AudiencScapes

By Giovanna Monteverde
Senior Project Manager for Latin America, InterMedia

3 March 2010

(Bogota, Colombia)-- In the last three years, the Colombian capital has seen the emergence of an informal street market for mobile phone minutes. At nearly every corner or shopping mall, you can see vendors selling mobile minutes alongside their typical offerings of cigarettes, candies and chips. This informal market has allowed many more people, especially from low-income neighborhoods, to have access to and use mobile phones when they are needed.

I have been to nearly every major city in Latin America recently, and this is the only place where I have seen such a system operating. It seemed to begin about three or four years ago when mobile phone plans became very accessible. Urban legend has it that a customer once asked a street vendor if he could use the vendor’s mobile phone because he needed to make an urgent phone call. The customer offered to pay the street vendor, who agreed to lend the customer his phone and sell him the mobile phone minutes. After that, the vendor decided to keep reselling his mobile phone minutes. He was so successful that other street sellers got into the act. Small stores and businesses also are offering this service. (Click here to view the Urban Colombia Communication Profile)

Vendors Adapt to a Competitive Mobile Market

What the vendor or store charges for their mobile phone minutes depends on the neighborhood. In upscale neighborhoods, one minute seems to cost from 300 to 500 Colombian Pesos (about $ 0.14 to $0.30 per minute). In middle-class neighborhoods, one minute can cost from 200 Colombian Pesos to 350 Pesos (approximately $0.10 to $0.16 per minute) and in low- income neighborhoods, one minute can cost 150 Colombian Pesos (about $ 0.09 per minute).

The street market for minutes has evolved amid a fairly competitive mobile phone sector. The leading providers in Bogota are COMCEL, TIGO and MOVISTAR, with leader COMCEL claiming about 60 percent of the market. Call prices vary depending on whether the caller and receiver use the same service or not. For example, if one person has COMCEL and wants to call another person who uses COMCEL, the caller will have to pay about 130 Colombian Pesos per minute ($ 0.07). But if the other person subscribes to TIGO or MOVISTAR, the caller will pay 320 Colombian Pesos per minute ($ 0.19).

Street vendors are aware of this and subscribe to different mobile phone providers to maximize their income. Before giving a mobile phone to a customer, a street vendor will ask what provider corresponds to the number the customer will dial. The vendor will give the client a specific mobile phone, depending on the provider. Increasingly, vendors will simply keep one mobile phone and use multiple SIM cards in it from the various providers as needed.

Customers also have negotiating power over street prices for minutes. For example, in front of one of the most fashionable shopping centers, there are usually five to 10 street vendors selling minutes. There is so much competition that some of them are ready to cut prices on the spot to attract a client. Customers learn that they can negotiate the price with the street vendors.

Mobile Operators Are Forced to Adapt

Growth in the informal mobile phone market has been fueled by declining prices for mobile phone plans in general, and the increasing popularity of pre-paid plans in particular. In the past year or so, mobile phone plans prices have decreased 30 to 40 percent on average, according to officials at COMCEL and MOVISTAR. Pre-paid plans are now the most popular mobile phone plans in Bogota, with the key advantage that users do not have to pay for incoming calls as they do with subscription plans. Pre-paid customers can also go to any store and buy a loaded mobile phone card or they can buy minute credits online.

Many pre-paid plan users in Bogota do not have calling minutes on their mobile phones; rather. They use their mobile phones mostly to receive phone calls. If they want to make a phone call, they look for a street vendor or store that sells mobile phone minutes. The importance of these mobile phone sellers will grow as pre-paid mobile phones increase.

The government has apparently tried without success to stop this informal phone minutes market because the mobile phone providers complained about it. Mobile phone providers, meanwhile, have countered the trend by developing new strategies to motivate customers to change from pre-paid to post-paid plans by slashing prices and offering more free minutes and SMS services if customers switch from pre-paid. However, post-paid plans still require a fixed-term contract and a specific number for that contract; pre-paid customers can simply change to another mobile phone provider by changing the SIM card without having to change their numbers.

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