During recent visits to countries including Colombia, Chile and Venezuela, I’ve witnessed and benefited from black-market mobile calls. While my interest was in offsetting relatively high roaming charges, most of the local population is quite price sensitive and simply wants to save money however they can.
This mobile calling black-market is driven by small-time, roaming entrepreneurs looking to make money by exploiting an arbitrage opportunity from buying low-cost calling minutes to specific mobile numbers, and reselling them at a higher price, yet which is lower than what most consumers would pay through their existing plans.
Consumers, most of which subscribe to prepaid or small post-paid plans, use their phones for incoming calls, but often go to ‘minute re-sellers’ to make outgoing calls. Black-market resellers often subscribers of multiple, large plans, often with special rates to same-service provider numbers; service plans that the majority of individuals cannot afford.
In this scheme, consumers save money by buying low-cost minutes as needed, as opposed to recharging their accounts, while resellers pocket a per-minute margin, at the service providers’ expense.
While it’s difficult to estimate the cost to service providers, it’s plausible to imagine that black-market resellers represent 5-10% of all resellers, and that they take home a 30% margins on minutes sold, otherwise destined to providers.
For a medium market like Colombia, characterized by 44M people, with 96% mobile penetration and an ARPU of €7.04 ($9.50), the mobile industry represents a yearly turnover of roughly €3.6B ($4.8B). This translates into between €54M -€107M ($73M-$145M) of revenue shifted from service providers to illegal resellers.
This phenomenon probably tends to arise in markets characterized by:
- Populations with low, personal ability to pay for services
- High-mobile phone penetration and usage
- Marked differences in mobile-to-mobile calling rates due to preferential rates to same-service provider numbers and other commercial conditions
- Unattractive offer and pricing conditions when spending on additional minutes / buying top-up
- Lax service subscriber monitoring and regulation enforcement
For service providers there are a number of ways to minimize this type of situation and recover some lost revenue, while possibly improving the customer experience and enhancing the lives of would-be, illegal resellers. Possible steps may include:
- Developing service offers with less distinction between calls to same and different service provider numbers
- Selling additional minutes with more attractive conditions.
- Enabling per-second billing to give users more value for their calling budgets.
- Enabling micro prepaid top-ups with equivalents to down to 60s – 15s worth of calling time.
- Loyalty rewards for top-ups and additional spend through additional minutes, text messages or other valuable communication services.
- Establishing more coordinated service monitoring across service providers to jointly identify subscribers with multiple, high-volume plans, and weed-out any illegal resellers.
- Promoting more legal reselling, not only through regulated wholesale plans, but also with additional benefits such as support with micro-business management, micro-financing assistance, related training and other educational benefits, which can help drive long term economic and social development.
