Addressing the needs of the next billion users

The ability of mobile telecommunications as a means to bridge the digital divide by providing access to voice and data means that operators need to seriously address the issue of connecting the next billion users - those in the lower income brackets who thus far have not had access to mobile communications.

However, Martin Sanne, MD for mobile networks at Siemens Communications, says addressing the needs of the next billion users requires a different approach to that used thus far to attract mobile subscribers.

"While the low-end segment may not have a lot of money to spend, it is nonetheless a huge market waiting to be tapped," says Sanne. "As long as an operator has decent billing mechanisms, offers the optimum amount of airtime minutes for the subscribers` purse, and provides innovative packages, there is no reason they cannot do well in this arena."

In support of this, Sanne says that currently, there is a lot of innovation around the billing of packages, with different tariffs for different times of the day.

"Some operators are now enabling subscribers to tailor their own packages by allowing them to switch between per minute and per second billing for example," he says. "Looking to the near future, packages combining voice, data, video streaming and multimedia messaging that are aimed at the market segment where there is a low average revenue per user (ARPU) will attract and keep customers."

He says that for the operators, it is mostly about capturing market share in this end of the market as since these customers do not have a lot of money to spend, a large customer base is necessary.

"While it involves an upfront investment by the operator, the return on investment will occur in the long-term," he says. "It is therefore critical that operators ensure strong customer support by offering innovative packages tailored to this segment of the market."

Sanne says the key to creating affordable connectivity lies in properly understanding low income consumers and in realising that their basic motivation is similar to that of the mid-income market, namely for social interaction such as communicating with loved ones, as a tool for self-expression and communication, as well as creating the right impression when doing business.

"While there is a definite industry trend towards connecting the low income end of the market, operators need to bear in mind that affordability is not restricted to the cost of handsets, but also the minimum cost for prepaid airtime," he says. "With limited amounts of money available on a daily basis for the low income market, a prepaid offering with a lower entry level is essential."

Sanne says that as the African market is a large and mostly untapped arena, it that holds a lot of promise for operators prepared to make a long-term investment in areas where there is lower average revenue per user (ARPU).

"It is something of a chicken and egg situation, as the question is whether the demand needs to exist before the players are willing to invest in the region, or will putting the services in place stimulate the demand?" he asks.

He says that most operators looking towards the lower end of the market believe the latter to be the case, as they view it as a long-term investment.

"There is a direct correlation between mobile services and the economy of a country, so it seems to be a case of the players moving into these regions with relatively low cost solutions and infrastructure, and then as the market grows, realising a return on their investment further down the line," he concludes.