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Market Study
Published: March 2010
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Research from: Pyramid Research
Sector: Mobile Strategies

Mobile network operators in key emerging markets are now enjoying relatively robust profit margins from prepaid services, a market sector originally associated with low-income, low-revenue users, according to a new report from Pyramid Research.

Prepaid Mobile Services: Using New Business Models to Boost Profits examines the success of prepaid operators in developing markets. This 57-page report identifies the characteristics of successful prepaid players and suggests several core drivers for their profitability. It makes several observations on the impact of ARPS on profitability in a competitive prepaid market context, as well as on the core strategies successful prepaid operators rely on to boost revenue. The report also looks at the dynamics of the cost base and trends emerging in the management of network opex. In terms of the next phase, selling mobile broadband, the report details trends in pricing schemes and discusses the challenges operators will face with subsidies. It also examines in-depth the operator models of four prepaid players: MTS Russia, Safaricom Kenya, Turkcell Turkey, and Grameenphone Bangladesh.  

Concerns of operator viability are widespread as consolidation is becoming more of a reality, notes Guy Zibi, analyst at large for Pyramid and author of the report. "Operators with heavy prepaid user bases are at the forefront of these concerns,  yet many operators are highly successful, boast strong margins, and have managed to withstand internal and external hurdles," says Zibi. "Initially characterized as a solution for low-income or poor customers, prepaid has encountered resounding success around the world, in both developed and developing economies," he adds.

The success of prepaid has been more palpable in emerging markets.  "In most markets in Africa, Eastern Europe, and Southeast Asia, prepaid accounts for up to 99 percent of subscribers," Zibi explains. "Even in relatively developed markets, such as South Africa or Russia, prepaid still accounts for more than 80 percent of the subscriber base."  

Prepaid is the preferred billing plan in most developing markets because it is convenient, it minimizes billing surprises, and it is the most appropriate choice when potential customers do not have a credit history, notes Zibi.   "However, there is more to the success of prepaid operators in developing markets than merely the popular adoption of a billing plan – it is the outcome of something larger: A comprehensive rethinking of what the mobile business model had historically been and how it has historically worked."   

Prepaid Mobile Services: Using New Business Models to Boost Profits is part of Pyramid's research report series. A blend of primary research and qualitative analysis, Pyramid's research reports offer comprehensive coverage of the fixed and mobile communications space and enable those in the communications industry to stay ahead of changing market dynamics. 

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