Observation from Mumbai:
Just a few minutes ago, on my way back to our hotel, I counted 9 booths selling talk time for cell phones. Compared, I saw only 3 places selling clean drinking water.
That observation made me think of the book “The fortune at the bottom at the pyramid” by C.K. Prahalad. Prahalad believes that by looking at the poor, low-income inhabitants of third world countries as viable consumers, it is possible not only to make money, but also to unleash a horde of entrepreneurial potential amongst the worlds poorest.
Mathematically this makes sense. Taking India as an example, approx. 230 million people are living for less than 2$ a day. If you multiply these numbers, you get a buying power of whopping 460 million dollars / day.
The cell phone booths in Mumbai are a good example of Prahalads theory. Talk time is relatively cheap to buy, but only if you buy it in small quantities (between 0.25$ – 5$). Around 90% of this amount is transferred directly to your phone, the rest – I presume – goes to the retailer.
Buying larger amounts (above 5$) invokes a big penalty. In these cases, less than 60% of the amount is transferred to your phone. I believe the reason for this is to maintain a high rate of employment. If it was possible to put large amount in your phone, half of the booths would probably have to close down their business.
I don’t know how many people are employed in Mumbai alone selling talk time, but it seems to be in the thousands. A whole new market is unleashed, bringing prosperity and better lives to the people involved – and making companies like Vodafone and Airtel able to tap into some of the 460 million mentioned above.
But the question whether having cell phones is betting than clean water remains unanswered.
MC
