For release on 19-12-2005

NEWS RELEASE

Low-income telephone users uncounted, but spending more than

expected

Colombo, Sri Lanka, 19 December 2005: A recent study has shown that fifty-eight
per cent of low-income telephone users are absent from conventional telecom
indicators. The study also shows that they are spending more of their monthly
incomes than expected on telecom services. The study supports C.K. Prahalad’s
claim that there is a fortune to be made at the ‘bottom of the pyramid,’ not only at the
top.

Decisions in the telecom sector are frequently made based on the number of
telephone subscribers per 100 population, an indicator called teledensity. A path-
breaking study of telecommunication use by people in Sri Lanka and India with
incomes of below approximately USD 100 per month reveals that 58 per cent of
these low-income users do not own the phone that they use. They are not counted in
the teledensity measures.

The study, aptly titled ‘Telecom Use on a Shoestring: a Study of Financially

Constrained People in South Asia,’ was released at a news conference today by
LIRNEasia, a Sri Lanka-based Asian research organization. The study examines the
use of telecom services amongst people whose incomes are less than approximately
USD 100 per month, in four localities in Sri Lanka and seven in India. The localities
surveyed in Sri Lanka were Badulla, Colombo, Hambantota and Jaffna.
According to Ayesha Zainudeen, a researcher at LIRNEasia, ‘this is quite a revealing
number; it illustrates that these consumers are essentially silent, that they are not
accounted for in industry numbers. The most commonly used measure of telecom
access, teledensity, only counts telephone subscribers; this is what is used in making
decisions on an industry as well as policy level.’

‘The situation gets worse as income declines, with just one quarter of those surveyed
owning a phone’ said Ayoma Abeysuriya, Project Director of the Social Research
Unit (SRU) at TNS Lanka, LIRNEasia’s implementing partner on this project. ‘There
is a great reliance on public call offices, public payphones and post offices,
collectively known a “public access telephones,” both in Sri Lanka as well as India
added Ms. Abeysuriya.

The study also finds that these ‘financially constrained’ people are willing to spend
considerable proportions of their incomes on telecommunication. ‘Around 40 per cent
of the Sri Lankan mobile users sampled were spending at least 8 per cent of their
monthly incomes on mobile telecommunication; in some cases, people were
spending more than twelve per cent’ added Ms. Zainudeen. This is far greater than
the common estimate of 2-3 per cent that is used as a rule-of-thumb in the telecom
sector.

Often, lower income segments of the market are neglected as a result of common
perceptions that such ‘financially constrained’ people are an unprofitable market. This
is clearly not the case, given the proportions of their monthly incomes that they are
willing to spend on telecommunications, especially on mobiles, where call rates are
higher. Innovative approaches, such as a mix of micro-finance and low-cost wireless
technology, that some operators in Sri Lanka have recently chosen to adopt, should
be encouraged. The financially constrained should not be seen as an obligation, but
as an opportunity by telecom operators.

A total of 3,199 respondents were surveyed, 1,100 respondents across four localities
in Sri Lanka and 2,099 respondents across seven localities in India. Localities were
selected to capture the diversity that exists across the two countries, to explore the
use of telecom services by the financially constrained. The survey was implemented
by TNS Lanka and its Indian counterpart TNS India in April and May 2005.

LIRNEasia is regional, non-profit ICT policy and regulation capacity-building

organization incorporated under the Companies Act of Sri Lanka, No. 17 of 1982, in
2004. It is currently funded primarily by the International Development Research
Centre of Canada. Additional information is available at http://www.lirneasia.net.

TNS Lanka is wholly owned by TNS India, and has been operating in Sri Lanka since
1995. TNS Lanka has a fully fledged field structure in all parts of the island, including
the North and East, in addition to its research, operation and data processing units in
Colombo. TNS is the world’s second largest market information groups, with 230
offices across 70 countries.

For more information:

LIRNEasia
Ayesha Zainudeen
Researcher
SLIDA Campus, 28/10 Malalasekera Mawatha
Colombo 7 Sri Lanka
Tel: +94 11 452 7647 Fax: +94 11 452 7648 Mobile : +94 (0)77 313 3945
E-mail: zainudeen@lirne.net