New Ideas for Emerging Markets
By Carlo Longino, Wed Sep 01 21:45:00 GMT 2004

The importance of emerging markets to the mobile industry is firmly entrenched as mature markets near saturation, and carriers must develop new strategies to reach low-earning customers.

Carriers in emerging markets often find quick early success by catering to customers at the upper end of the local income scale, but at some point, they have to start looking a little lower down. While they'll still go all-out over those top-tier customers, operators must also figure out a way to remain profitable at the low ARPUs generated by low-income subscribers.

Equipment manufacturers have developed network gear that can be profitably run on low incomes, but carriers too need to come up with service innovations to stimulate spending. They don't have to be complicated new plans or strategies, either, as Smart Communications in the Phillipines and several other Asian carriers have proved, raising subscriber figures and revenues by letting users refill their prepaid accounts with electronic micropayments.

Smart users used to have to buy refills of a minimum of 100 pesos (about $1.75), but the lower limit is now just 30 pesos. It looks like Smart latched on to an idea spawned by its Smart Buddy Load program, which allowed users to send credit from their prepaid account to someone else's via text message. Enterprising users would load up their accounts, then sell minutes -- in smaller increments than available directly from the carrier -- to others. Now, users buy the smaller refills from one of Smart's 500,000 resellers across the country, who then updates the user's account with an SMS.

The smaller refill amounts, along with the negated need to print scratch-off refill vouchers, cut Smart's costs by 300 million pesos ($5.3 million) in its first six months and helped the company add a record number of subscribers in the second quarter. Indonesian carrier Indosat is also using the electronic micropayments, and says it will add more subscribers this year than it first estimated since the system helps attract new lower-income users.

It's easy to forget in the midst of so much technological innovation that the business side of the mobile industry must innovate as well to keep pace. These Asian carriers have shown that even something that seems as insignificant as reducing the minimum refill amount can have a great impact on sales and subscribers.