DevelopMobile

A Phone for the Developing World!

! Enoch Kim, Shrinesh Patel, Alex Patow, and Gaukhar Tergemessova - December 11, 2013! !

Problem! Solution! Business Proposal! Market Size and Denition! SWOT Analysis! Financial Justication! Conclusion! References!

1! 2! 4! 7! 8! 9! 13! 14!

Problem!
Individuals in sub-Saharan Africa who rely on their cell phones for several aspects of their livelihood such as medical emergencies, business transactions, and weather updates, may live in areas without any electricity. 53% of the population of sub-Saharan Africa has cell phones but only 35% has electrical power. To charge their phones, many have to walk miles, one to three times a week, to charging stations that can cost them as much as a dollar for each charge. In these regions the average annual income is $2190. The costs of charging mobile phones equates to roughly 7% of their annual income, and thus is a signicant drain in terms of nances, traveling, and time. This requires a need for a non conventional way of charging their device. !

From the following graph, one can spot the disparity between electricity access and mobile phone usage:!
Mobile Phones per 100 people Electricity Access (% of population)

60

53.30 45.20

45

38.00 32.10 23.30 17.80 12.00

Percentage

32.50 34.60

30

157.40

2004

2005

2006

2007

2008

2009

2010

2011

Year

Currently, people purchase mobile phones or minutes from kiosks, but none of the phones available in the current market mostly comprised of Nokia and Samsung feature phones, solve this charging problem. A solution must be found to allow people without electric power to charge their phones, which is so very often the singular link between the phone-owner and his business clients, family, and important updates regarding livelihood, commerce, and weather.!

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Solution!
Our solution to this growing problem is the DevelopMobile 1, a full mobile feature phone with a rugged waterproof design. It is designed specically for developing countries, unlike the phones currently available. The way we solve the charging problem is by having a builtin charger. The consumer rotates a large disk which produces enough energy to charge the phone in roughly 2 hours. This is a working illustration of Faradays Law, in the sense that an electric current is generated in a metal coil that is passed in and out of a magnetic eld. Both the coil and magnet are integrated under the dial, and so turning the dial generates an electric current that is relayed into the phones battery. A great feature of our idea is that applications (apps) developed specically for these developing areas can be used on the phone. These include banking apps through the most popular mobile banking service MPesa, and a weather app to alert users to changing conditions. These apps would run through SMS and would not require data. Thus the phone user would also be able to quickly receive and send important messages relating to family, business, weather, etc. !

Below are renderings of our prototype:!

We developed our solution by searching for what was currently available and what the users were familiar with. Today, 70% of phones sold today are feature phones, that is having just a T9 keyboard, voice calling, SMS, and basic functions. The most popular is the Nokia 1100, our major competitor. It has a rugged design and is easy to use, but it lacks the features specically needed by the target market of Sub-Saharan Africa, namely an integrated charging mechanism that generates electrical power for those who live in areas without it.!

An article by TechCrunch gave us some basic guidelines for designing a phone for this market. The article stated that an ideal phone should be cheap, rugged and simple, and have the battery life of a week. We agreed, but thought we could do better than just a week of battery life: the phone should have a battery that doesn't require a plug-in charger. To do this we designed the integrated charging device as rugged, simple and easy to use. By simply rotating the dial on the back of the phone, users are able to charge the phone within two hours. The rubber casing and buttons provide a waterproof seal. The dimensions of the

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phone are roughly equivalent to the other phones available on the market, and so size changes are insignicant.!

! ! !

Apps are a major feature of mobile phones in the developed world, but there are no apps available for phones in developing nations. We believe that we can make the lives of our customers easier if we create apps that use SMS for banking, social, market and weather purposes. These would be dependent on the phones service providers.! The DevelopMobile 1 will solve the problems outlined in our problem statement, which identies an emerging market in need of a tailored solution to t their needs.!

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Business Proposal!
We seek to market our device so that it is not only interpreted as a time-saving product of consequence, but a tool that will drastically improve the efciency of workers, businessmen, farmers, etc in regards to their economic livelihood. The business model revolves around marketing the product as an affordable alternative phone with an easy to use charging system. Consumers will easily see that the DevelopMobile 1 is within the price range of other phones available to them, with the added benet of having the charging system built in. The phone itself has no detachable parts, so there is nothing to lose, break off, or forget at home. This makes it especially desirable as the consumers in our target market would value a phone that can stand up to the rigors of everyday tasks and duties. The no-nonsense charging system does not require the turning of a crank, which would require a hand to hold the phone and another to turn the crank, nor does it require the user to assemble the charging apparatus each and every time he wishes to charge. The design is a model of efciency, and is designed to remove another obstacle in the lives of our consumers so they can reach new heights in their productivity. The mechanism built into the phone provides instant charging, and is highly portable, unlike other charging devices. By marketing the phone as one that is able to generate power as soon as you turn the dial, regardless of where you are, we are demonstrating that we are aware of the power problems many Sub-Saharan households have, and have taken care to build both quality and convenience into our product. No longer does the consumer have to stay attached to a charging station, which cuts into time better spent working. This also plays into how portable our device is. Most of the consumers using our device in sub-Saharan Africa have elements of mobility incorporated into their daily jobs; for example, they can be traveling businessmen or sales representatives that require constant motion from ofce to ofce, town to town. Also, they can be farmers who are constantly out in the eld spending time on their crops. With our product marketed as a portable charging and communication system, they no longer have to worry about bringing along charging equipment and wires that can slow them down, or nding a station to charge their phones. This leads to an increase in productivity, a decrease in stress levels and wasted time, and less hassle associated with a device overall. That, for all intents and purposes, may be the singular link connecting a sub-Saharan businessman to his clients, customers, or business. !

We have identied the sub-Saharan nations with the fastest projected growth in the consumer phone market to be Nigeria, Tanzania, South Africa, Ghana, and Kenya. We thus plan to market our phones exclusively in these regions in order to take advantages of the signicant market share there, as well as to increase awareness about our product in an efcient manner. It is more reasonable to expect consumers in nations with these fastest market growth to become more familiar with your brand and product, compared to nations with slower or stagnating growth. It is evident that marketing the DevelopMobile 1 in these nations serves two purposes: it takes advantage of a fast growing markets where consumers would be quick to buy our product, and it will allow our brand to lter throughout the regions with a slower
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growth projection. This in turn can actually speed up growth in other nations eventually, as our product can be a catalyst for market growth if it sells successfully. !

We plan to sell our product directly to the largest cell phone companies in the Sub-Saharan nations that display the fastest market growth for our consumer phones. These companies are Vodaphone, airtel, MTN, and Orange. These companies provide both the physical phones, and their service. These four companies represent the overwhelming majority of company presence in our ve selected nations. From the gure below, we can see that:!

! ! ! ! !

MTN (47%), Vodaphone (21%), airtel (13%) comprise 81% of the Ghanaian market! MTN (43%) and airtel (20%) comprise 63% of the Nigerian market! Vodaphone (47%) and MTN (36%) comprise 83% of the South African market! Vodaphone (39%), and airtel (16%) comprise 55% of the Tanzanian market! Vodaphone (64%), airtel (16%), and Orange (11%) comprise 91% of the Kenyan market!

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These four companies are veritable titans in their markets, commanding vast market shares as well as instantly recognizable brands in the nations weve selected. As the above gures show, so ubiquitous is these presence in the consumer phone market that it is reasonable to believe that a new competing phone company would be at a drastic disadvantage when competing for consumers simply because of the stranglehold these four companies have in the phone market. By selling our product to these companies, so that they in turn may sell directly to consumers, we reward ourselves in many ways. !

Primarily, instead of having to devote capital to advertise to an entire nation of phone users, we simply have to advertise to the four specic cell phone companies. This represents a huge reduction in costs for our edgling company. We would present a model to these executives of these companies that greatly resembles the model presented to the consumer market; namely one that clearly shows how our phone is bettered suited for households without electric power in Sub-Saharan Africa. The nances associated with bringing the DevelopMobile 1to these companies are discussed in the section of this report titled Financial Justications. The money we would spend on advertising and trying to establish a base of networks could be spent towards additional research and development.!

Also, by selling through the four aforementioned companies, we ease ourselves into the ecosystem of Sub-Saharan phone users. When we introduce DevelopMobile 1 in the preexisting Vodaphone, Orange, MTN, and airtel stores, we are in essence taking on their identity as sellers, as we will market our phone only to these four companies. People are more likely to trust preexisting-companies with a proven record of success in their communities as they are trusted brands. They have had the company presence in these nations for a while and are staples in the phone company infrastructures. They have essentially done the most difcult work with getting consumers to be comfortable with their brand and products. By capitalizing on this, our model seeks to utilize a four existing presences to distribute our phones. This also removes the need to build stores and retail chains to house and sell our phone. There is no reason to set aside millions of dollars to build physical establishments as they are already exist in the forms of Vodaphone, MTN, Orange, and airtel stores. !

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Market Size and Denition!

Market Denition! Our main market segment is the rural population of sub-Saharan Africa. We target specically people who do not have electricity, or for whom electricity is scarce. Analyzing the mobile market in sub-Saharan Africa, we decided to target specically ve countries: Ghana, Kenya, Tanzania, South Africa, and Nigeria. The reason we picked these nations is because they represent ve key mobile phone markets in Sub-Saharan Africa, as they have the highest rate of mobile growth. This works in conjunction with our statement that most of the inhabitants of these nations rely on their phones as essential components of their economic livelihood, as described in the problem statement, but no have electricity to power their phones. !

Market Size!

Our market size will be 8 million people living in the ve aforementioned nations. The justication for this number is based on the research that we have conducted after examining the GSMA analysis paper. The paper has introduced ve key countries in the mobile market which are Ghana, Nigeria, Tanzania, South Africa and Kenya. We were able to nd the total population in each country and the number of active customers. This data is presented in a table located on page 9 of the Financial Justication section. Each country has its own mobile "penetration rate, which is also shown in the table. The total calculations show that there are 13.4 million potential customers in the mobile phone market. We have also found that 60% of the population in these countries correlate to people who live in rural areas who dont have access to electricity. Since this is the target audience we have chosen to market our product towards, the 60% of the total rural population comes out to be 8 million users. This target population is about 1.6% of the whole total number of mobile phone connections in subSaharan Africa, which is 475 million connections. Another factor that justies our decision to target 8 million customers is the fact that many of these customers already have phones, and may not wish to switch to our product for whatever reason, despite our product being superior in regards to charging. In addition to this, one of our biggest competitors, Nokia, has a variety of phones to display in the mobile phone market, which limits our target audience to only 1.6% of the total mobile connections. We would essentially be competing with Nokia, an established brand in these communities, and this is a limiting factor to the number of people we are able to reach.!

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SWOT Analysis!
Strengths Our phone is designed specically for the needs of developing countries. The lack of electricity ties the user of the mobile devices to the specic charging kiosks. The uniqueness of the phone is that the charging mechanism is located on the back of the phone, which allows the user to charge the phone on the go. This functionality makes the user independent of the electric grid and independent of the charging kiosks. The turning dial on the back of the phone produces the right amount of energy to keep their phones always alive. This is the perfect option for the users in the developing countries with limited or no access to the electricity. The incorporation of the phone text message application helps the user request needed information on weather updates or banking information makes it easier to do business. These features that we have incorporated into the phone make the product unique in its market because by having the built in charging mechanism we are allowing the user stay connected all the time. These kinds of innovations that we are offering the people in the developing countries will make a huge difference in their lives.! Opportunities The novelty of our product helps our business to be one step ahead of other phone businesses. The fact that our phone is not a smartphone, but a phone with basic features and even more, the self-charging mechanism, gives us a great opportunity to penetrate the mobile phone market. We have analyzed mobile phone users and phones currently available in SubSaharan Africa, and according to the GSMA research, 70% of the phones sold in developing nations are inferior phones. Due to the relative simplicity of the product, the adaptation curve is smooth. Moreover, since we are marketing our product through mobile phone service providers that have established their names on the market, we are expecting to have high penetration rate and justify our predictions. ! Weaknesses Our business is something that depends only on one particular product. Since we are not focusing our business on any other products or accessories, we put our business in a vulnerable position. In order to grow as a successful business we have to make very thoughtful and smart decisions in how to approach the market and set up all the necessary marketing strategies.

Threats By entering mobile market we are competing against one of the biggest mobile phone providers Nokia. Since Nokia provides variety of mobile devices for a good price and quality, we, as a new business, must offer the user an even better solution. ! The magnitude of the feature phone market is another factor that threatens our business. The variety of phones and different features they offer might dim the uniqueness of our product and not be seen in the market at all. In order to be able to stand out in such a huge market, we will develop a strong advertising to the four existing phone companies.

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Financial Justication!
Here, we have developed the projected nancial statements to justify our nancial performance of DevelopMobile 1. We have dened many assumptions that we used for the justication of our nancial statement. Primarily, the market size is growing exponentially for the new users in Sub-Saharan Africa. As given by Mobile Connections, Populations, and Mobile penetration in SSA (2000-2016) graph, the penetration rate is growing far higher than the total mobile connections that are being made in the market. This gap accounts for our market penetration and how we intend on growing in number of potential customers that we can attract. Our estimate of potential customers that we can reach within 5 years is described by the sample of ve countries that we have chosen below. !

Countries

Population (Millions) 52 25.6 48.5 171.2 43.8

Active Customers (Millions 30.3 25.1 9.5 112.5 30.7

Mobile Penetration (%) 144 98 55 66 70

Increase in Active Customers (Millions) 2 0.62 2.6 7.5 0.76 13.48 8.088

South Africa Ghana Tanzania Nigeria Kenya Total= Rural Total=

Comparison of population, currently active mobile customers, mobile penetration rate, and increase in active customers.!
Based on the projection of mobile penetration rate of 2013, the increase in number account for the new customers that we can possibly attract to buying our product. The sum of these number in ve countries is approximately 13.5 million. 13.5 million new users are out in the market for 2013 potentially looking for phones to purchase throughout the ve countries. However, our business model aimed towards users in the rural area with low power grid, the percentage of the 13.5 million is our actual number of target customers. Based on the percentage of rural population in Sub-Saharan Africa being 60% of the 13.5 million, 8.08 million in the ve countries mentioned above are living in the rural are looking for phones to purchase.!

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The simplied nancial justication of our cost break down (per unit phone) is given in the following table:!

Revenue (per phone) Expenses (per phone) 30% to Service Providers Manufacturing + R&D Shipping Administrative/others

$35

$35.00 $10.00 $15.00 $0.34 $5.00 $4.66

Total Prot (per phone)

Our phone is marked at $25 to be sold to service providers like MTN and Vodaphone. $35 is the projected price of what our phone would cost, as sold by the service providers. Average feature phones in Sub-Saharan Africa costs about $28 with varying slightly between country to country ($29 in Tanzania and $27 in Nigeria). Our manufacturing and R&D cost is based on the Nokias cost of $14.20/phone. We marked our price higher than what Nokia does given the fact that we are adding another component to our phones and adding a factor of safety to our numbers. In this sense, we overestimate the cost. Shipping and delivery was based on the fact that renting the cargos from China to South Africa costs about $6000 to rent. With the size of the cargo ship enabling us to t around 34,000 units of packaged phones, the cost to ship one packaged phone to South Africa costs about $0.17. Doubling this cost for insurance and delivery to other countries comes out to be $0.34 per phones. Adding the administrative costs of running the company and other possible expenses that we may have overlooked is projected to be about $5/phone. Giving us the prot of $4.66/phone. We did not include the marketing and advertising expenses because we will be the ones pitching this product to service providers so this is partially included in the administrative expenses.!

! !

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! Net Present Value for DevelopMobile is given by the table and the graph below:! !
Year Cost of Money Number of Phones Discount Prot Expenses Net Cash Cumulative Cash 0 10% 40440 1 0.00 (822549.60) (822549.60) (822549.60) 80880 0.909090909 2022000.00 (1645099.20) 376900.80 (445648.80) 202200 0.826446281 5055000.00 (4112748.00) 942252.00 496603.20 323520 0.751314801 8088000.00 (6580396.80) 1507603.20 2004206.40 566160 0.683013455 14154000.00 (11515694.40) 2638305.60 4642512.00 1 2 3 4

Discounted Cash CDCF

(822549.60) (822549.60)

342637.09 (479912.51)

778720.66 298808.15

1132684.60 1431492.75

1801998.22 3233490.97

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With 15% penetration rate (0.5% in the rst year, 1%, 2.5%, 4%, 7% in the following years) over the 5 year projection for our phone, based on the 31% of lowest penetration rate for our competing companies over 5 years, the projected prot is 3.2M. This is also accounting for the devaluation of money from present years prediction for next 5 years which is given the Cumulative Discounted Cash Flow plot.!

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Conclusion!
DevelopMobile 1 solves the problem faced by millions of people in rural Sub-Saharan Africa. Our products rugged, waterproof design, SMS apps, and innovative built-in charging system will allow these people the opportunity to conduct business using a mobile device. In order to gain traction in the market we will distribute our phone through various carriers in the ve nations with the highest rate of growth for mobile phone usage: South Africa, Ghana, Nigeria, Tanzania, and Kenya. We predict, through careful analysis that we will capture 0.5%, 1%, 2.5%, 4%, 7%, in the rst ve years respectively. Using these calculations, as well as an average selling price of $25 per phone to service providers, we will break even in one year."

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References!
Kochi, Erica. How The Future of Mobile Lies in the Developing World. TechCrunch, 27 May 2012. Web. 11 Dec. 2013. <http://techcrunch.com/2012/05/27/mobile-developingworld/>.! "Sub-Saharan Africa Mobile Observatory 2012." Deloitte, n.d. Web. 11 Dec. 2013. <http:// www.gsma.com/publicpolicy/wp-content/uploads/2013/01/ gsma_ssamo_full_web_11_12-1.pdf>.

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