Market musings

Is Affordability the New White Knight for Telecom Subscriber Growth?

by Jason Kerr
November 3, 2016

Is "Affordability" is the new White-Knight for Telecom subscriber growth?

We are seeing telecom operators launch global initiatives in an effort to attract new subscribers in far off lands.

When new subscriber growth is under 1% and all you've got to look forward to is stealing subscribers from the other guy, global plans had better be in your future playbook.

One problem

With taking a business model that works well, in say the US, and dumping that model into India, South America, or other countries, is pricing. Specifically, you get a lot less money for your services, and (generally) the population has less disposable income to pay for your services and technology.

Some telco operators exacerbated pricing in developing nations as a profitability model.

In the old days the reverse was somewhat true. Some telco operators exacerbated pricing in developing nations as a profitability model. I recall an operator proudly telling me one day, that they make so much money from pre-paid SIMs in South Africa, that they recouped their investment in mere weeks.

The problem for South Africans back then (and still today somewhat), was that the telecom subscriber lacked a credit rating that would enable them to sign up for the fixed term plans that were popular in the day. Fixed term plans or commitments were popular because phones were so expensive that Operators had to subsidize the purchase of the phone, hence the commitment - for the average citizen getting mobile service was out of the question, so pre-paid was a way around the problem.

Today we are seeing less of that old approach, and much more focus on affordability.

For instance

The more affordable all-you-can-eat type plans, that are mainstream trends in the US, are starting to trickle down to other markets. In New Zealand for instance, call/data plans are becoming more 'US" like, albeit, the cost is still way too high.

But New Zealand is a rather well-developed nation, compared to some, so what about those nations who are less so developed. What's being done for them?

A fortunate side benefit is that telcos and hardware manufacturers are stepping up and making connectivity more affordable.

Well, some good news

It would appear. As telcos reach subscriber saturation in their home country, they are forced to find new avenues to grow subscribers (and revenue). They are turning to less-developed nations.

A fortunate side benefit is, that in order to get traction in these developing nations, telcos and hardware manufacturers are stepping up and making calling and data plans, and the actual hardware itself, more affordable. This is good news for the telecom subscriber on the ground.

In recent months

I've been noticing increasing press about how the industry as a whole is coming together and reducing costs to subscribers in developing nations. One such company is DataWind, who is on a mission to enable the availability of affordable mobility devices such as smartphones, tablets and phablets for a huge number of unconnected people.

Now yes, it's all in the name of growing revenues and profits, (which companies rightly need to make), but to the telecom subscriber on the ground, I suspect it means a whole lot more.

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