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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?


Creative destruction: izi killed the public phones June 15, 2007

Posted by François in africa, appropriation, co-opt, cycle, re-make.

Senegal’s télécentres are disappearing and it seems “izi” and “seddo”, the new micro-recharge services from operators Tigo and Orange, are to blame. These télécentres are not what we typically think of as “telecenters” –roomfulls of public access computers. In fact, “the majority of them would more rightly be described as telephone kiosks or phone shops.” This unfolding story of creative destruction is very significant because over the past 10 years, such public phones have been key to economic development and information access throughout the developing world (recall Grameen’s village phones.) The disappearance of Sénégal’s télécentres fits a broader pattern currently emerging in several parts of Africa. It also maps very nicely onto our appropriation cycle and illustrates the related tug-of-war between suppliers and users, that drives innovation.

The often-told story goes like this:

  • Step 1 (roll-out): mobile phones were introduced, but were too expensive for many people to afford.
  • Step 2 (re-make): entreprising individuals get a phone and offer ‘fractional phone service’ to others by reselling their minutes on street corners. These ‘public phones’ come in many flavors: some are just individuals looking for extra cash, others may be informal micro-enterprises or more substantial ventures.
  • Step 3 (re-claim): phone companies (and others, like Grameen) co-opt this practice with micro-loans, enhanced public phone booths, accounting features to help manage the public phones, etc.
  • Step 4 (new roll-out): a changed business ecology supports multiple avenues for the provision of phone service: personal or shared, bought directly from the phone company or re-sold through intermediaries.

But now comes this new African twist:

Step 3-bis (“assertive” re-claim): Phone companies (like Tigo in Senegal), seeing that there is a market for small increments of phone credit and shared phones, introduce much more granular offers. For example in Senegal, Tigo offers billing-by-the-second (10 seconds for 20 Francs CFA, or $0.02), electronic recharges (“izi”, in Tigo’s Senegalese franglais) as low as 100FCFA ($0.20), and free unit transfers between consumers (available on the “Tigo Jeune” plan).

All of a sudden, users don’t need the ‘public phones’ any more. In Senegal most of these télécentres have gone out of business. Bassirou Cissé, the general secretary of Unetts(*) says that “In 2000, there were 18,000 télécentres in Sénégal, accounting for 33% of the Senegalese operators’ revenues and 30,000 jobs. Today, most of them have closed down.”

Any guesses as to what “Step 4” will now look like?

(*) Unetts is the Union nationale des exploitants de télécentres et des téléservices du Sénégal. The ‘public phone’ business may be informal at times, but certainly not dis-organized.

Recommended reading: Olivier Sagna’s Batik newsletter, a great source of information on African ICTs (in French.) I ran into this article while poking around OSIRIS (Observatoire sur les Systèmes d’Information, les Réseaux, et les Inforoutes au Sénégal), where Batik is hosted. No RSS yet, but Olivier tells me this is coming soon.