Rusdi, an Indonesian office worker, has never had a home Internet connection. Since getting a Samsung Electronics Co. smartphone, he now gets online every day and pays 2 cents a minute to carrier PT Indosat.
“I need entertainment while waiting for my wife shopping,” said Rusdi, 26, who doesn’t have a family name. “Mobile Internet is the only answer.”
From Indonesia to Brazil, emerging market carriers are breaking Web services into more affordable, bite-sized pieces to hook clients like Rusdi on using the Internet on their phones. Carriers are offering unlimited surfing plans for a day or as little as a minute and dangling free access to Facebook Inc. and Twitter Inc. to lure customers, particularly younger people.
“It’s a teaser concept, with the idea that eventually users will upgrade,” said Marc Einstein, an analyst at Frost & Sullivan Inc. in Tokyo, who has advised carriers including NTT DoCoMo Inc. and Telstra Corp. “Most of these countries have a very large youth market.”
Unlike in the U.S. and Europe, where most users sign up for contracts of a year or more and pay monthly for their Internet and voice services, the clients of emerging-market carriers are almost all prepay customers. Clients in those markets often don’t have the credit to qualify for contracts or prefer the flexibility of paying for communications services with the money they have available.
Indonesians With Smartphones
Carriers in Asia and Latin America are figuring out ways to offer online access profitably without making it too expensive or producing unexpected charges. Competition among handset makers is also reducing the prices for phones that can access the Internet.
Only about 2 percent of Indonesians have Internet connections at home, though 60 percent access the Web through Internet cafes and other alternatives, Einstein said.
Rusdi said he uses the mobile Internet about 15 minutes a day with funds from a prepaid card he tops up about once a month for 200,000 rupiah ($23). His phone is Samsung’s Star, a touchscreen device that runs on Jakarta-based Indosat’s second- generation mobile network, not the faster 3G network used by advanced handsets such as Apple Inc. (AAPL)’s iPhone.
“There was a Facebook app installed on the device, and the device fit my budget,” Rusdi said. He paid 1.3 million rupiah for his Star. Indosat is the second largest carrier in Indonesia behind PT Telekomunikasi Indonesia.
While Rusdi’s 2 cents a minute of Internet access may not seem like much, it adds up quickly in countries where the average revenue per user is about $2 a month, said Einstein.
Indosat is using Internet promotions to boost revenue and to improve customer loyalty in a market where many consumers use multiple devices with different carriers, said Djarot Handoko, a company spokesman. Prepaid customers make up at least 95 percent of Indosat’s 44.3 million clients, and about 85 percent of them pay for Internet access, he said.
Smartphones climbed to 12 percent of mobile-phone shipments in Indonesia last year, from 4.4 percent in 2008, according to market researcher IDC. That compares to 18 percent for the Asia- Pacific region in 2010 and 38 percent for the U.S.
Rogerio Takayanagi, marketing director for Brazilian mobile-phone company Tim Participacoes SA (TCSL4), said he was grappling with the problem of how to boost mobile Internet growth when he took a trip to Asia last August to see how his counterparts overseas were handling the challenge.
Free Facebook Access
“Our main inspiration came from Indonesia,” Takayanagi said in a phone interview. “It was very clear for us that playing in emerging markets is completely different from Europe and the U.S. Trying to replicate from what works in those markets in Brazil does not work.”
Tim introduced its Brazil-tailored version of what Takayanagi saw in Indonesia, a service called Infinity Web, in late September. Fifty centavos (30 cents) would buy the user a full day of unlimited Web access. By early this year, Tim, which has about 52 million users, was getting 8 million clients a month on Infinity Web.
Rio de Janeiro-based Tim is one of several emerging-market carriers around the world that offer 0.facebook.com, a scaled- down version of the Palo Alto, California-based social- networking site for phones that don’t have the Web-browsing power of smartphones. Clients who download the application get three months of free Facebook access through their phones.
Mimics Internet Cafes
To further boost growth, handset prices must come down, Takayanagi said. Tim has made headway by working with Samsung and LG Electronics Inc. (066570) to produce phones with a proprietary operating system, reducing royalty payments. While the phones lack the processing power of more expensive devices, they have large screens and full keyboards, making them fit for Web browsing.
Tim is the third largest carrier in Brazil, trailing Vivo Participacoes SA (VIV) and America Movil SAB.
Part of the appeal of “snack-sized” Web access on phones is that it mimics Internet cafes, which also charge users based on the time they spend rather than the data they consume, said Joanna Africa, head of platform management at Globe Telecom Inc. (GLO), the second-biggest wireless carrier in the Philippines.
“The Philippine consumer understood the Internet in hours,” Africa said in an e-mail. “Mobile Internet addresses the snacking requirements, i.e. the need to post updates on Facebook or needing to quickly check information through Google.”
‘Holding the World’
Globe has determined that prepaid customers are willing to spend about 5,000 Philippine pesos ($115) for an Internet- capable device, Africa said. Smartphones with operating systems such as Google Inc. (GOOG)’s Android should begin to reach $100 this year, she said.
Budhiwan Pradhana, a record-label promoter in Jakarta, has upgraded, paying about $339 six months ago to get a BlackBerry device from Research in Motion Ltd. (RIM) to replace his Sony Ericsson Mobile Communications AB handset. His carrier, Jakarta-based XL, automatically deducts 99,000 rupiah ($11) a month for Web access and BlackBerry messaging from his prepaid plan.
With his new phone, Pradhana said he can upload images directly to his Facebook account. He also chats with friends on Yahoo Inc.’s and RIM’s instant-messaging services. He said he rarely accessed the Internet with his old phone, finding it too costly.
“This device helps me in working and in my social life,” said Pradhana, 30. “The technology development makes me feel like I’m holding the world.”
To contact the editor responsible for this story: Peter Elstrom at email@example.com