Catch the prepaid smartphone wave

Staff writer
10 Sep 2012

In the five years since the first iPhone was launched, smartphones have become the standard-bearer for what people think about when they think about mobile phones and particularly mobile data services.

That’s been mostly in developed markets – in developing markets in Asia-Pacific, current smartphone penetration is estimated at around 5%. But that’s projected to increase by more than four-fold between 2011 and 2016, according to Strategy Analytics, as prices come down and as more and more people see value in the overall mobile lifestyle of being connected anywhere, anytime, etc. Indeed, there are already smartphones on the market available for under $100, and in some cases under $50. And those prices will get lower over time, making smartphones more affordable than ever.

Meanwhile, the smartphones that have already reached Asia’s developing markets represent a serious market opportunity for mobile data services as affordable smartphones become available to people whose first Internet experience has been with mobile devices.

However, operators in developing markets can’t simply look to their developed-market counterparts for business models targeting smartphone users – at least not beyond the small percentage of wealthy urban users. It’s not a question of what “G” the network supports so much as the fundamental differences between the market segments themselves, says Warren Chaisatien, strategic marketing manager at Ericsson.

“In developing markets the mobile subscriber base is primarily prepaid voice, where people just top-up minutes at the local convenience store,” he explains. “Now they’re essentially porting that kind of price-sensitive micropayment behavior to the data side.”

In other words, prepaid customers are accustomed to buying mobile services within that established business model – in small chunks. They’ve built up their consumption habits accordingly, and will naturally expect data services to be sold the same way.

Consequently, given the price-conscious and low-ARPU nature of prepaid users, data offerings on smartphones must be affordable, relevant (i.e. true value-adds) and simple to purchase and use.

“Operators will have to strike a good balance there to tap into this fast growing and largely untapped market segment,” Chaisatien says.

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