TELECOM Digest OnLine - Sorted: But Cell Phones are Vital in Developing World

But Cell Phones are Vital in Developing World

Malcolm Foster, AP (
Sat, 27 Jan 2007 23:38:17 -0600

By MALCOLM FOSTER, AP Business Writer

Nguyen Huu Truc's trusty cell phone has revolutionized his small
embroidery business and his life.

When he bought his first mobile phone in 1995, Vietnam had just one
fixed-line phone for every 100 people, and cell phones were a pricey
novelty. Communication was difficult, forcing Truc to make
time-consuming trips to suppliers and buyers.

But these days, Vietnam has 33 telephones per 100 people -- and
two-thirds of the phones are mobile. Now Truc can make calls on his
cell phone from virtually anywhere in the country for about 10 cents a
minute, saving him time and money and providing quicker access to

"I cannot imagine what it would be like if I didn't have my mobile
phone for a day," he says. "It's no longer just something that only
the rich can afford. Now, it's a basic means of communication."

Truc's experience provides a glimpse into how wireless communication
is helping fuel Vietnam's rapid growth; and transforming dozens of
other developing nations from the ground up.

Today, mobile phones are the primary form of telecommunication in most
emerging economies, fulfilling much the same role as fixed-line phone
networks did in facilitating growth in the United States and Europe
after World War II.

Some developing nations have even jumped out in front as mobile
pioneers. In the Philippines, more than 4 million people use their cell
phones as virtual wallets to buy things or transfer cash -- services
still rare in many wealthy countries, with few exceptions like Japan.

As service charges and handset prices have plunged and coverage areas
have expanded, cell phone subscriptions in the developing world have
surged fivefold since 2000, to 1.4 billion at the end of 2005,
according to the U.N. International Telecommunication Union. That's
nearly double the 800 million in advanced economies.

Research shows that greater cell phone use can drive economic growth
in emerging economies. Based on market research in China, India and
the Philippines, consulting firm McKinsey & Co. found that raising
wireless penetration by 10 percentage points can lead to an increase
in gross domestic product of about 0.5 percent, or around $12 billion
for an economy the size of China.

"There's enormous entrepreneurship and creativity worldwide, and
through mobile phones you're providing people with the tools -- rather
than aid -- to earn a living," says Leonard Waverman, a London
Business School professor. In a separate study of 92 countries,
Waverman had findings similar to McKinsey's report.

"It's not a magic bullet, but it's a vital tool," says Waverman, whose
research was partly funded by British mobile carrier Vodafone Group

By bouncing signals off base stations, relay towers and satellites
instead of over copper wires strung to villages and homes, cell phones
can hurdle mountains. Mobile phones are not hampered by illiteracy
-- which is a barrier to computer use -- giving millions new
opportunities to exchange information, make money and conduct

In India, fishermen call ahead to ports to see where they will get the
best deal on their catch. Kenyan farmers check crop prices on a
service offered by local provider Safaricom.

In South Africa, cell phones serve as a virtual office for carpenters,
painters and other laborers who post their numbers on handwritten
signs advertising their skills.

The Philippines has become a global leader in mobile commerce. Since
2000, Smart Communications Inc., the country's largest carrier, has
allowed subscribers in its Smart Money program to hold limited amounts
of cash in electronic wallets linked to their mobile accounts.

Using their cell phones, members can withdraw cash from their bank
accounts, pay for goods and services and transfer money and airtime
credit. The phone records all transactions. Overseas Filipinos are
even using this service to send money home. While the system is
designed with work with financial institutions, subscribers don't need
a bank account.

"If your son or daughter is away at school and needs money, this is an
easy way to send it to them," says Ramon Isberto, a Smart spokesman.

This kind of application holds promise for the millions in developing
countries who have no bank accounts and for whom transferring money
can be difficult or risky.

Wizzit, a South African-based company targeting customers without bank
accounts, has been offering cell phone-based financial services since

Vodafone, which is investing heavily in Africa, is partnering with
Kenyan affiliate Safaricom and the Commercial Bank of Africa to soon
launch M-Pesa, a mobile financial service that allows users to send
and receive cash and perform other transactions.

"Financial institutions are realizing that the only way to reach new
customers is through mobile networks," says Nick Hughes, head of the
mobile payment team at Vodafone.

Expanding mobile networks also brings other economic benefits, experts
say. It lures more foreign investment, gives families better access to
health and educational information and provides governments with more
revenue from licenses and taxes.

Wireless technology has emerged at a fortuitous time for carriers
expanding in developing countries because it is so much cheaper and
easier to build than fixed-line networks.

Rugged, sprawling Afghanistan, for example, now has 2 million cell
phone subscribers and only 20,000 fixed-line phones.

"They can leapfrog the technology," says David Knapp, general director
of Motorola Vietnam.

In Vietnam, where the economy is growing 8 percent a year, the
communist government has spent heavily to expand coverage to all 64

"The more people who have cell phones, the more the economy will grow,
and vice versa," says Bui Quoc Viet, a spokesman for the state-run
Vietnam Post & Telecommunications Corp., the country's largest telecom

The government has also promoted competition: Vietnam now has six
mobile carriers, two with foreign partners. The development has driven
down service charges, a key factor in the tripling of cell phone
subscribers over the past two years to 18 million.

Mobile phones provide a good way for the younger generation to seek
new business opportunities and cash in on Vietnam's move toward a
market economy, says Paul Ruppert, managing director of consultancy
Global Point View LLC, who has extensive experience in Asia.

"It's all micro-activity -- tailors, small repair shops, textile
producers, grocery stores," Ruppert says. "Even though they're small,
they're allowed to get an idea of the market via the cell phone."

Text messaging, or SMS, is another application that's particularly
popular in Asian nations like Thailand, Vietnam and the Philippines.
It's considered a cheap, unobtrusive way to stay in touch with
friends, connect to the Internet and conduct business.

"It's a good way to save costs, but more importantly I can use SMS
services as evidence for my business transactions," says Truc, the
embroidery business owner.

Carriers have adapted to the needs of poorer customers by selling
prepaid airtime cards, often for as little as 35 cents per card. This
eliminates the need for a contract, credit history check or even an
address. Once you register for a phone number and buy an airtime card,
you're in business.

Handset makers, meanwhile, are offering ultra-cheap phones. Motorola
Inc., under the GSM Association's emerging market handset program, has
produced cell phones with a wholesale price of less than $30. Retail
prices vary depending on taxes and local market conditions.

But even those phones are still too expensive for many who live on one
or two dollars a day.

That's given rise to communal phone use and a cottage industry made up
of people who resell phone service for a living.

Both are typified in Bangladesh's "Palli Phone," or village phone,
program. A quarter million "phone ladies" buy mobile phones on credit
from Grameen Bank, winner of the 2006 Nobel Peace Prize along with its
founder Muhammad Yunus, providing wireless communication for the
community and themselves with a livelihood.

Hasina Banu, who lives in a remote village in northern Bangladesh,
bought a phone from Grameen for about $110 and each week pays back
about $2.50. She now earns about $25 a month from the phone and plans
to use that money to open a small grocery store.

But even in rural Bangladesh she says competition is heating up among
other "Palli Phone" sellers.

"Now I get less customers," Banu says. "But I am happy that now I have
some money with (which) I can expand my business."

Associated Press Writers Tran Van Minh in Hanoi, Vietnam, and Julhas
Alam in Dhaka, Bangladesh, contributed to this report.

Copyright 2007 The Associated Press.

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