...were nearly billion GSM subscribers worldwide by February 2005), the lower-income groups in emerging markets will need to be connected.

In some emerging markets, the trick of achieving profitability on the back of low-ARPU customers already appears doable. At the 3GSM World Congress held in Cannes last February, Sunil Mittal, chairman of Bharti TeleVentures (which has fixed and cellular interest in India), reported it was running profitable mobile operations on a monthly prepaid ARPU of US$5.00. (During the quarter ended December 2004, Bharti Cellular achieved EBITDA margins of 36.4 per cent.) "We have found a business model that works," said Mittal. "In fact, we're aiming for the model to work on monthly ARPU as low as US$3.00."

In addition to its emphasis on pre-paid customers, who require less customer support costs than post-paid, an important ingredient of Bharti's successful business model is infrastructure sharing. This avoids unnecessary duplication of capex. "In the private sector, around 30-35 percent of infrastructure is shared in India," said Mittal. "We're now pushing for that principle to extend into the public sector as well."

Similarly impressive figures can be found at Smart, a mobile operator in the Philippines. For the first six months of 2004, Smart reported a staggering EBITDA margin of 69 per cent on an average prepaid monthly ARPU of US$7.00. (Generally speaking if a mobile operator can turn in EBITDA margins of around 50 per cent then it is considered to be doing very well.) To lower its costs, Smart--like Bharti--relies heavily on pre-paid, which accounts for 98 per cent of its revenue.

Despite the apparent success of both Bharti and Smart, their operations will need to become even leaner if they are...

NOTE: All illustrations and photos have been removed from this article.



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