Connecting Developing Nations

BARCELONA A pregnant woman at home alone in her remote village in Sierra Leone unexpectedly went into a difficult labor and, with no access to a doctor or medical facilities, a minor medical emergency could have taken a tragic turn.

But the woman, Emma Sesay, managed to use one of the few cellphones in the village of Port Loko and called her husband, who borrowed a car and rushed home from his job, picking up a midwife along the way. They arrived in time to help Sesay give birth to a healthy boy, whom she promptly christened Celtel, the name of the cellphone company that provides services in her village and many others across 14 African countries, including Burkina Faso, Kenya, Uganda and Madagascar.

Sesay's story was recounted in an interview on Wednesday with Celtel's chairman, Mohamed Ibrahim, who said, "You cannot underestimate the effect a cellphone can have on the lives of people who live in conditions where there are no roads, no transport networks and no postal service."

Executives of cellphone companies are fond of saying that cellular services bring economic development to poor countries while improving people's lives, and Ibrahim, who is from Sudan and has a net worth of about $700 million, is no different. But Celtel, which last year had $1 billion in revenue and $440 million in gross operating profit, is not building a pan-African network of cellular phone companies for charity. The Kuwaiti company MTC acquired Celtel in May for $3.4 billion.

"Africa offers great opportunities and last year added more new cellphone customers than Europe or the United States," Ibrahim said. "There were two million people using phones in Africa in 1998, and now there are 120 million."

Bringing services to the two-thirds of the world's population that does not yet use cellular phones, most of whom are in Asia and Africa, is an issue that has been festering for years and that emerged as a central theme at the 3GSM World Congress in Barcelona, the biggest industry gathering of the year. It brings together the sector's top executives, who come to tout their newest products, but also to speak about the future of their constantly evolving business.

"Emerging markets are on everybody's mind," Adrian Nemcek, the president of Motorola's networks division, said during an interview this week. "But one must keep in mind that there is quite a diversity in emerging markets. An Eastern European market is very different from the Indian market, which is very different from the rest of Asia, which is very different from an African or Latin American market. Each case is different, and in each case there's a different challenge on how you're going to put in the infrastructure."

While there are companies for sale and there is no lack of new licenses being issued to cellphone companies by the governments of developing countries, there remain numerous challenges, ranging from the prosaic to the particular. Companies running networks in Iraq pay millions of dollars to protect their workers and infrastructure, and in some cases companies operating in remote parts of Africa and Asia produce their own electricity to supply power to the base stations, the backbone of the network.

Perhaps the strongest brakes on telecommunications development, excessive regulation and cripplingly high taxes, often come from the countries themselves, which are ostensibly trying to encourage investment.

"Taxes are a huge issue for us: The government sees us as a sort of secondary treasury that they can go to when they need to solve financial issues," said Phuthuma Nhleko, chief executive of MTN, a cellphone company that competes with Celtel. "The governments need to carefully think about the decisions they make on taxes because that will dictate how much people are willing to invest in their country."

While the challenges of building and operating a cellphone company in developing countries are always enormous and sometimes asphyxiating, the rapid growth in the number of subscribers is often enough for investors to forget the stumbling blocks - and nowhere is that more the case than in China.

China's two cellphone companies quickly built national networks and are adding a combined total of more than five million new subscribers a month, but industry experts warn against drawing too many conclusions because of the peculiarity of the country's benevolent state control that encouraged rapid development in the industry.

"China has been a textbook case of how the government did just enough intervention to increase penetration, but the reality is that it isn't going to work for all countries in the same way," said Duncan Clark, president of BDA, a consulting firm based in Beijing. "Culture always plays a role, and you can't necessarily take what worked in one market and automatically make it work somewhere else."

More than 96 percent of China's territory has cellular phone coverage, compared with just 22 percent coverage in neighboring India, the developing world's other massive market. BDA estimates that 60 percent of the people in the world without cellphone connections are in India or China, compared with 14 percent in Southeast Asia and 13 percent in Africa. There are 3.7 billion people in developing countries that do not have a cellular phone, according to BDA, though in some cases that can be misleading since one phone might be used by many people.

Companies operating in the poorest countries must contend with average monthly revenue per subscriber, known as ARPU, that is sometimes $5, while the figure can exceed $50 in developed economies. The phenomenal growth rates - Pakistan, for example, has 23 million cellular phone subscribers compared with two million just three years ago - have local investors willing to challenge the sometimes tough conditions, and on occasion European investors, like Vodafone, Orange and Telenor, have been enticed to invest in Africa and Asia.

"Telecommunications helps decrease poverty and boost our growth rate while increasing the size of the middle class," Awais Ahmad Khan Leghari, the Pakistani minister of information technology, said in an interview this week. "Our improvements in the cellphone market have brought a kind of revolution to the country."

A revolution that has in some cases saved lives, such as that of the Celtel baby in Sierra Leone, or shaken up the local economy. In Congo, farmers who are 600 kilometers, or 370 miles, from the capital city used to find it impossible to know the going rate for their goods and were forced to sell at the rate demanded by buyers passing through town.

Now by using a cellphone, the farmers can call the capital to know what prices are that day and in some cases they are earning four times what they did before.

With cellular phones gaining a firm foothold in developing countries, some cellphone operators are already thinking about how to move beyond basic voice traffic.

"Mobile commerce and other types of nonvoice services can work in emerging markets," said Svetlana Issaeva a manager with Pyramid Research in London specializing in mobile communications in Eastern Europe and Central Asia, "but perhaps not in the form that we are used to thinking of them. Anybody wanting to do business in developing countries has to come with a different mind-set and realize that things are different."