I attended a presentation today by Dr Rohan Samarajiva, former Director General of Telecommunications for Sri Lanka, and now head of LirneAsia. He shared with us the results of a 2006 survey on mobile phone use in the BoP segments in five countries – India, Pakistan, Sri Lanka, Thailand and the Philipines. Three sets of slides are available online but here are some highlights from today’s talk [slides not found online] that caught my interest,
- Hutch, the mobile phone service operator serves only the BoP segment in Sri Lanka through pre-paid services only.
- Their average revenue per user [arpu] is just under USD 3.00 per user per month but their EBITDA is over 50% averaging 57%
- BoP market is extremely profitable.
- Potential revenue opportunity for the BoP segment is estimated to be between USD 1 to 2 per month per customer.
- Across the 5 countries, over 70% of the respondents stated social networking and staying in touch i.e. “relationship maintenance” as the primary reason for mobile ownership, as opposed to social status for example
- 70 to 80% indicated they want to purchase a phone in the next year or two but cannot afford it. There is a perception that cost is a barrier to entry because their research found that there was a great variance between the user’s imagined cost of mobile ownership and actual cost.
- Interestingly enough, very few said gave ‘enhance my income’ as a reason for ownership, as low as 8% in India.
Apart from the data, Dr Samarijiva added that there was immense potential for innovative and profitable business models at the BoP but service providers needed to get out of the consumption game and into the production game. That is the existing business models on the mobile platforms are based on consumption by the user – of data, infotainment, ringtones et al, not on improving their productivity, income or saving them time or money. An example he gave was a villager making a call to receive information rather than taking a bus or walking to the nearest public phone service.
The key to profitability at the bottom of the pyramid, he believes, is if you can show them how to Save Money or Make Money with your product or service.