New Business Models to Reach Low Income Deciles

Nokia Siemens Networks is developing new business models for African consumers (see Figure 21). Beyond the well known postpaid and prepaid options, the following solutions are incorporated:

• With microprepayment consumers can load electronically (by SMS) some cents onto their accounts. In the past operators have used vouchers (e.g. USD 10)#5. However, in emerging markets, even this is a large sum to spend. Reducing the value of the voucher was difficult for operators, as the small value and distribution costs of the voucher were above the potential revenue. Nokia Siemens Networks was a pioneer in developing SMS-based solutions by which any amount could be uploaded to a prepaid account. Micropayment is also a very common way of recharging in Africa.

• Microfinance is funding support to enable hard-up consumers to purchase a handset and subscription. The loan is paid back in installments. The most famous case can be found in Bangladesh, where GrameenPhone launched the “Village Phones” programme. It has since been used in Uganda and Rwanda. In Rwanda, Village Phone aims to create over 3 000 new small businesses within the next three years. Five thousand new businesses have been created in Uganda since 2003. The Grameen Foundation and Nokia are looking into replicating the model in other countries.

A microfinance loan of approximately USD 200 allows the Village Phone operator to purchase a mobile phone kit. The kit comprises a Nokia handset, a SIM card preloaded with prepaid airtime, an external antenna set (including a booster antenna, a coupler, and a cable), and marketing materials. The loan is usually for up to nine months, at an interest rate of not more than 4 per cent. Village Phone operators are typically able to repay their loan within six months, from their revenues.

• Phone sharing is widely used in the low income segment. A phone is shared within a family or among friends, whoever uses the phone and has some small change available pays to upload the prepaid account.

Source: Frank Oehler, Head of Business Development, New Growth Markets, Nokia Siemens Networks.