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Safaricom, Others Find Pricing Key to Mobile Service Use
Tariff Plans Must Reflect Emerging Market Spending Practices
Boston, MA - January 21, 2010 – Kenya’s Safaricom, and other emerging market mobile operators, are seeing increasing use of non-voice services as a result of pricing plans that take into account how money is actually earned and spent in developing economies. The Strategy Analytics Emerging Markets Communications Strategies (EMCS) service report, “Impact of Tariffs on Non-Voice Mobile Services in Emerging Markets”, points out that Safaricom’s M-PESA mobile funds transfer service handles nearly 10 percent of Kenya’s GDP in transactions that average less than $20.
Since personal cash flow in emerging markets tends to be very irregular and relatively few consumers can afford to tie up significant sums, purchases of goods and services are often made in small amounts as need arises. Safaricom and other operators—like Globe and Smart in the Philippines, Reliance in India and Celcom in Malaysia—have responded by developing tariff plans that allow for charging value-added services in small increments.
“Obviously, the absolute price level matters and the service has to be something people want, but for broad acceptance operators have to be able to support this low-value, ‘sachet marketing’,” says Tom Elliott, Director of EMCS. M-PESA allows the transfer of cash in amounts as small as $1.30 and mobile airtime – often used as a second currency in developing countries – in increments as small as 2.5 minutes. Malaysia’s Celcom has a daily mobile broadband access plan that costs $2 for 24 hours, while Reliance has rolled out a plan that provides low-end broadband mobile access to rural India for as little as US$ 2.15 per week.
“Providing low-increment services in a pre-paid environment has some unique requirements for back-office and billing services,” notes Susan Welsh de Grimaldo, Director of Strategy Analytics Mobile Broadband Opportunities service. “It is not good business if a $2 transaction billed incorrectly leads to a $10 customer service call.”
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