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“Right now the business has spoil” June 21, 2007

Posted by arabasey in africa, Ghana, payphones.
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Business is a lot slower these days for Ghana’s payphone operators. So slow that you are likely to see them sleeping or idling, rather than serving customers. “Right now the business has spoil,” one of them complains. She blames this on the introduction of the unit transfer (electronic recharging) system, as well as the proliferation of micro-entrepreneurs in the payphone and prepaid airtime business. She used to make up to 3 million cedis (about $320) in sales per day from selling phone calls and prepaid cards. But now she makes less than 1 million (about $105). I sat several hours with payphone operators and saw that for them, the business has indeed “spoil.” Most customers purchased unit transfers. Only a handful made voice calls, most of which lasted just a few seconds. Making matters worse, the unit transfer service has a much lower margin than the payphone service. Even in rural areas, profitability of payphones seems largely dependent on the livelihood economy in the area – use is high in some communities, and very low in others, even where only a few people have their own cell phones.

It’s not just about the cost of airtime; people patronize mobile payphones but don’t necessarily love using them. Enthusiasm over mobile payphones camouflaged certain aspects of mobile phone use that are being revealed as the system faces collapse. For example, the majority of payphone users were probably subscribers, people prefer to have their own phone, and make very short calls. Network providers eventually caught onto these preferences and have responded by making it easier for subscribers to own and recharge their phones. Mobile payphones have their place, but are proving to be a transitory phase in the process of expanding access to telephony not just in Ghana, but in other African countries, such as Senegal.

This could spell disaster for the hundreds of individuals who have invested or are being encouraged to invest their limited funds in payphone ventures. Some payphone operators have branched into providing unit transfers, but most are unable to. At the moment, unit transfer operators are mainly new entrants who had sufficient funds to cover the high cost of initial investment.

Will the death of the payphone business be a debilitating set-back for micro-scale operators? Or will the market open up new opportunities for them to continue participating in the industry as intermediaries?

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