1. Barriers for increasing mobile phone penetration in emerging markets Goal: Identify factors that affect most to mobile phone penetration in emerging markets. Scope: Consisted of 18 emerging markets. To who: Study to Nokia entry business line. Mikko Kielinen

2. Global cellular markets Market growth in develop markets slow Developing countries has big potential Characters of developing countries:  Lower ARPU  Low low end phones  Big customer base

3. Parties involved Market regulator Maximizes social profit by controlling the whole market  Cherish effective competiton  Control the operators (interconnection, optimizes scarce resources…) Cellular operators Attract customers whose ARPU is less than 5€/month  Manage costs  Services to attract these groups Mobile phone manufacturers Average cost per terminal below 50€  Manage costs In order to increase mobile phone penetration market players have to adjust these conditions

4. Why some countries succeed better than others? Mobile phone penetration is correlated heavily to wealth But: Why some countries are better than the others?? Saudi Arabia (7706€!!!) and Philippines (787€) have the same penetration. Thailand (40%) and Iran (5%) have the same GDP/Capita

5. Study Methods Interviews and literature survey Contacts as close as possible from these countries 32 contacts Market attributes to measure market conditions 17 attributes Divided to between all market parties (regulator, operator and terminal manufacturers) So, 18 markets each of them having 17 market attributes. All of these attributes were evaluated with “traffic light” Most important attributes are discovered by comparing these “traffic lights” to mobile phone penetration and wealth. These results are also compared to growth in penetration during summer 2004 – summer 2005

6. Results (1/3)

7. Results (2/3) CountryPenetration 2004GDP/CapitaPoints Philippines31.5%787 €43 Thailand39.8%2 008 €41 India3.5%491 €40 Indonesia9.9%821 €39 Iran5.1%1 748 €36 Vietnam4.2%427 €36 Mexico31.5%4 926 €35 South Africa44.7%3 325 €35 Columbia17.9%1 632 €35 China22.0%1 032 €34 Turkey44.0%3 316 €34 Nigeria3.7%329 €34 Egypt8.5%801 €33 Saudi Arabia32.5%7 706 €33 Bangladesh2.0%310 €32 Brazil30.2%2 422 €31 Pakistan2.8%415 €31 Russia33.4%3 105 €29 More simplified picture where “traffic lights” are evaluated with points Points: Conclusions: Success of Phillippines and Thailand can be seen from here India and Indonesia will have rapid growth in the near future. If the market conditions are not good wealth compensates this heavily (Russia, Brasil and Turkey) Green3 Yellow2 Red1

8. Results (3/3) Winners Countries where high penetration compared to wealth: Light taxation Custom duties are small Cheap calls Micro charging Countries where growth was fast during 2004 - 2005: High wealth!! Expensive calls RPP or CPP Interconnection charges not based on costs Losers No competion Charging of prepaid account expensive

9. Conclusions Competition!!! 3 or more equal operators Market conditions are more important if the country is poor Prepaid connections are must! Minimum prepaid account charge value should be small Network coverage correlation: Network coverage >60%  penetration can be over 5% Network coverage >80%  penetration can be over 30% Interconnection charges shouldn’t be based on costs Calling party pays and Receiving party pays are both allow rapid increase in penetration The effect of tariffs is smaller than expected

10. Thank you…