Just a few days ago I posted a few links to interesting numbers about the growth of the mobile phone industry. According to the ITU, we are expected to finish the 2008 with 4 billion mobile cellular subscribers, which supposedly represents over 60% of the world population and indicates growth rates of 25% annually for the past 8 years. Even though i don’t know the details of how the ITU collects its statistics and how it addresses issues such as multiple subscriptions owned by a single individual (there are countries with over 100% penetration of mobile, primarily due to the billing models applied in those countries), the numbers are certainly impressive.
Probably even more interesting, Millicom, a Luxembourg based mobile provider that operates in South Africa, Africa, and Asia, has released numbers indicating “92% year-on-year increase to 7.58 million subscribers from its seven African operations as at 30 June 2008″ (source). On average, the emerging economies where Millicom is operating showed a very impressive, and consistent with the ITU statistics, growth of 58% within a year. These and other similar numbers can be found in numerous reports published in the recent years (you need paid subscription to get most of them though, here is a snippet of a free one) and the forecasts are rather optimistic.
Such an overwhelming penetration rate generated a fare amount of discourse that would picture mobile phone as a basic, almost necessity, good. Indeed, communication is a very fundamental human activity and a device enhancing it to such extend as the mobile phone does, can easily be pictured as similarly fundamental. For example, the ITU report mentioned above links the mobile phone penetration with achieving the MDG goals, thus linking it to socioeconomic development (without describing an exact mechanism though).
However, as of a few weeks ago the world has entered a financial turmoil. Just a few days ago, the Washington Post published the following article suggesting that the growth estimates for the mobile phone industry will have to be adjusted:
While industry executives often say mobile phones are the last thing consumers will give up to save money, analysts are now citing lengthening phone replacement cycles and weakening economies around the world for their weaker sales estimates.
UBS analyst Maynard Um halved his forecast for 2009 global handset growth to 3 percent from 6 percent, pointing to particular weakness in Europe and North America.
also:
Handset market leader Nokia warned early last month that the mobile phone market would be hurt by weakening consumer confidence in many markets in 2008 and the company itself would lose market share in the third quarter.
All this got me thinkingthat my initial intuition a few years ago was correct. In 2005 I spoke at an industry conference dedicated to the “future” of telecom industry. Back then I was surprised to hear the executives debating the next killer app, which will bring them the next stream of revenues focusing on, what i viewed at the time, margins - the very technologically advanced users in developed countries. The point I tried to make in that presentation was that there is enormous business potential in the developing countries (and apparently I was right). Moreover, I was trying to make a case for cheap, durable, and simple technology as opposed to expansive, gentle, and (many times unnecessarily) sophisticated one. Now I understand that I was trying to explain a dissonance between the rhetoric of mobile communication as a basic good and developing handhelds and applications that were in fact luxury.
I think now it all falls in places. Now, it seems that the market is highlighting this dissonance. People are not going to stop communicating and it will be difficult for them to give up the convenience of mobile communication. However, as people start viewing mobile communicaiton as a basic good, they start treating it as such and start voting with their wallets for cheaper, simpler, and more durable technology that would answer their basic need first. And the economic environment, particularly in the developed countries, is currently enhancing this process. All the extra functionality is becoming a luxury and there is only so much space for competition in the luxury market compared to the market for basic goods. It will be definitely interesting to see how this situation unfolds.
