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TELECOMS MARKET MOBILES FOR THE MASSES
BY AMENA BAKR
Some 12 million Egyptians own mobile phones. It may sound like a lot, but that still leaves 80 percent of the population without one. Telecoms are devising marketing strategies they hope will entice this untapped market.
For handset makers, Egypt is fierce territory. Motorola, which has set its eyes on being a regional leader, is introducing low-cost handsets it says will cater to the needs of low- and middle-income consumers. “If you want to get a market share, you have to go after the masses,” says Khaled El Haggan. He says to attract these buyers, handsets must be cheap, cost effective and adaptable. “There is less margin, but the numbers more than make up for it.”
Nokia says the cost of owning a mobile phone is particularly relevant in new growth markets such as Egypt. “Nokia is working closely together with operators in the low-penetration markets to develop and facilitate innovative new business models and to offer first-time mobile phone users attractive subscriber or pre-paid plans together with highly affordable products with high quality, optimized features and applications,” the company said in a statement.
The Finnish handset maker is introducing several low-cost models, but ultimately, it admits, the cost of mobile ownership falls largely on service providers. “Handset price is actually only one part of the equation,” it said. “Our goal is to bring the benefits of mobility to consumers with a monthly mobile spending of $5 [£E 30] or less. For these consumers, the cost of the service represents around 85 percent of the total cost of ownership and the phone around 15 percent.”
With millions of potential subscribers at stake, Egypt’s GSM operators are cutting calling rates even though they are already among the lowest in the world. In five years, the prepaid card rate has dropped from £E 1.75 per minute to the current range of 30-50 piastres per minute. “The value of the service we provide is much more than the value paid for it,” says Ian Grey, CEO of Vodafone Egypt.”
Both Vodafone and Mobinil have introduced new prepaid services that lower the cost of basic service to attract new users. Vodafone’s “Away” plan, for instance, is intended for users outside Cairo and Alexandria with a special 25-piastre per minute rate that can be maintained for just £E 10 per month. Mobinil, meanwhile, is marketing a scratch card called E-Recharge that can be used to charge a prepaid account in increments as small as £E 3.
But the services will not work without a mobile handset. So unless the service companies can convince first-time customers to buy handsets, their services will never sell. “A lot of the new handsets and services are too complex for the ordinary user to set up and configure, therefore he needs a simpler offer in order to make the right decision based on his needs and budget,” Mobinil said in a statement.
Hence phone makers and service providers have begun “bundling” phones and service plans together instead of selling each separate. The bundles aim at simplifying the purchasing decisions of the customer, who can walk out of a shop with a fully working mobile. The idea, already popular in the US, has resulted in plummeting retail prices to as low as £E 200.
And increasing sales. Raafat Mahmoud, a salesman at a small mobile store in Ataba, a Cairo district and hub for electronics and mobile phones, says the new packages have encouraged customers to purchase new phones instead of used ones. “With the packages that are now being offered by mobile companies, people are less interested in buying used phones when they can buy a new one and the service for a cheap price,” he says.
Mohamed Henna, chief technology officer at Vodafone, explains that the “dramatic” decrease in price barriers is encouraging more people to buy mobile phones. “Before, the cost of a line used to be around £E 250; now it’s almost £E 20,” he told Business Monthly. “Now, you can get a brand new handset and a line for only £E 220.”
Vodafone is offering the “El Negm” package, which includes a Motorola C118 handset and a line for about £E 220. Customers can then buy prepaid cards to charge the line. Mobinil, meanwhile, is offering bundles that include a line and a Motorola C113 or Nokia 1100 for £E 212 and £E 319 respectively, letting the customer select from a number of prepaid service plans, some with rates as low as 30 piastres per minute.
While price is important to customers, so is network quality. Mobinil and Vodafone claim their networks cover more than 91 and 99 percent of the country’s populated area respectively. Both companies are investing heavily in maintenance and upgrades. Vodafone alone invested £E 1.7 billion last year and expects to spend as much this year, the idea being that more coverage equals more traffic, which amounts to more profits.
Despite their efforts, coverage is patchy in some remote areas, such as desert and border regions. Sayeda El-Araby, a 28-year-old housewife, says it is difficult to communicate with her family in Halaib, a town near the Sudanese border, using a mobile phone. “Both my father and brother have mobiles, but when I try to call, their phones are almost always out of coverage area.”
Henna concedes that for economic reasons service providers have focused on densely populated areas instead of rural villages. But that has begun to change, he insists. In its drive to get new customers, Vodafone recently added several towns and villages, such as Bir Shalatein – a sleepy fishing village on the Sudanese border – and has plans to connect the country’s highways, which are important for tourism and safety.
Telecom insiders feel competition at all levels will only intensify when a third service provider enters the market following July’s license auction. “There is no doubt that with the third mobile operator coming in we will do our best to attract more customers and keep the ones we already have happy,” says Henna.
As prices go down, owning a mobile will become a reality for more and more people along with a sense of entitlement. A mobile is something everyone deserves to have, argues Henna. “Personally, I believe everybody who needs a mobile phone should have access to one whether for work or socially,” he says. “Even kids feel the need to own mobiles these days.”
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