regions are facing. Even as operators sign up tens and even hundreds of
thousands of new customers each month, the average revenue per user (ARPU) in
these developing markets remains low, and in some regions is even on the
decline. The average monthly ARPU is around $3 in India, $8 in China and $16 in
Latin America – far lower than the ARPU of $50 in the U.S. At the same time,
these regions have predominantly prepaid customer bases, making it far easier
for subscribers to churn than in more postpaid-leaning markets with service
contracts and termination fees.
This level of innovation is also allowing
incumbents to counter another
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targeted services based on predictive
analytics, as Bharti is doing in India.
Urban hubs and mobile villages
Yet the most pervasive challenge that these
operators face may well be the diversity of their customer base. While
subscribers in urban areas are increasingly demanding the multimedia
applications and data services that subscribers in more developed markets have
enjoyed for some time, those subscribers represent less than half of the
population in most ‘developing’ regions. Rural-to-urban migration is causing an
incremental annual rise in urban populations, but most developing countries
remain predominantly rural and agrarian.
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