Emerging Market Operators Go Underground

January 29, 2010

The informal economy can generate 50% or more of GDP in some countries, such as Nigeria and Russia. Typically, the number of formal businesses, and hence formal employees, is limited to government employees and large companies with 50 or more employees. Smaller companies tend to not be registered or pay taxes, nor are they required to adhere to regulations, such as employment laws. Although governments want to increase their tax takings, they don’t impose these laws strictly due to the scope of this part of the economy.

Exhibit: Informal economy’s percentage of GDP, most recent available data

Source: World Bank

Informal employees, therefore, make up a significant portion of total employment; in the case of Kenya, it’s around 80%, as per the case study included in the recently published Mobile Enterprise Services in Emerging Markets report. Although many informal employees work for themselves in one way or another, a significant portion work in SMEs (companies of 2-50 employees). Again in the case of Kenya, we estimate that more than half of all employees work in the informal SME segment. This is an attractive segment for operators to address, given that ARPS in SMEs tends to be higher than in large or corporate enterprise segments.

There are a number of ways in which operators can target the informal business segment. Orange Senegal, for instance, offers Seddo Corporate, a service whereby business owners can manage a number of prepaid accounts, such as by transferring funds and creating limits on calls (such as banning international calls). Furthermore, calls between employees are discounted by 35%. Other services can also be offered to target this segment, such as mobile payments, an area where Kenya’s Safaricom continues to report significant success. Still, other services might target specific segments, such as market pricing for agricultural produce or traffic information for taxis and street sellers.

— Jan ten Sythoff, Analyst at large

Related resources:

Mobile Enterprise Services in Emerging Markets; A Survey of Innovation and Opportunities
Research report published January 2010
This report analyzes the prospects of mobile services targeting enterprises of all sizes in emerging markets. It evaluates services and mobile network operators with an eye to the uniqueness of each market while continually referencing more mature markets. The report assesses the prospects of various business-oriented services as well as specific initiatives, looking at the roles of applications such as SMS, email, m-commerce and digital signatures as well as M2M services — telematics and telemetry. Handsets, netbooks and laptops are also discussed. Seven case studies covering mobile operators, enterprises and a WiMAX operator examine Autotransportes de Carga Tres Guerras in Mexico, Zap in Kenya and Tanzania, Hospital Espanhol in Brazil, Vodacom Business in South Africa, Yota and MTS in Russia, and Vodafone in Romania.

Global Mobile Data Forecast
Forecasts published quarterly
Updated on a quarterly basis, this Mobile Data Forecast product provides a complete picture of demand trends for the global market. The Excel output includes five years of historical data and five years of market projections for metrics such as penetration, mobile subscriptions (by type of package, by operator or MVNO and by network technology), users of specific data services (SMS, music, etc.), MOU, ARPS (by operator, by subscription type, by service, by application) and revenue (by messaging and non-messaging applications). The Forecast is based on extensive field research and uses a consistent methodology, aiming to capture the total spending on mobile data services on an aggregate global level. Data from these Forecasts is available online for subscribers to our DataTracker service.

Communications Markets in Kenya
Country Intelligence Report published March 2009
We expect Kenya’s telecom sector to grow to $1.98bn by 2013, from $1.39bn in 2008. Mobile voice services will generate the largest growth in dollar terms —from an estimated $0.97bn in 2008 to $1.32bn in 2013 — and we predict that mobile data will be the telecom sector’s fastest-growing revenue stream. This Country Intelligence Report analyzes Kenya’s communications, media and technology industries, including key trends, regulatory pressures and the competitive landscape, making it an excellent complement to our Forecast products.

Mobile Internet Adoption: Content is the Catalyst
Telecom Insider published December 2009
Mobile online services remain an attractive but elusive opportunity in much of Africa and the Middle East. The low usage of traditional, PC-based Internet services leaves a void that will be largely filled by mobile handsets, and social networking will be a key application. Case studies cover Egypt, Nigeria, Senegal and South Africa.