Mobile Email in Emerging Markets

By Carsten Brinkschulte, CEO of Synchronica

The Quiet Revolution

There is a quiet revolution going on in emerging markets. At the heart of this revolution is the mobile phone which is rapidly transforming people's lives in regions as far-flung as the Middle East, Asia, Africa, and Latin America. Increasingly, the mobile phone is becoming the communications lifeline for business users and consumers in these regions, providing not only voice, but also messaging services.

Almost 60 percent of the world's first 3.5 billion mobile phone subscribers came from emerging markets, and most market analysts predict that the majority of the next billion users will come from these developing countries. According to a recent study by Portio Research, nine out of the top ten highest growth markets over the next four years have one key defining factor in common - they are all low income per capita markets. The only high income per capita market to make the top ten is the USA. So, what is driving this revolution? And how will the global market for mobile phones - and core applications such as mobile email - transform over the next few years?

The Challenges

Over the past year, I have travelled extensively in Africa, the Middle East, Asia, and, more recently, Latin America and have found that mobile operators in these regions are facing different challenges and opportunities to those in the developed world. In many of these countries, fixed-line and PC penetration is very low, and a high percentage - up to 70 percent - of the population live in rural areas, and those that have mobile phones tend to be on a pre-paid tariff, frequently switching between operators to get the best available price plan. They also tend to use lower-end handsets: In Bangladesh, for example, one operator told me that their smartphone penetration was less than 0.5 percent, probably 30 times lower than in the U.K.

Furthermore, although the potential subscriber base in these regions is huge and as yet largely untapped, the relative value of each customer to anyone in the mobile value chain is small when compared to the developed world. As a result, the focus is on capturing as much of the subscriber base as possible, to achieve economies of scale and optimal profitability from these markets.

Low Fixed-Line Penetration

In India, as in many other developing countries, the number of email users outstrips the installed base of PCs, and very few people have the luxury of a broadband connection at home. In countries like India, the cost of establishing a fixed-line network is prohibitive, which has left the way open for a more cost-effective wireless infrastructure to permeate all levels of society - from rich to poor, business to consumer - at an incredibly fast rate. Currently, most people have to travel to an internet cafe to send and receive emails. For people in rural communities, this could involve a walk of a few miles each way, just to send an email to distant relatives or to communicate for business reasons. In this landscape, mobile operators have the unique opportunity to make the mobile phone the primary device for accessing the internet and overcoming the inadequacies of the fixed-line network by offering mobile email and other internet-based applications on low-cost handsets.

High Churn Rates

A challenge for mobile operators in developing countries is to reduce churn among the largely pre-paid subscriber base and protect average revenue per user (ARPU) and customer acquisition costs. With the vast majority of subscribers opting for pre-paid tariffs, customer loyalty is minimal, and operators are struggling to keep existing customers from switching to the latest low-cost option, as well as to entice new subscribers to their service. Forward-looking operators see mobile email as a key differentiator and, more importantly, as a way to reduce churn while also increasing average revenue per user (ARPU). Mobile email is a valuable and addictive service they can offer to customers at a flat rate of around USD 3 a month - or even as a free service, funded from the customer acquisition budget.

Which Handsets?

There is also the thorny issue of mobile handsets. The general perception is that for mobile email and other content-rich data services to take off, customers first need to invest in a more expensive smartphone. Most vendors in the value chain are trying to persuade customers to move up to a higher functionality phone in order to benefit from these new services. The reality is that this is just not going to happen in emerging markets: these higher-end phones, while great for the developed world, are simply too expensive to suit the pocket of a Sudanese or Bangladeshi consumer. They need applications and services that can work on even the most basic of phones, without having to invest in one of the more expensive handsets.

Mobile Email Standards

For new applications such as mobile email to succeed at a mass market level in emerging countries, industry standards are a critical factor. Most existing mobile email solutions are based on proprietary protocols, requiring users to download additional client software, effectively limiting the addressable market to the small fraction of smartphones. This approach is set to fail in the developing worldwhere the overwhelming majority of people have basic or feature phones that often cannot use proprietary clients. The client-based approach is also set to fail because users have to go through a complex download and configuration process. Time and again it has been proven that consumers won't adopt services that are hard to setup or difficult to use. They want to be able to use mobile services right out of the box. No software installation, no fiddly configuration, no expensive proprietary devices.

The only viable option for mobile operators is to use open industry standards to interface with the built-in email and synchronization applications that are shipping pre-installed with the vast majority of devices today, enabling both smartphone and mass market feature phones to receive push email, or converting email to SMS so that the message can be received even on the most basic phones. Once they have got that part sorted, operators need to ensure a seamless setup by adding automatic client provisioning of the built-in applications.

The Next Four Years

Given all of the above challenges, how will this market play out over the next four years or so? Informa predicts that there will be 4.81 billion mobile phone subscribers by 2012, with the majority of the next billion subscribers coming from emerging markets; but which handsets will these subscribers be using, which operators will be successful, and which services will prove to be the 'killer application'?

My belief is that handsets sold into emerging markets will continue to be mainly lower-end devices. Very few smartphones - particularly in the consumer space - will be adopted in these markets. Software vendors and operators need to acknowledge this fact and offer services that are designed to work on even the most basic of handsets if they want to succeed in these regions.

Mobile operators need to provide relevant additional services to their subscribers and get their pricing plans right in order to achieve fast take-up rates, reduce churn while also increasing average revenue per user (ARPU) and customer loyalty. My belief is that the 'killer application' for the mobile phone in emerging markets will be push email. Email is one of the oldest and most widely used internet applications, and I believe that it will become very popular on the mobile platform. It offers extended communication capabilities that are complementary to SMS and is a cost-effective and convenient way of allowing people in disparate locations to stay in touch. If offered at aggressive prices and made available on mass market handsets, mobile operators will see rapid take-up rates and steal a march over their competitors, reducing churn and also increasing average revenue per user (ARPU) over time.

Another service that I believe will prove highly popular in emerging markets, as well as in the consumer sector of the developed world, is a backup and restore service - an insurance policy against the loss of data stored on a mobile phone. Many users today rely almost exclusively on their mobile phone as an information repository for their entire business and social network, so a lost or stolen phone becomes a real problem. It is also bad news for the mobile operator: Studies show that it can take up to three months for subscribers to restore their data, during which time they will initiate fewer phone calls and send fewer text messages. Service providers offering a low-cost or free facility for backing up and restoring lost contact information over the air, will be providing subscribers with an attractive mass market service, that will protect against average revenue per user (ARPU) losses.

Conclusion

The mobile phone, together with applications such as mobile email and mobile backup, will make great headway in emerging markets over the next few years, but the challenge for device manufacturers, service providers, and software vendors is to understand the limitations and drivers that underpin this growth and realign their offerings accordingly. The rewards for everyone in the value chain are potentially huge, but there are challenges ahead, too. The quiet revolution will continue, but who wins and who loses is still up for grabs.

About Synchronica

Synchronica plc develops and markets industry-standard mobile email and synchronization solutions that work with the built-in email and synchronization clients of 1.5 billion mobile devices. The new email-to-SMS conversion brings mobile email to every mobile phone on the planet. Mobile operators, device manufacturers, and service providers in emerging and developed markets use Synchronica products to offer mobile email, PIM synchronization, and backup and restore services to their consumer and corporate customer base. Products include the push email and synchronization solution Mobile Gateway and the mass market device backup solution Mobile Backup. The headquarter is in England, the development center in Germany. With presences in the USA, Hong Kong, and Dubai. Synchronica plc is a public company traded on the AIM list of the London Stock Exchange (SYNC.LN). More information is available at www.synchronica.com

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