Sep 24, 2012
Zain Group is a mobile network operator reaching more than 65 million customers in 25 countries in the Middle East and Africa. In Madagascar, Zain is working to extend its reach to consumers who cannot afford their own phones through a Village Phone Program (VPP). The VPP, which has expanded to include more than 6,000 independent phone operators, is part of a broader inclusive business model in which network expansion makes coverage possible in geographically remote areas and economies of scale help keep prices low enough for base of the pyramid customers to afford.
In 2007, Zain Group announced a new growth strategy known aiming to reach more than 70 million customers by 2011 largely by tapping new, predominantly rural and underserved African markets. And while Zain did see new acquisitions as one channel for growth, it was also highly committed to expanding its existing operations. In Madagascar, where the company essentially competed in a duopoly with Orange, Zain projected that its growth would come from the acquisition of customers brand-new to mobile telecommunications. The country was largely unserved, with a penetration rate of less than 5%. In this context, the company outlined a network expansion plan to bring coverage to areas with no prior access. As part of the plan, Zain developed 105 new towers, reaching 372 at the end of 2008. This gave Zain the widest geographic network coverage in the country. Zain also worked to extend its reach to consumers who could not afford their own phones through a Village Phone Program (VPP). The VPP can be understood as part of a broader inclusive business model in which network expansion makes coverage possible in geographically remote areas and economies of scale help keep prices low enough for base of the pyramid customers to afford. The VPP is designed as a cost-efficient addition to existing network infrastructure, effectively extending coverage beyond the point at which a conventional network rollout would be too expensive. The VPP is a shared access model in which a mobile phone is used as a public phone operated by a micro-entrepreneur. Each village phone comes with equipment that allows it to capture a Zain network signal remotely, significantly reducing initial capital expenditure and virtually eliminating the operational expenditure associated with standard network expansion. This is important in rural areas, where such costs are higher and where networks serve small numbers of low-paying subscribers.