January 11th, 2008

Philippines Wireless Services – Mastering Low Cost Distribution

I’m just back from a couple weeks in the Philippines. Even though I was on vacation, it’s hard to stop thinking about cell phones and service when you’re surrounded by advertisements. Ten to fifteen years ago when I would travel abroad, it seemed as though only Coca Cola was advertising everywhere – by everywhere, I mean billboards, airports, train stations, sides of buildings, etc. Now it seems to be telecom companies.

In places such as Africa, they even serve as the only paint on some buildings. See this blog for photos.

The last numbers I saw for ARPU for cell phones in the Philippines was under US$10/month. Some carriers here would likely wonder how one generates margins with such low revenue numbers, but as the carriers there know, you need to cut your cost structure to match the revenue. One of the ways they cut cost is in distribution of SIM cards and the processing of “reloading them.”

As you may or may not know about the Philippines, they mostly send text messages. One of the many reasons – and probably the primary reason – is because it is relatively inexpensive. So, in order to be able to communicate with folks there, I needed to get a Filipino SIM card.

I purchased my SIM card with 50 text messages at this shop below.

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The young woman opened up the small package with the SIM. She popped my new SIM card into her phone and within about 60 seconds it was activated. The $3 (approximate) fee came with 50 text messages. No additional activation fees. No paperwork required. The folks with whom I was staying primarily used SMS rather than voice so it was perfect.

Needless to say, these shops were everywhere. I did not once see a dedicated phone shop from one of the carriers. It’s possible that they existed, but I didn’t see one – an indication that even if they do have shops, they aren’t as prevalent as they are here in the States or in Europe. I did see phone shops though with not only Nokias, but also the latest from Motorola.

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