Thinking beyond traditional business models

Almost 90 percent of future subscriber growth is expected to come from emerging markets. Operators are already present in large cities but not in rural areas where the average revenue per user is low. The challenge here is to create commercially sustainable growth based on solutions that people with a daily income of about USD 2 can afford.
 

This requires thinking beyond traditional business models. To build communication in this part of the world, it is important to have an outside-in perspective instead of the other way around, which is normally the case in highly saturated markets. Bengt Wattenström, Director of Business Development at Ericsson, says: "The first thing you should ask is: What services do people really need to improve their lives? Followed by: In what parts of the country do they need these services? What can they afford? Can several stakeholders share the financial risk?"
 

In developing countries, mobile voice is still the most important way of communicating. Since communication can replace transportation, it makes it possible for poor people living in rural areas to save both time and money. "What counts are basic applications that can help people in their daily struggle for survival," Wattenström says. "Besides voice, successful services can include supplying a fisherman with weather forecasts or giving a farmer the best local market price of the day."
 

Areas for further development include mobile banking, healthcare applications, business-to-business trading and education.
 
When looking at end-user solutions for developing economies, one should not focus on the applications alone without seeing the whole picture. Finding a sustainable infrastructure solution is crucial. Circumstances vary from country to country, and participating stakeholders should adapt their business models to suit the local conditions of each market. By applying business models that remove financial and operational entry hurdles, telecom suppliers and application developers can help operators to take the necessary steps to access new subscribers in rural areas.
 

Examples of typical entry hurdles can be unclear regulatory policies, energy supply in remote places, political instability, corruption and rollout costs in rural areas. At the same time there are many possibilities both when it comes to technical solutions and new ways of doing business. This is discussed more extensively in the book Business Models for Sustainable Telecoms Growth in Developing Economies, which Bengt Wattenström is writing together with Sanjay Kaul, Fuaad Ali and Subramaniam Janakiram. All the authors have hands-on experience from this field. The book will be published in March 2008.
 

"There is no doubt that there is a large demand for both mobile phones and services," Wattenström says. "The key to success is to strive for large call volumes with the right applications. New business models, of which new applications are one important part, can help to achieve this goal in a commercially sustainable way."