A Different Kind of Smart Mob
By Eric Lin, Thu Aug 19 01:00:00 GMT 2004

A mob of smart shoppers lined up outside Ufone's offices in Pakistan to become mobile phone owners during a four day repreive in initiation fees.


This weekend it looked like a concert or the opening of the Ginza Apple store as crowds thronged outside Ufone stores in Pakistan. Crowds lined up outside offices in Islamabad to take advantage of the state-owned carrier's offer to waive connection fees for new subscribers from Saturday until Tuesday. The savings added up to 1000 rupees ($17), which may not sound like much, but it's nearly one percent of the average Pakistani income. In a few cases crowds even got violent (this is sounding more like a few well known rock concerts now) when stores tried to close for the night while people still were waiting in line to sign up.

Only about three percent of Pakistan's 150 million people currently have mobile phones. In the past the high cost of phones and sign up fees have prevented most Pakistanis (as well as citizens of other developing nations) from owning mobile phones. To lower the barrier of entry, manufacturers have been launching inexpensive, simplified handsets for emerging markets. Increasing competition from existing as well as emerging carriers is also forcing subscription prices lower in many countries.

In Pakistan there are already four carriers and two more will be entering the market next year. Ufone could be making an attempt to sign as many customers as it can to contracts in order to keep users from joining new networks as they come online or other networks if they try to imitate Ufone's successful tactics. Even without the threat of competition, Ufone's attempts to significantly increase subscribers still makes economic sense. Wireless operators in developing countries need to do whatever it takes to sign on as many subscribers as possible in order to fund their networks.

If lowering the price of entry increases demand significantly (the reports estimate Ufone may have signed on as many as half a million users in four days), those subscription fees will generate a steady income to pay for basic network services (voice, SMS) which don't really increase in cost as the number of subscribers increase, and is all that most of the inexpensive handsets are capable of anyway. Besides the immediate economic benefit, increasing the number of cellular customers has long term benefits for the carriers. The more people who are seen with mobile phones, the more likely the phones are to be viewed as must have technologies. Increasing the number of wireless subscribers also increases the pool of people likely to become power users, who will upgrade to advanced services once they can be offered.