Mobile phones and magic bullets

November 4, 2009

     By Duncan Green     

The Economist continues its love affair with the mobile phone in a recent special report. Highlights:

‘In 2000 the developing countries accounted for around one-quarter of the world’s 700m or so mobile phones. By the beginning of 2009 their share had mobile phone growthgrown to three-quarters of a total which by then had risen to over 4 billion. [see chart]

China is the world’s largest market for mobile telephony, with over 700m subscribers. India is adding the biggest number each month: 15.6m in March alone. And Africa is the region with the fastest rate of subscriber growth.

mobile phones in AfricaThree trends in particular are reshaping the telecoms landscape. First, the spread of mobile phones in developing countries has been accompanied by the rise of home-grown mobile operators in China, India, Africa and the Middle East that rival or exceed the industry’s Western incumbents in size.

These operators have developed new business models and industry structures that enable them to make a profit serving low-spending customers that Western firms would not bother with. Indian operators have led the way, and some aspects of the “Indian model” are now being adopted by operators in other countries, both rich and poor.

The second trend is the emergence of China’s two leading telecoms-equipment-makers, Huawei and ZTE,….. prompting a shake-out among the incumbent Western equipment-makers.

The third trend is the development of new phone-based services, beyond voice calls and basic text messages, which are now becoming feasible because mobile phones are relatively widely available. In rich countries most such services have revolved around trivial things like music downloads and mobile gaming. In poor countries data services such as mobile-phone-based agricultural advice, health care and money transfer could provide enormous economic and developmental benefits.’

The one unconvincing bit is the claim, based on some World Bank econometrics that ‘adding an extra ten mobile phones per 100 people in a typical developing country boosts growth in GDP per person by 0.8 percentage points.’ The source for this isn’t online, but I’m trying to track down whether the Bank researcher is really claiming causality, correlation or a mixture of both. If it’s causality we can forget aid, let’s just drop crate loads of mobiles on poor countries and declare victory (yes, I realize it might be a bit more complicated than that……..)

If you are left wanting more, UNCTAD’s recent Information Economy Report 2009 should sort you out (Guardian summary of the report here). As a panacea, mobiles are right up there with microcredit, but for a rare bit of mobile phone scepticism, see my previous blog here.

The Economist has even provided a 3 minute video summarizing the report

November 4, 2009
Duncan Green