A Globe Connected

Staying in touch has become a globe-spanning phenomenon. There currently are about four billion cell phones for the world's 6.7 billion people, with virtually all of the growth in recent years taking place in developing countries. We wonder: How much does the average Indian cell phone user spend on phone service each month?

A. $30
B. $15
C. $10
D. $6.50

A. $30 is not correct.

The average German cell phone user spends about $31 on phone service per month, according to TeleGeography. At that level, Germans are among the rich countries' lower spenders. In Japan, the average of $57 per month is almost double that in Germany (as of 2008, the latest year for which complete data are available).

Only about one billion of the world's four billion cell phone users live in the developed world. By 2013, there are expected to be six billion cell phone users worldwide — with most of this growth accounted for by the developing world's rural poor.

B. $15 is not correct.

Brazilians spend $15 on their cell phone use per month. This compares with $54 in France and $51 in the United States.

Due to an insufficient credit infrastructure, the business model in many developing countries depends largely on prepaid cards. This has the benefit of providing business opportunities for resellers, which, in turn, strengthens the overall business infrastructure.

C. $10 is not correct.

China is the world's largest market for cell phones, with over 700 million users. The average cell phone user in the country spends about $10 per month. That amount is roughly in line with spending incurred in parts of Africa, with Kenyans spending $9.80 per month.

Countries such as South Africa and Ghana are close to reaching a 100% cell phone penetration rate or have already done so. Operators in Africa manage to keep down prices by offering big discounts during non-peak times, which allows operators to increase network usage when demand is typically low.

D. $6.50 is correct.

The average Indian spends only $6.50 per month on cell phone usage. Despite this low level of per user monthly revenues, India's cell phone operators still manage to have operating margins of around 40%, in line with leading Western operators.

Part of the explanation is that the operating costs can be spread over a wide customer base, which in India includes 525 million cell phone users. India's cell phone operators have also focused relentlessly on outsourcing by shifting actual network operations to companies such as IBM. As a result, they themselves are mostly focused on marketing and strategy, much like Apple.

In general, cell phone service costs are declining around the world. This trend is particularly prominent in India, which has experienced a price war in recent months.

Word count: 453