Working Group Report on Smartphone Access Strategies Towards Universal Smartphone Access

Working Group Report on Smartphone Access

Strategies Towards Universal

Smartphone Access

September 2022

Working Group Report on

Smartphone Access

Strategies Towards

Universal Smartphone Access

September 2022

Acknowledgements

This report and its recommendations are a

collective endeavour drawing on contributions

and insights from the participants of the

ITU/UNESCO Broadband Commission for

Sustainable Development’s Working Group on

Smartphone Access.

The Working Group on Smartphone Access

was co-chaired by Nick Read, CEO of Vodafone

Group, Houlin Zhao, Secretary General of the

International Telecommunication Union and

Rabab Fatima, UN High Representative for

the Least Developed Countries, Landlocked

Developing Countries and Small Island

Developing States (UN-OHRLLS).

The Working Group Co-Chairs greatly and

sincerely appreciate the efforts of our Working

Group members and external experts for their

invaluable contributions, kind review, and

useful comments and feedback. The Working

Group members and experts are listed below.

This report has been informed by research

from GSMA, ITU and 19 structured expert

interviews, as well as insights from International

Trade Centre (ITC) convened focus group of

entrepreneurs (listed below) and extensive

desk research. We gratefully acknowledge all

for sharing their time and expertise to develop

the report and we extend our sincere gratitude

to H.E. Emma Inamutila Theofelus, Deputy

Minister of Information and Communication

Technology, Republic of Namibia, for sharing

her views and perspective on the topic.

We would like to acknowledge with much

appreciation the crucial role of Professor

Christopher Yoo, John H. Chestnut Professor

of Law, Communication, and Computer

& Information Science at the University of

Pennsylvania, the Working Group expert

as well as lead author of the report, and his

team at University of Pennsylvania – Dr. Leon

Gwaka, Sindhura Kammardi Sachidananda,

Sophie Roling, Shahana Banerjee, and Meghan

Moran – for conducting extensive research and

drafting this comprehensive report.

In addition, we would like to thank the following

for executing the work of the Working Group

and providing invaluable subject matter

knowledge and guidance throughout the

process: Doreen Bogdan-Martin, Alex Wong,

Nancy Sundberg, Anna Polomska, Sameer

Sharma, Karen Woo, Julia Gorlovetskaya and

Leah Mann from ITU. Heidi Schroderus-Fox,

Miniva Chibuye and Conor O’Loughlin from

UN-OHRLLS. Davide Tacchino and Keﬁlwe

Madingoane from Vodacom. Joakim Reiter,

Bobbie Mellor, Joe Grifﬁn and Maleeha Khan

from Vodafone Group.

Working Group Members: Commissioners

and Focal Points

• America Móvil: Commissioner Dr. Carlos

Jarque

• Benin: Commissioner H.E. Aurélie Adam-

Soule Zoumarou and Bleck Yoro

• FAO: Commissioner Dr. Qu Dongyu,

Maximo Torero Cullen and Henry

Burgsteden

• Ghana: Commissioner H.E. Ursula Owusu-

Ekufu, Afua Mensah and Kwame Baah-

Acheamfuor

• GSMA: Commissioner Mr. Mats Granryd ,

Belinda Exelby and Luca Elmosi

• ITC: Commissioner Ms. Pamela Coke-

Hamilton, James Howe, Riefqah Jappie and

John Ndabarasa

• Intelsat: Former Commissioner Mr. Stephen

Spengler and Jose Toscano

• International Science Technology and

Innovation Centre for South-South

Cooperation: Commissioner Dato’ Lee Yee

Cheong

• Millicom: Commissioner Mr. Mauricio

Ramos, Aidan McCartan, Horacio Romanelli

and Karim Lesina

• Smart Africa: Commissioner Mr. Lacina

Koné, Thelma Efua Quaye, Osman Issah,

Calvain Nangue and Wilgon Tsib

• UNESCO: Co-Vice Chair of the

Commission, Ms. Audrey Azoulay and

Borhene Chakroun

Strategies Towards Universal Smartphone Access

• ZTE: Commissioner Mr. Ziyang Xu, Lei Xue

and Tian Dao

External Experts

• Alliance for Affordable Internet (A4AI):

Sonia Jorge and Teddy Woodhouse

• ARM: Neil Fletcher

• AST: Clemens Wolbers and Chris Ivory

• Google: Mariam Abdullahi, Vinod Nenwani

and Aleksandra Stremidlo

• HMD/Nokia: Alain Lejeune, Won Chang,

Florian Seiche and Justin Maier

• Intel: John M Roman and Turhan Muluk

• Mara Phone: Ashish J. Thakkar and Eddy

Sebera K.

• PayJoy: Deepak Murthy and Dominique

Friedl

• Softbank: Jingyi Huang, Osamu Kamimura

and Masumi Oyama

• TCT: Aaron Zhang, Ernst Wittmann and

Guoqing Yao

• Transsion: Steven Huang and Yoyo Zhang

• Trustonic: Dion Price and Craige Fleischer

• World Bank Digital Development Global

Practice: Doyle Gallegos

ITC-convened Focus Group

• Aspira (Kenya): Irshad Muttur

• FollowMeTalk (Kenya): Edwin Okoye

• Intelligra (Nigeria): Tayo Ogundipe

• Kei Phone (Uganda): Maria Nampijja

• Lipalater (Uganda): Ephraim Okalebo

• Nuovo Pay (Nigeria): Nitesh Bhalothia

• PayJoy (Nigeria): Dominique Friedl

• Superﬂuid (Ghana): Winifred Kotin

Disclaimer

This research report, titled Strategies Towards Universal Smartphone Access is based on data and

material accessible as of 31 Aug 2022 and may not reﬂect circumstances thereafter.

This report has been prepared, with the support of experts under the supervision of Professor

Christopher Yoo, John H. Chestnut Professor of Law, Communication, and Computer & Information

Science at the University of Pennsylvania, andthe members of the Broadband Commission Working

Group on Smartphone Access co-chaired by Nick Read, CEO Vodafone Group; Houlin Zhao,

Secretary General of the International Telecommunication Union and Rabab Fatima, UN High

Representative for the Least Developed Countries, Landlocked Developing Countries and Small

Island Developing States.

The ideas and opinions expressed in this publication do not necessarily reﬂect the views of the

Broadband Commission members or their organizations. This Working Group report does not

commit the Broadband Commission for Sustainable Development.

Strategies Towards Universal Smartphone Access

Acknowledgements �� iv

Vodafone Group foreword

�� viii

ITU foreword

��ix

UN-OHRLLS foreword

��x

Executive summary

��xi

Section 1: Introduction: The opportunity

�� 1

1.1 The beneﬁts of Internet connectivity ................................................................................................1

1.2 Shifting focus from the “coverage gap” to the “adoption gap” ....................................................2

1.3 The “consumption gap” as the next frontier and the beneﬁts of upgrading to

smartphones and broadband ............................................................................................................3

1.4 Mobile Internet access for sector-speciﬁc use cases ......................................................................5

Section 2: Smartphone access as a barrier to adoption

�� 10

2.1 Supply-side barriers ..........................................................................................................................12

2.1.1 Supply-side barrier – handset affordability .......................................................................12

2.1.2 Supply-side barrier – last-mile supply chain issues..........................................................14

2.1.3 Supply-side barrier – foreign currency availability and exchange rate volatility .........14

2.2 Demand-side barriers .......................................................................................................................14

2.2.1 Demand-side barrier – lack of consumer understanding and information .................14

2.2.2 Demand-side barrier – lack of sufﬁcient incentives .........................................................15

2.2.3 Demand-side barrier – digital illiteracy .............................................................................15

2.2.4 Demand-side barrier – social and cultural norms ............................................................15

2.2.5 Demand-side barrier – security and harassment .............................................................16

Section 3: Case studies and evaluation

�� 20

3.1 Methodology ......................................................................................................................................20

3.2 Higher priority interventions ............................................................................................................20

3.2.1 Higher priority intervention – device ﬁnancing ................................................................20

3.2.2 Higher priority intervention – taxes and import duties ...................................................26

3.2.3 Higher priority intervention - improved distribution channels ......................................31

3.3 Interventions that merit further exploration ...................................................................................34

3.3.1 Intervention for further exploration - device subsidies ...................................................34

3.3.2 Interventions for further exploration – reuse of preowned smartphones ....................39

3.4 Lower priority interventions .............................................................................................................43

3.4.1 Lower priority intervention – local manufacturing ...........................................................43

3.4.2 Lower priority intervention – smart feature phones ........................................................47

Table of contents

vii

Section 4: Translating our ﬁndings into action: A ﬁve-point plan to increase smartphone

ownership ............................................................................................................................................... 53

Conclusion..................................................................................................................................................... 56

List of ﬁgures and tables

Figures

Figure 1: Mobile Internet (MI) connectedness, adoption gap, and coverage gap by region, 2020

.........................................................................................................................................................3

Figure 2: 4G connectedness, adoption gap, and coverage gap by region, 2019....................................5

Figure 3: Main reason for not using the mobile Internet, 2019-20 ...........................................................10

Figure 4: Main reason for not having a smartphone, 2017-18 ...................................................................11

Tables

Table 1: Classiﬁcation of case study interventions .......................................................................................20

Strategies Towards Universal Smartphone Access

viii

Vodafone Group foreword

Over the last ten years, our daily lives, societies and economies have been transformed by

highspeed connectivity and smartphones. We can now keep in touch with loved ones wherever they

are. We can access key health, education and government services remotely. Entrepreneurs and

small businesses can become connected and ﬂourish. And we can entertain ourselves 24/7. Digital

connectivity is now a necessity, no longer a luxury.

Now, as much of the world stands on the edge of a 5G revolution with the potential to address

some of our biggest challenges, there are still 2.7 billion people who remain on the other side of the

digital divide, unconnected. Most of these people live in Low and Middle Income Countries (LMICs),

and most are covered by a mobile broadband network.

One of the biggest barriers to access is affordable smartphones. In many LMICs they can cost over

70% of the average monthly income. However, we lacked a collaborative action plan to overcome

this barrier to connectivity. That is why in 2021 we launched the Broadband Commission’s Working

Group on Smartphone Access. This is the ﬁrst ever cross-industry and government group on

affordable access to smartphones, and a continuation of Vodafone’s commitment to closing the

digital divide through our Africa.connected programme.

Over recent months, the group has studied the biggest barriers to smartphone access, and tested

initiatives designed to improve access, with the aim of producing clear recommendations to policy

makers, industry and international organisations. This report is the culmination of those efforts.

We know that if we solve the problem of global smartphone access, the beneﬁts will be enormous.

According to the World Economic Forum, a 10% increase in access to mobile broadband would

lead to an average 1.5% increase in GDP. In Africa, the increase would be 2.5%. For the individual,

the impact is also lifechanging. Studies show that mobile Internet adoption is linked to a 3% rise in

socioeconomic wellbeing. We also know that efforts to close the digital divide must not come at the

cost of the planet, and we have explored interventions that may concurrently address growing levels

of e-waste.

This report recommends a ﬁve point action plan to increase smartphone ownership for all. It's

important that we now agree on continued cooperation to translate this action plan into positive

outcomes.

I would like to thank every member of the Working Group for the energy, expertise and insight they

contributed to this report. I look forward to working with governments, international organisations,

and other technology companies to make the recommendations of this report a reality.

Vodafone’s purpose is to connect for a better future by using technology to improve lives, digitalise

critical sectors, and enable inclusive and sustainable digital societies. To achieve this, we cannot

- and must not - leave anyone behind. By acting on the recommendations of the report, we can

ensure that is the case.

Nick Read

CEO Vodafone Group

Strategies Towards Universal Smartphone Access

ITU foreword

It is with great pleasure that the International Telecommunication Union (ITU) presents this

Broadband Commission Working Group Report as a contribution towards promoting universal and

meaningful connectivity against the backdrop of a pandemic-impacted world with growing digital

inequalities.

Since it was founded in 1865, the ITU has contributed to connecting people globally with our role in

managing radio-frequency spectrum and satellite orbit resources, developing technical standards

to ensure interoperability and interconnection of networks and technologies, as well as promoting

connectivity and access to information and communication technologies (ICTs) to underserved and

unserved communities worldwide.

There have been tremendous strides in terms of connectivity, however, as at 2022, ITU estimates that

there are still 2.7 billion people worldwide who do not use the Internet. This is despite the fact that

at least 95 per cent of the world’s population live within the range of mobile broadband network.

According to the ITU Global Connectivity Report 2022, affordability and connectivity go hand in

hand. In countries where broadband is affordable, this leads to a high number of Internet users;

conversely, in countries where broadband is not affordable, there exists a high percentage of users

who are unconnected. Further, the lower the share of Internet users in a country, the less affordable

the devices are. In addition, the least mature ICT regulatory environment also goes hand in hand

with the least affordable prices in countries.

In recognizing that affordability is a key element of achieving universal connectivity, the Broadband

Commission for Sustainable Development has set the target to reduce the price of entry-level

ﬁxed or mobile broadband services in low- and middle-income countries to less than 2 per cent of

monthly Gross National Income (GNI) per capita by 2025.

In this regard, the Broadband Commission Working Group on Smartphone Access was established

in November 2021 to address the device gap in order to enhance affordability and digital inclusion.

Co-chaired by Vodafone, ITU, and UN-OHRLLS, this group brings together members from the

Broadband Commission and external experts to examine the barriers to smartphone access and to

explore initiatives to overcome these barriers.

Thanks to the collaborative efforts of all members of the Working Group and their valuable input,

commitment and contributions, this report moves the conversation forward by providing detailed

case studies on initiatives implemented globally to address the challenges in providing affordable

broadband and smartphone access. This report is just the ﬁrst step. For the next phase, I would like

to invite you to join us to implement the recommended initiatives and the ﬁve-point action plan to

reduce the device gap for the underserved communities globally, as we move towards building a

more inclusive, equitable and sustainable world.

Achieving universal and meaningful connectivity and the Sustainable Development Goals (SDGs)

requires a multistakeholder approach, and national, regional, and global collaboration on an

unprecedented scale. We invite you all to join the Broadband Commission to implement the

recommendations to address affordability, reduce the smartphone device gap and enable digital

inclusion. Our goal is to leave no one behind.

Houlin Zhao

Secretary General of the International Telecommunication Union

Strategies Towards Universal Smartphone Access

UN-OHRLLS foreword

For many of us – the lucky ones – the mobile phone in our hand is a link to friends and colleagues,

a ﬁrst line of defence in an emergency, and a tool of research. And yet, billions of people remain

without this most fundamental form of connection. This denies whole communities economic,

educational, and social opportunities, and it holds back the earning power of less developed

nations.

The situation is most acute in the world’s most vulnerable countries – the Least Developed Countries,

Landlocked Developing Countries, and Small Island Developing States – where most of the 2.7

billion people without Internet access live. And within these countries and communities, it is often

the people already at the margins, especially women, who struggle to get online.

Indeed, this report shows that women in low- and middle-income countries are 18% less likely than

men to own a smartphone. This exclusion is worse in the least developed countries, especially in the

most rural areas, and it reinforces and exacerbates their marginalisation.

Smartphone exclusion also acts as a signiﬁcant brake on growth: a strong correlation exists between

access to mobile Internet services and GDP, with studies showing that as little as a 10% access

increase in 3G services or higher can deliver as much as a 2.46% growth in GDP in low- and middle-

income countries in Africa, and 2.44% in Asia-Paciﬁc.

Infrastructure challenges remain, but this is a crisis of adoption, not connectivity. Mobile coverage is

widely available, but Internet uptake and usage remain low. This report proposes a plan to bridge

that digital divide with clear recommendations based on evidence and lived experience.

In the short term, governments should reduce tax and duties on devices to reﬂect their growing

centrality to developing economies and telecom operators should introduce more ﬂexible

ﬁnancing and improved distribution focusing on the most marginalised, especially women and rural

communities.

And in the long term, tackling value chain issues, and greatly improving device recycling, can close

the Internet adoption gap. Like a new train with no passengers, there is little beneﬁt from increasing

Internet coverage without adoption and access.

This is the ﬁrst time a report of this kind has presented new strategies for universal smartphone

access, and I want to thank my co-chairs from ITU and Vodafone for their leadership and vision,

as well as the rest of the working group for their guidance and expertise. And to the Broadband

Commission, under whose leadership this work has been commissioned, I offer my unwavering

support and that of my ofﬁce to support the delivery of the solutions proposed herein.

For individuals, institutions and nations alike, the beneﬁts are clear; universal smartphone access can

change lives, bridge divides, and boost economies. We must share these beneﬁts and opportunities

with all.

Rabab Fatima

UN High Representative for the Least Developed Countries,

Landlocked Developing Countries and Small Island Developing States

Strategies Towards Universal Smartphone Access

Executive summary

An estimated 2.7 billion people globally remain ofﬂine today. Most of these people are in low- and

middle-income countries (LMICs), and most of them live within good Internet coverage. However,

the cost of a smartphone to access the Internet can exceed 70% of the average income in LMICs,

presenting a signiﬁcant barrier to digital inclusion.

The adoption gap for mobile Internet – which arises when people do not use the Internet even when

there is mobile network coverage available – is now over seven times larger than the coverage gap

globally.

Furthermore, most people in LMICs who do access the Internet are still using 2G and 3G, which

is preventing them from realizing the full social and economic beneﬁts of high-speed Internet

connectivity.

This study represents the ﬁrst multi-stakeholder dialogue and analysis on the topic of smartphone

access, under the ITU/UNESCO Broadband Commission for Sustainable Development.

This report examines the barriers to smartphone ownership and usage, and provides

recommendations based on empirical evidence to overcome those barriers, with a special focus

on LMICs. The report categorises the assessed interventions into; “High Priority” interventions,

interventions that “Warrant Further Investigation”, and “Low Priority” interventions. These ﬁndings

have been informed by research from GSMA, ITU and 19 structured expert interviews, as well as

insights from an ITC-convened focus group of entrepreneurs, and extensive desk research.

The report’s actionable recommendations are designed to guide stakeholders when determining

how to address smartphone access challenges, and provide a clear roadmap forward.

Key ﬁndings

The research found three high priority interventions that are proven to increase smartphone

ownership:

1. Smartphone ﬁnancing schemes

2. Reduction of taxes and import duties on smartphones

3. Improvement of smartphone distribution channels

We also found two interventions that warrant further investigation:

1. Device subsidies

2. Increasing use of refurbished/preowned devices

Two interventions studied were classiﬁed as low priority, meaning that they lacked evidence of

increasing smartphone ownership at scale, but may achieve results at a smaller scale in some

countries:

1. Local manufacturing

2. Supply of smart feature phones

Strategies Towards Universal Smartphone Access

xii

Translating our ﬁndings into action: a ﬁve-point plan to increase smartphone ownership

This report has been created as a starting point for policymakers, governments, and businesses

to take action on increasing smartphone access. As such, the report provides a ﬁve-point action

plan to translate the ﬁndings into action, outlined below. Most of the actions require cross-party

collaboration and, as such, the report recommends the establishment of taskforces to drive concrete

commitments, conduct further research, and implement pilots.

Action 1: Initiate win-win partnerships with players across the digital value

chain

Action 2: Improve regulation on smartphone recycling and develop quality

standards for preowned smartphones

Action 3: Develop strategies for recycling of mid- and lower-tier devices

Action 4: Explore the use of Universal Service Funds and other government

subsidies for smartphones

Action 5: Further explore the overall economic beneﬁts of reducing tax and

import duties on smartphones

Strategies Towards Universal Smartphone Access

Introduction:

The opportunity

Section 1: Introduction: The opportunity

1�1 The beneﬁts of Internet

connectivity

Photo credit: ©Asian Development Bank

The policy debate over the global digital

divide and digital equity is undergoing a

fundamental transformation. A growing body

of empirical research has demonstrated the

economic and social beneﬁts of connecting

people.

Any remaining doubts were effectively

laid to rest by the COVID-19 pandemic,

which eloquently demonstrated the key role

that Internet access plays in critical areas

such as agriculture, education, health care,

remote working, economic development,

public services delivery, ﬁnancial services,

and disaster recovery. A recent International

Telecommunication Union (ITU) study estimates

that the number of Internet users surged by

800 million people in 2020.

That study also

estimates that 97% of the world population

now has access to a mobile cellular data

network, and that 95% has access to at least

a 3G signal, and the quality of broadband

has also improved with 4G network coverage

doubling between 2015 and 2021 to reach

88% of the world’s population. Mobile phones

continue to be the primary way, and in many

cases, the only way, most people access the

Internet, particularly in low- and middle-income

countries (LMICs).

Wi-Fi is also a standard

feature of smartphones that people use to

access the Internet in homes, public hotspots,

and community centres.

Despite these gains, in 2022, an estimated

2.7 billion people still cannot or do not access

the Internet.

Furthermore, most of those still

ofﬂine live in fragile and conﬂict-affected areas,

least developed countries (LDCs), landlocked

developing countries (LLDCs) and small

island developing states (SIDS). By way of

comparison, 92% of residents in high-income

country populations are Internet users, while

adoption rates in SIDS (66%), LLDCs (36%),

and LDCs (36%) continue to lag far behind.

Research has also shown that overcoming the

barriers to mobile Internet adoption would

yield substantial beneﬁts. Studies conducted

at a national or similarly large-scale level

consistently found that Internet adoption has a

positive impact on national GDP. For example,

the ITU estimates that a 10% increase in ﬁxed

broadband adoption yields a 1.4% increase in

GDP in Europe, 1.9% in the Americas, and 2.5%

in Africa.

Other studies have corroborated

these ﬁndings:

•

A Broadband Commission study of

Rwanda, Senegal, and Vanuatu from

2010-16 estimates that the information and

communications sector contributed to a

0.3% to 0.5% increase in GDP.

• A study of 220 towns in 10 sub-Saharan

African countries employing a new

methodology that uses satellite images of

night-time lights as a proxy for changes

in economic activities estimates that basic

Internet coverage leads to a 2% increase in

economic growth rates.

Studies of beneﬁts to individual wellbeing are

beginning to emerge as well.

, For example,

surveys of individual users conducted in

Bangladesh and Ghana in 2020 found that

mobile Internet adoption is associated with

a 3% increase in individual socioeconomic

wellbeing, with the effect being larger among

women (4% to 6%) and those with at least

a primary education (5%).

Wellbeing is

enhanced by broader access to ﬁnancial

services, e-commerce, and government

Strategies Towards Universal Smartphone Access

Section 1

services.

Other studies have found that

Internet access increases women’s participation

in society as well as their social and economic

resilience.

Due to COVID-19 and its consequent

lockdowns and social distancing measures,

people relied on their mobile networks to stay

connected with each other and the rest of

the world. Despite the pandemic’s impact on

the economy and consumer incomes, mobile

adoption continued to increase in 2020,

justifying the mobile industry’s contribution

to the UN Sustainable Development Goals

(SDGs). Some contributions to SDGs included

increased use of mobile ﬁnancial services,

access to government services, and online

learning.

Mobile Internet connectivity also creates

beneﬁts during natural disasters both in terms

of sending early-warning alerts to people and

allowing them to share information about

the disaster with authorities.

Furthermore,

mobile devices improve coordination and

rescue efforts by enabling rescue teams to

communicate and access key information such

as visuals required for planning.

Access to

the Internet is particularly beneﬁcial to women

faced with natural disasters or other threats

that force them to become refugees.

During

disasters, vulnerable groups, including persons

with disabilities, can use new technologies to

share their location and improve their chances

of receiving assistance. Applications such as

Facebook Disaster Maps help rescue teams

and victims to establish their location during

disasters.

Similar applications and other technologies

are being used to collect data essential for

reviews of disasters.

Given the importance

of technologies before, during, and after

disasters, equitable access and use of

technologies, especially among women,

is therefore important.

Next generation

technologies, including smartphones and

4G/5G, promise improved approaches and

coordination before, during, and after the

disaster.

For example, Google’s earthquake

detection and alert application for smartphones

can help people to prepare before disaster

strikes.

Governments can also derive several beneﬁts

from increased access to smartphones among

the citizens. Research shows that smartphones

enhance opportunities for digital government

and citizen engagement. There is evidence that

increased smartphone access enables more

citizens to participate on social media platforms

that have augmented traditional channels to

interact with governments, report concerns,

and provide feedback.

In addition, increased

smartphone access also enables sourcing of

open public data that governments can use to

make real time decisions.

1�2 Shifting focus from the “coverage

gap” to the “adoption gap”

Until recently, investments to close the

connectivity gap have focused on rolling

out infrastructure to expand mobile Internet

coverage. These efforts have achieved a

signiﬁcant degree of success.

The ITU estimates that in 2021, 95% of the

world's population was covered by at least a 3G

signal. Moreover, of the 2.7 billion who remain

ofﬂine, only 390 million were not covered by a

mobile Internet 3G signal or better, although

these shortfalls are not evenly distributed.

Speciﬁcally, more than 99% of people in

high-income countries have access to mobile

coverage, while only 86% of residents of low-

income countries do.

Rural coverage rates lag

behind urban rates as well with respect to basic

mobile cellular coverage (100% for urban areas

vs. 93% for rural areas, for a disparity of 7%),

3G coverage (100% for urban areas vs. 88%

for rural areas, for a disparity of 12%), and 4G

coverage (97% for urban areas vs. 75% for rural

areas, for a disparity of 22%). The urban-rural

disparity is particularly severe in LLDCs (69%),

LDCs (54%), and SIDS (46%).

Despite the success in extending mobile

broadband coverage to an ever-increasing

proportion of the world’s population, a large

number of people have access to a network

but remain ofﬂine. The signiﬁcant number

Strategies Towards Universal Smartphone Access

of people who have the opportunity to

adopt the Internet but choose not to do so

underscores the need to refocus efforts to close

the digital divide beyond merely expanding

coverage. Policymakers need a more complete

understanding of the barriers to mobile

Internet adoption and how to overcome

them. Studies have increasingly shown that

in addition to “coverage gaps,” the digital

divide is also the product of an “adoption gap,”

which arises when individuals do not use the

Internet even when mobile network coverage

exists.

Figure1 shows that the worldwide

adoption gap of 43% is much larger than the

6% coverage gap, with the adoption gaps in

South Asia (61% vs. 5% coverage gap), sub-

Saharan Africa (53% vs. 19% coverage gap),

and the Middle East and North Africa (48% vs.

7% coverage gap) all exceeding the global

average. The size of these adoption gaps

makes clear that signiﬁcant barriers to adoption

exist aside from coverage.

1�3 The “consumption gap” as the

next frontier and the beneﬁts of

upgrading to smartphones and

broadband

Photo credit: ©OCHA / IRIN

Studies have found that accessing the Internet

through feature phones connected to 2G

networks can enhance economic and social

welfare.

However, there are suggestions

that users can gain further beneﬁts by moving

beyond 2G and 3G and connecting to high-

speed broadband services such as 4G and

eventually 5G. For example, a GSMA working

paper studying a panel of 160 countries found

Strategies Towards Universal Smartphone Access

Section 1

Figure 1: Mobile Internet (MI) connectedness, adoption gap, and coverage gap by region,

2020

Source: GSMA

that upgrading from 2G to 3G increases the

GDP impact of mobile connectivity by 15% and

that upgrading from 2G to 4G increases the

impact by 25%.

Analyses that attempted to

identify how broadband connectivity conveys

beneﬁts further underscore the importance of

4G adoption. A World Bank study identiﬁed

six foundational online activities—news,

government, health, education, shopping, and

social media—and that realizing the beneﬁts

of these foundational activities requires a

minimum of 6GB per month.

A4AI has

emphasized that realizing the beneﬁts of these

more advanced services requires “meaningful

connectivity” that allows individuals to use the

Internet every day using an appropriate device

with enough data and a fast connection.

Consistent with this concern, industry observers

have cautioned that the fact that most mobile

Internet users are still using 2G and 3G in most

LMICs is preventing them from realizing the

full beneﬁts of Internet connectivity.

Using

education as an example, 2G and 3G support

ﬁle sharing only in limited formats, while 4G

and 5G can deliver seamless online interactions

such as video tutorials and interactive learning

exercises.

Available data suggest that adoption of mobile

broadband would enable users to access these

services. For example, upgrading users from

2G to 3G increases their data capacity by 9.4

times and data performance by 112 times.

Upgrading users from 3G to 4G increases data

capacity by 4.2 times and data performance by

4.6 times. 5G is expected to deliver higher peak

data speeds, lower latencies, and higher data

capacity. By 2027, 5G subscriptions across the

globe are forecast to reach 4.4 billion, nearly

half of all mobile subscriptions.

Studies conducted at the country level have

consistently found that adoption of mobile

broadband services such as 3G, 4G, and 5G

would provide signiﬁcant economic and social

beneﬁts:

•

An ITU study of 145 countries between

2010-18 found that a 10% increase in

unique subscriber penetration for 3G or

higher services yielded a 1.50% increase

in GDP driven by a 1.76% increase in

middle-income countries and a 1.98%

increase in low-income countries.

This

effect was particularly strong in Africa

(2.46% increase), Asia Paciﬁc middle- and

low-income countries (2.44%), European

low-income countries (2.00%), Arab states

(1.82%), and Latin American and Caribbean

states (1.73%).

•

A UN-OHRLLS and ITU study of 91 LDCs,

LLDCs, and SIDS from 2000-17 found that

a 10% increase in 3G, 4G, and WiMAX

penetration generated a 2.8% increase in

GDP.

• IHS Markit has predicted that by 2035,

5G will enable USD 13.2 trillion of global

economic output and will represent about

5.0% of all global real output.

Studies conducted at the household level

that used consumption as a proxy for income

corroborated these ﬁndings:

•

Surveys conducted in Senegal in 2011 and

2017 indicate that household consumption

is 14% higher and that the extreme poverty

rate is 10% lower in areas covered by 3G.

• Three rounds of household surveys

conducted in Nigeria between 2010-16

revealed that at least one year of 3G or 4G

mobile broadband coverage increased

household consumption by 6% and

reduced extreme and moderate poverty by

4.3% and 2.6% respectively.

• Three rounds of surveys administered in

Tanzania between 2008 to 2013 found that

3G coverage was associated with a 10%

increase in household consumption and

that one year of coverage was associated

with a 3%-8% increase in labour force

participation, wage employment, and non-

farm employment.

The beneﬁts from 3G, 4G, and 5G mobile

broadband connectivity appear to have

increased during the COVID-19 pandemic.

For example, a new ITU study that extended

the previous ITU study found that including

2019 and 2020 in the analysis caused the GDP

increase associated with a 10% increase in

mobile broadband penetration to grow from

1.50% to 1.60% worldwide, driven by a 2.04%

increase in GDP in low-income countries and

a 162% increase in GDP growth in middle-

income countries.

Strategies Towards Universal Smartphone Access

Despite the beneﬁts that come from adopting

3G and 4G mobile broadband services,

adoption rates remain low. This problem is

especially prominent in LMICs.

4G adoption similarly continues to lag,

although 4G coverage gaps remain signiﬁcant

in some areas. The ITU reports a global 4G

adoption gap of 31% vs. a coverage gap of

15%. The adoption gap exceeds the global

average in South Asia (43% vs. 12% coverage

gap) and sub-Saharan Africa (40% vs. 50%

coverage gap), and Middle East and North

Africa (32% vs. 35% coverage gap).

These data suggest that simply closing the

coverage gap (by extending mobile networks

to cover unserved areas) and closing the

adoption gap (by getting people with access

to a mobile signal to subscribe) would not be

enough to ensure that people obtain the full

beneﬁt of Internet connectivity. Policymakers

must also address what the World Bank calls

the “consumption gap,” which arises when

Internet data consumption among people

who have adopted the Internet remains low.

Closing the consumption gap will require

interventions beyond those necessary to close

the coverage gap and the adoption gap.

Beyond providing simple network connectivity

and a device capable of connecting to the

mobile Internet, enabling people to use the

full capabilities that the Internet has to offer

requires extending higher level connectivity

(4G and 5G) and expanding access to higher

level devices such as smartphones.

1�4 Mobile Internet access for sector-

speciﬁc use cases

In addition to individual level use of

connectivity, research shows the importance

of the mobile Internet at an institutional level.

Mobile Internet is reported to support activities

in agricultural, educational, and health-

care institutions. However, use patterns and

mechanisms are likely to vary across sectors.

The different use patterns result in demands

for different levels of connectivity and devices

across different institutions. For example,

schools need more devices and power than

clinics, with a typical school needing at least

one device per every two students. In contrast,

a clinic, depending on its size, could get by

with a few devices at crucial points of care for

Strategies Towards Universal Smartphone Access

Section 1

Figure 2: 4G connectedness, adoption gap, and coverage gap by region, 2019

Source: ITU

registering patients, consulting patients, and

managing medicines.

The fact that this Working Group’s charter

focusses on smartphone access inevitably drew

attention away from issues surrounding access

to laptops, tablets, and other similar devices.

The relative lack of attention on other types

of devices in this report reﬂects that no study

can address every aspect of every issue and is

not meant to suggest that that such issues are

unimportant.

Strategies Towards Universal Smartphone Access

Photo credit: ©Asian Development Bank

Hjort and Tian: The Economic Impact of Internet Connectivity in Developing Countries; Vergara-Cobos and

Malásquez: Digital Technology Adoption and the Jobs and Economic Transformation Agenda: A Survey;

ITU: The State of Broadband 2021.

ITU: Measuring Digital Development: Facts and Figures 2021.

GSMA: The State of Mobile Internet Connectivity 2021; ITU: Connect2Recover: A new methodology for

identifying connectivity gaps and strengthening resilience in the new normal.

ITU: Measuring digital development: Facts and Figures 2022 (forthcoming).

ITU: How broadband, digitization and ICT regulation impact the global economy: Global econometric

modelling.

Broadband Commission for Sustainable Development: Working Group on Broadband for the most

vulnerable countries.

Min et al.: Light every night – New nighttime light data set and tools for development; Goldbeck and

Lindlacher: Digital infrastructure and local economic growth: early Internet in Sub-Saharan Africa.

A4AI: The costs of exclusion: South Asia regional report; GSMA: The impact of mobile on people’s

happiness and well-being.

Yoo et al.: Exploring the Deep Structure of Mobile Internet Use Patterns in Bangladesh and Ghana

(Unpublished Report, University of Pennsylvania).

ITU: Connectivity in the least developed countries: Status report 2021; GSMA: 2021 mobile industry impact

report: Sustainable development goals.

A4Ai: The costs of exclusion: South Asia reginal report; A4AI: The costs of exclusion: West Africa regional

report.

GSMA: 2021 mobile industry SDG impact report.

ITU: Women, ICT and emergency telecommunications: opportunities and constraints; ITU: Utilizing

telecommunications/information and communication technologies for disaster risk reduction and

management.

Rawat et al.: Towards efﬁcient disaster management: 5G and device to device communication.

Mallalieu: Women, ICT, and emergency telecommunications: opportunities and constraints.

ITU: Utilizing telecommunications/information and communication technologies for disaster risk reduction

and management.

ITU: Utilizing telecommunications/information and communication technologies for disaster risk reduction

and management.

ITU: Women, ICT and emergency telecommunications: opportunities and constraints.

Rawat et al.: Towards efﬁcient disaster management: 5G and device to device communication.

Google: Earthquake detection and early alerts, now on your Android phone.

Republic of Kenya: Kenya digital economy. Digital economy blueprint – powering Kenya’s transformation

ITU: Measuring digital development: Facts and ﬁgures 2021.

ITU: ITU world telecommunication/ICT indicators database.

ITU: The State of Broadband: People-Centered Approaches for Universal Broadband.

GSMA: Accelerating mobile Internet adoption: Policy considerations to bridge the digital divide in low- and

middle-income countries. The data from GSMA is based on 2020, and note there is difference with ITU data

in 2021 and 2022 cited in the report.

Mensah, J. T: Mobile phones and local economic development: A global evidence.

GSMA Intelligence: Mobile technology: Two decades driving economic growth.

Chen and Minges: Minimum data consumption: How much is needed to support online activities, and is it

affordable?.

A4AI: Advancing meaningful connectivity: Towards active & participatory digital societies.

GSMA: Closing the coverage gap: How innovation can drive rural connectivity; Vodafone: Next-generation

mobile connectivity.

GSMA: The WRC series Study on socio-economic beneﬁts of 5G Services provided in mmWave Bands.

Ericsson: Ericsson Mobility Report 2021.

Strategies Towards Universal Smartphone Access

Endnotes

ITU: How broadband, digitization and ICT regulation impact the global economy: Global econometric

modelling.

ITU and UN-OHRLLS: Economic impact of broadband in LDCs, LLDCs and SIDS: An empirical study.

IHS Markit: The 5G economy: How 5G will contribute to the global economy.

Masaki et al.: Broadband Internet and household welfare in Senegal.

Bahia et al.: The welfare effects of mobile broadband Internet: Evidence from Nigeria.

Bahia et al.: Mobile broadband Internet, poverty, and labor outcomes in Tanzania.

ITU: How broadband, digitization and ICT regulation impact the global economy: Global econometric

modelling; ITU: The economic impact of broadband and digitization through the COVID-19 pandemic:

Econometric modelling.

ITU: Connecting humanity: Assessing investment needs of connecting humanity to the Internet by 2030.

World Bank: World Development Report 2021.

Economist Intelligence Unit: Bridging the digital divide to engage students in higher education.

Lane: Smart Business Models Are Needed to Connect Schools & Clinics.

Strategies Towards Universal Smartphone Access

Smartphone access

as a barrier to

adoption

Section 2: Smartphone access as a barrier to

adoption

The fact that many people do not adopt

mobile broadband even when it is available

underscores that closing the digital divide is not

simply a matter of extending network coverage.

Policymakers wishing for their people to realize

the beneﬁts of Internet connectivity must

understand the other potential barriers to

adoption.

A study conducted of mobile users who do not

use mobile Internet in 15 countries in 2019-20

found that lack of access to devices was the

second-most frequently cited reason for not

using the Internet (Figure3).

This insight was conﬁrmed by a World Bank

phone survey of 22 Latin American countries

conducted in June-July 2021, which found that

lack of access to a network signal was only the

third-most cited obstacle to Internet access

(10%), behind the high cost of data (60%) and

device cost (14%), and ahead of the lack of

digital skills (4%).

Other studies similarly report

that the adoption gap is the product of several

factors, including affordability of both devices

and data, lack of digital skills, relevance, and

inadequate safety and security, among others.

Access to a device thus emerges as one of

the critical barriers that must be overcome

for people to be able to access the Internet.

Enjoying the beneﬁts of higher speed services

such as 4G requires access to not just any

device; it requires access to a smartphone.

Obstacles to smartphone ownership exist

worldwide but are particularly acute in lesser

developed areas of the world. A Pew Research

Centre study that compared smartphone

ownership in 19 advanced economies and

nine emerging economies found that the

percentage of adults owning any kind of mobile

Strategies Towards Universal Smartphone Access

Figure 3: Main reason for not using the mobile Internet, 2019-20

Source: GSMA

phone reached 94% in advanced economies

and 83% in emerging economies.

However, in

terms of adults owning a smartphone, the gap

between advanced and emerging economies

widens. At least 76% of adults in advanced

economies own a smartphone compared

to only 45% in emerging economies. As an

example, at the end of June 2019, MTN had

240 million subscribers on its network in Africa

and the Middle East but only 108 million of

these were using smartphones.

A World Bank phone survey conducted in

2017-18 among owners of a basic mobile

phone in 22 countries across Africa, Latin

America, and Asia found that the reasons for

not owning a smartphone include affordability

(39%), lack of electricity at home (18%), and lack

of mobile coverage (16%). Moreover, around

70% of phone owners have only a basic or

feature phone, particularly in African countries.

The study also ﬁnds that affordability is among

the top three reasons that device owners have

chosen not to obtain a smartphone in every

country surveyed.

As shown in Figure 4, many factors contribute

to the lack of access to smartphones. Efforts

to address these challenges have been

hindered by a lack of concrete information

regarding their relative importance and the

effectiveness of interventions to address them.

An extensive review of literature suggests that

a study by GSMA presents one of the more

comprehensive lists of barriers to smartphone

access.

This study classiﬁes the barriers to

smartphone access and ownership into four

main categories: income and affordability,

incentives to own and use a smartphone, user

capability and design, and infrastructure.

Understanding barriers to device access is thus

a critical step in making sure that everyone can

enjoy the beneﬁts of Internet connectivity.

In this report, we classify the barriers to

smartphone access into two main categories:

supply-side and demand-side, each with

its own subcategories.

Other barriers

to smartphone access, such as device

refurbishment, fall into neither the supply nor

demand-side category. These are discussed

further in the report with the help of existing

literature such as Chen.

We also note that

productivity applications in key sectors, such

as agriculture, education, manufacturing, and

health care, may require devices with larger

form factors, such as laptops and tablets.

However, several questions remain: For

example, in what context are different devices

relevant? Even when this is answered, there is

Strategies Towards Universal Smartphone Access

Section 2

Figure 4: Main reason for not having a smartphone, 2017-18

Source: Chen

a need to establish the impact that universal

access to device has across social groups.

2�1 Supply-side barriers

Supply-side barriers are constraints that device

suppliers face when attempting to deliver

affordable devices. These mainly result from

business limitations, such as high operating

costs and legacy business models.

These

barriers affect the retail prices for smartphones

and distribution channels respectively.

2�1�1 Supply-side barrier – handset

affordability

Handset affordability is one of the most

important barriers to smartphone access and

ownership.

Despite the continued decline in

the cost of Internet-enabled handsets, retail

prices of smartphones vary widely across the

globe, driven by factors such as distribution

costs and taxes.

Handset affordability appears to affect women

more than men in many low- and middle-

income countries and is cited as the top barrier

preventing women from owning a mobile

phone.

In Pakistan, for example, men were

approximately three times more likely to own a

mobile phone than women.

Retail costs of handsets

A GSMA survey on barriers to mobile Internet

use reported that handset cost was the single

most important barrier to using the mobile

Internet.

The cost of smartphones remains

high relative to average income, especially in

LMICs. A survey of 187 countries conducted

by A4AI suggests that the retail cost of a

smartphone averages 26% of the average

monthly income across the globe. In the

U.S. and Europe, the cost fell below 5% of

the average monthly income, while in the

low-income countries, it exceeds 70%.

a result, smartphones are not affordable for

most people in most LMICs. This pushes most

individuals to buy 2G phones, which can cost

between USD 6-10, while 4G smartphones

often cost more than USD40.

An analysis of the handset cost composition

and retail price formation indicates that the

retail cost of a device is determined by a

combination of production costs, logistics

costs, intellectual property rights costs, retailers’

margins, and relevant taxes, such as import

duties and VAT. Research further suggests

that the global technology value chain has

been undergoing signiﬁcant transformations

in recent years, but the onset of the COVID-19

pandemic exacerbated the already present

tension and created excess demand in

the chipset supply sector.

Despite new

innovations, the retail costs of mobile handsets

continue to be inﬂuenced by the costs of

hardware and operating systems.

Additionally,

the disruption of global and local logistics

caused smartphone prices to rise during the

early days of the pandemic

only to see them

fall again in response to oversupply in the face

of softening demand.

The spectre of further

lockdowns could cause prices to rise again.

High taxes and device import duties on

smartphones

Although taxes and import duties are factored

in the retail prices discussed above, they are

a policy component and warrant a separate

discussion. Evidence from studies such as

GSMA indicates that different governments,

especially in LMICs, have been imposing

sector-speciﬁc taxes and import duties on

smartphones that makes them inaccessible

to many.

Taxes on smartphones vary from

country to country, and justiﬁcations for

imposing import taxes on smartphones include

stimulating local industry. However, in countries

where local industry is non-existent, taxes and

duties on mobile phones are imposed to boost

government revenue.

In addition, some governments, especially

in Africa, are levying taxes on smartphones

in a way similar to luxury goods, resulting

in excessively high ﬁnal prices for devices.

Reports in Pakistan indicated a 240% hike in

import duties on mobile phones,

while in

Strategies Towards Universal Smartphone Access

Zimbabwe, the Ministry of Finance proposed

a USD 50 levy for the registration of imported

handsets onto a mobile network in addition to

a 25% import tax on mobile handsets.

Other

countries have large sector-speciﬁc tax rates

and excise duties, including Tanzania, which

charges excise duties on mobile services of

17% of revenue. The sector-speciﬁc tax rate

on mobile devices was 18%.

Collectively,

taxes and device import duties translate into

high costs of devices which act as a barrier to

smartphone access.

Studies by the OECD and ITU have raised

questions about whether taxes targeting the

digital sector may have adverse distributional

consequences and may dampen the

spillover beneﬁts that the adoption of digital

technologies creates for the entire economy.

Other costs affecting handset affordability

Photo credit: ©Asian Development Bank

The total costs of owning a smartphone or

general mobile phone extend beyond solely

the retail price. In the 2017 GSMA report,

additional costs identiﬁed include SIM cost,

credit cost, and battery charging costs.

However, the extent to which these costs are

barriers to smartphone access differs across

countries. SIM card costs appear not to be of

concern for participants in Colombia, DRC,

and Indonesia but were reported as a major

barrier in Turkey. At the same time, credit

costs appeared as a moderately universal

barrier in the surveyed countries and one

that disproportionately affects more women.

Niger and Kenya had the most respondents

indicating that cost of battery charging was a

barrier, and likely due to the limited battery

charging infrastructure in those countries.

These additional costs often result in individuals

selecting feature phones, which cost less and

have a reputation of longer battery life and

durability.

Unregulated markets

Due to the high cost of smartphones,

distribution channels unauthorized by device

manufacturers have emerged. These are

referred to as parallel or black markets. Devices

sold in these markets are often produced from

components copied from original devices,

resulting in inferior quality devices.

Usually,

parallel import ﬂourishes in markets with high

import duties. Markets with high duties tend

to be very inefﬁcient as the duties reduce legal

import signiﬁcantly, and illegal import then

spikes with the cost and quality issues. Parallel

markets are often used as routes to sell illegally

imported devices, i.e., devices imported

without paying appropriate duties and taxes. In

Nepal, the government’s introduction of a 5%

excise duty on smartphone imports reduced

the legally imported devices while at the same

time fuelling a growth in the black markets for

devices.

There are several issues associated with

purchasing smartphones from parallel markets

that can act as barriers to smartphone access.

Most devices purchased from parallel markets

are produced from copied parts that often fail

after a short time in use.

Further, these devices

are sold with no warranties or repair options.

The non-durability of devices purchased from

parallel markets, the lack of warranties, the

limited repair options, and the risk of phone

data being stolen through invasive software

contribute to the negative perceptions towards

smartphones, thereby acting as a barrier to

smartphone access.

Strategies Towards Universal Smartphone Access

Section 2

2�1�2 Supply-side barrier – last-mile

supply chain issues

Another barrier to smartphone access is last-

mile supply issues resulting from the challenges

faced by smartphone retailers serving remote

communities and the difﬁculties they face

making their products visible to populations

in such communities. Rural areas are difﬁcult

to access, making transport and logistics costs

signiﬁcant.

Furthermore, there are fewer

retailers of smartphones in rural areas, which

limits options for customers, limits competition,

and complicates the regulation of retail prices.

Most device retailers perceive demand in

remote communities to be low due to poor

mobile networks, resulting in fewer retailers in

these communities. In addition to low demand,

remote locations, especially in LMICs, lack

facilities, such as retail space, where mobile

phone retailers can operate, requiring them to

construct their own units. This further increases

the required initial capital outlay to serve the

remote locations.

Hard-to-reach remote communities are also

often off-grid, which means, apart from the

challenge of accessing devices, individuals

also worry about their ability to recharge their

devices. This issue is compounded by the high

costs of battery charging.

Literature highlights

the importance of access to electricity

towards digital inclusion. Studies report that

“households without access to electricity,

on-grid or off-grid, need to rely on more

expensive sources of energy to power their

mobile handsets.

Therefore, last-mile supply

chain challenges facing smartphone retailers

and electricity supply companies contribute as

barriers to smartphone access and ownership.

2�1�3 Supply-side barrier – foreign

currency availability and exchange rate

volatility

Lack of access to hard currency and exchange

rate volatility represent other commonly

cited barriers to obtaining smartphones.

For example, in Ethiopia, where device

manufacturer Transsion operates, the currency

allocation rules prioritize sectors such as

pharmaceuticals, which limits the foreign

currency available for procuring devices and

device components.

In addition, the fact

that most devices are imported necessarily

means that ﬂuctuations in foreign exchange

rates, especially currency depreciation, present

additional challenges to entities seeking to

market devices in LMICs.

2�2 Demand-side barriers

Demand-side barriers are constraints that

individuals face when trying to obtain

access to devices. The 2017 GSMA report

suggests that demand-side barriers can be

classiﬁed into main categories such as lack

of consumer understanding and information,

lack of consumer incentives to own and use

smartphones, digital literacy, social and cultural

norms, and issues of security and harassment

for smartphone owners.

2�2�1 Demand-side barrier – lack

of consumer understanding and

information

Finding a balance between the price of

smartphones and the perceived value from

quality is a concern for consumers in multiple

LMICs.

However, consumers often have

an exaggerated understanding of the cost

of smartphones. This is compounded by a

misconception that entry-level smartphones

break easily or are of poor quality, leading

consumers to believe that higher-end premium

smartphone models are more desirable.

Refurbished devices are becoming increasingly

common, with the goal of creating a more

“circular economy”. However, consumers

remain concerned that refurbished phones

may have short lifespans.

This could cause

scepticism over the quality of these devices and

act as a barrier to device uptake.

In most LMICs, and particularly in rural

communities, potential customers lack the

traditional credit history retailers need to

assess credit worthiness for instalment plans.

Strategies Towards Universal Smartphone Access

In addition to the above, people in the lowest

quintile of socioeconomic status (who tend to

live disproportionately in rural areas) cannot

raise the upfront costs required to purchase

a device. Thus, they become excluded from

accessing smartphones.

2�2�2 Demand-side barrier – lack of

sufﬁcient incentives

McKinsey and Co. suggests that another barrier

to smartphone access is a lack of incentives.

This includes “a lack of awareness of the

Internet or use cases that create value for the

ofﬂine user” and “a lack of relevant (that is,

local or localized) content and services.” This

barrier is especially common among people

in the lowest quintile of socioeconomic status

(who tend to live disproportionately in rural

areas). As an example, prior to the COVID-19

pandemic, most services were accessible

in person. However, COVID-19 restrictions

resulted in some services being accessible only

online, which incentivized individuals to acquire

Internet-enabled devices like smartphones.

The lack of perceived relevance and necessity

of smartphones, coupled with concerns

over device cost, remain barriers despite the

pandemic.

2�2�3 Demand-side barrier – digital

illiteracy

Photo credit: ©Asian Development Bank

Another demand-side barrier to smartphone

access is a lack of basic literacy and digital

skills. Digital skills, categorized into low-level,

medium-level, and advanced skills, often

determine the extent of the beneﬁts that

smartphone ownership offers individuals.

Literature indicates that a lack of digital

skills acts as a barrier for adoption and use

of smartphones by instilling fear of using

smartphones and the Internet, which delays

adoption.

Studies show that technical and

ﬁnancial literacy contribute to consumer

conﬁdence in owning and using smartphones

in these emerging markets.

Inequalities in education, in some instances

prompted by social and cultural norms, are

major contributors to gender gaps in digital

illiteracy. In low- and middle-income countries,

women are less likely than men to have mobile

phone access and are less likely to be Internet

literate. This is particularly the case among

those who have low income and basic literacy

levels, live in rural areas, or are disabled.

Digital literacy thus determines whether users

can achieve meaningful outcomes and make

beneﬁcial use of smartphones. AI-based voice

assistants (such as Google Assistant and Apple

Siri) can also help people who lack digital

literacy to use the Internet by speaking directly

to their smartphones. For example, a farmer

could ask “what will the weather be tomorrow”

and students could ask any question relating

to their education. Voice assistants depend on

widespread adoption of 4G and 5G services.

2�2�4 Demand-side barrier – social and

cultural norms

Research has long established the impacts

of social and cultural norms on device access

across different communities.

A study on

mobile Internet use in Bangladesh and Ghana

highlights that women’s use of the mobile

Internet is likely to be impacted more by social

norms than men’s use.

Even though this study

focused on mobile Internet use, the ﬁndings

echo those of the study on smartphone

ownership conducted by GSMA Connected

Women, which shows that women are 18%

less likely than men to own a smartphone. In

addition, women in LMICs are 16% less likely to

use the mobile Internet.

Strategies Towards Universal Smartphone Access

Section 2

In countries with stringent social norms,

women’s access to and use of devices are often

limited, as women in such societies often lack

ﬁnancial autonomy. In addition, social and

cultural norms also dictate acceptable use of

smartphones by women. For example, too

much use of smartphones by women can be

associated with wasting time (that could be

used for other chores), immoral activities, and

illicit extra-marital affairs.

Another dimension of social and cultural norms

that affects women’s access to smartphone

devices is discouraging women’s uptake and

use of technologies. Research conducted

at the Consultative Group to Assist the Poor

(CGAP) indicates that the lack of conﬁdence in

how to use technology is adversely affecting

smartphone uptake.

Further, when family

members (or even members of the society)

are uncomfortable with one member owning

or using a smartphone, this discomfort acts as

another potential cultural barrier. This can be

particularly challenging for women, but it often

applies to any consumer relying on their family

for funds to purchase or access smartphones.

2�2�5 Demand-side barrier – security

and harassment

Security and harassment are usually

encountered after an individual acquires a

smartphone. In most LMICs, device purchases

are signiﬁcant investments. At the same time,

device theft is prevalent, with thousands of

devices being stolen each day.

The situation is

further complicated by the lack of and high cost

of device insurance options in most LMICs.

In addition to the negative ﬁnancial

consequences associated with device loss,

Deloitte indicates that device theft also exposes

personal private information, including

contacts, email addresses, and payments

details.

Lower-end devices are also vulnerable to

damage. Participants in the focus group

convened by the International Trade Center

report that the average lifespan of such devices

may be as short as six months.

Some consumers in LMICs share safety

concerns of using smartphones and the

Internet. Mobile devices have the potential to

make owners feel safer by acting as immediate

channels for contact, as well as offering safety

apps, mobile money, and other services.

However, this is a beneﬁt cited more by male

mobile owners than female mobile owners due

to the online harassment and lack of awareness

for mobile-related safety features and apps of

women.

Furthermore, reports by GSMA identiﬁed

concerns over online harassment and the

potential for misuse of personal images and

data as barriers, contributing to consumer

perceptions of safety.

Some consumers in

Latin American countries cite security threats

as a reason for not owning a mobile phone

much more often as a top barrier than any

other region. At least 16% of men and 13% of

women who do not own a mobile phone in

Guatemala share concerns of physical safety as

a main barrier for phone ownership.

Personal

safety, unwanted contact with strangers, and

information security remain large barriers to

mobile phone ownership.

Strategies Towards Universal Smartphone Access

GSMA: The state of mobile Internet connectivity 2021.

Chen: A demand-side view of mobile Internet adoption in the Global South.

World Economic Forum: Internet for all: A framework for accelerating Internet access and adoption; World

Bank: World development report 2021; GSMA: The mobile gender gap report 2021.

Pew Research Centre: Smartphone ownership is growing rapidly around the world, but not always equally.

Connecting Africa: MTN Is launching a $20 smartphone.

Chen: A demand-side view of mobile Internet adoption in the Global South.

GSMA: Accelerating affordable smartphone ownership in emerging markets.

World Bank: Digital ﬁnancial services.

Chen: A demand-side view of mobile Internet adoption in the Global South.

ITU: Connect2Recover: A methodology for identifying connectivity gaps and strengthening resilience in the

new normal.

World Bank: Digital ﬁnancial services.

GSMA: Accelerating affordable smartphone ownership in emerging markets.

A4AI: Affordability Report 2021.

GSMA Connected Women: The Mobile Gender Gap Report 2021.

Klapper: Mobile phones are key to economic development.

GSMA: Accelerating affordable smartphone ownership in emerging markets.

A4AI: Affordability Report 2021.

Sun and Grimes: China’s increasing participation in ICT’s global value chain: A ﬁrm level analysis; Wajsman

and Burgos: The economic cost of IPR infringement in the smartphones sector.

James: Extending the experience to Sub-Saharan Africa.

Business Today: Smartphone prices jumped 27% since COVID began in 2020: IDC.

Tech Crunch: Global smartphones hit lowest since pandemic start.

Mint: Smartphone, TV prices may rise amid covid resurgence.

GSMA: Rethinking mobile taxation to improve connectivity.

Business Daily: New 10pc phone tax takes effect Friday.

Vodafone: A lifeline, not a luxury: Accelerating 4G access in Sub-Saharan Africa.

Express Tribute: Up to 240% hike in import duties on smart phones.

Shahbaz: Up to 240% hike in import duties on mobile phones.; Karombo: Zimbabwe turns telcos into tax

collectors.

GSMA: The Mobile Gender Gap Report 2021.

OECD: Fundamental principles of taxation in addressing the tax challenges of the digital economy; ITU:

Taxing telecommunications/ICT services: An overview; GSMA: Rethinking mobile taxation to improve

connectivity.

GSMA: Accelerating affordable smartphone ownership in emerging markets.

Grabmayr: The many shades grey market smartphone repairs – are the risks really worth the savings?.

Kathmandu Post: The government’s decision to impose an additional ﬁve percent excise duty on

smartphones is fuelling a grey market in imports.

Meka and Linares: Three barriers to smartphone readiness in emerging markets.

Grabmayr: The many shades grey market smartphone repairs – are the risks really worth the savings?.

ITU: Assistance to developing countries for implementing conformance and interoperability programmes

and combating counterfeit ICT equipment and theft of mobile devices.

GSMA: Accelerating affordable smartphone ownership in emerging markets.

GSMA: Accelerating affordable smartphone ownership in emerging markets.; GSMA: The Mobile Economy

2021.

Houngbonon et al.: Access to electricity and digital inclusion: evidence from mobile call detail records.

Addis Standard: News analysis: NBE amends foreign exchange management directive; reveals foreign

currency allocation, priorities.

A4AI: Advancing meaningful connectivity: Towards active & participatory digital societies.

Strategies Towards Universal Smartphone Access

Endnotes

GSMA: Accelerating affordable smartphone ownership in emerging markets.

Chatterji: Repairing — not recycling — Is the ﬁrst step to tackling e-waste from smartphones.

McKinsey and Co.: Ofﬂine and falling behind: Barriers to Internet adoption.

A4AI: From luxury to lifeline: Reducing the cost of mobile devices to reach universal internet access.

GSMA: The Mobile Economy 2021.

Mozilla: The digital skills observatory research report.

GSMA: Accelerating affordable smartphone ownership in emerging markets.

OECD: Bridging the digital gender divide – include, upskill, innovate.

McKinsey and Co.: Ofﬂine and falling behind: Barriers to Internet adoption.

Yoo et al.: Exploring the Deep Structure of Mobile Internet Use Patterns in Bangladesh and Ghana

(Unpublished Report, University of Pennsylvania).

GSMA: Connected Women 2022; GSMA: The mobile gender gap report.

Yoo et al.: Exploring the Deep Structure of Mobile Internet Use Patterns in Bangladesh and Ghana

(Unpublished Report, University of Pennsylvania).

Highet et al.: Can free phones close the digital gender divide?.

GSMA: Accelerating affordable smartphone ownership in emerging markets.

Trustonic: Healing the Smartphone theft epidemic.

Deloitte: Mobile devices secure or security risk?.

Yoo et al.: Exploring the Deep Structure of Mobile Internet Use Patterns in Bangladesh and Ghana

(Unpublished Report, University of Pennsylvania); GSMA: Making internet-enabled phones more affordable

in low and middle-income countries.

GSMA: Accelerating affordable smartphone ownership in emerging markets; GSMA: The Mobile Economy

2021.

GSMA: The mobile gender gap report 2022.

GSMA Connected Women: A framework to understand women’s mobile-related safety concerns in low-

and middle-income countries.

Strategies Towards Universal Smartphone Access

Case studies

and evaluation

Section 3: Case studies and evaluation

Sections 1 and 2 of the report focus on the

beneﬁts of increasing mobile Internet and

broadband connectivity and the barriers faced

by individuals seeking to acquire Internet-

enabled phones. Section 3 explores real-world

case studies of interventions that have been

implemented to address these barriers and

make smartphones accessible to all.

3.1 Methodology

Research methodology

The work presented in this report was

completed through a series of engagements

of the Broadband Commission Working Group

on Smartphone Access between November

2021 and August 2022. Initial discussions of the

Working Group focused on the current state of

smartphone access and barriers to smartphone

access. Insights from these discussions

contributed to sections 1 and 2 of the report.

Empirical evidence presented in section 3 was

gathered through extensive desk research

supported by structured interviews with experts

well-versed in the initiatives implemented to

address smartphone access. In total, 19 expert

interviews were conducted. The International

Trade Center convened a focus group of

ten entrepreneurs involved in smartphone

distribution. In addition to the interviews

and focus group discussions, data were also

generated through review of documents,

some not publicly available, provided by the

participants.

The input from Working Group members and

other interviewees suggested seven categories

of interventions to promote smartphone access.

Where possible, these interventions were

evaluated based on their positive impact on

reducing device cost or on the number of total

devices sold. When speciﬁc data on ﬁnancial

outcomes were unavailable, success was

inferred from other criteria, such as whether

the initiative remained ongoing or had been

terminated (which was often the case), the

number of times it had been renewed, and

the extent to which experts characterized

an initiative as a success. These data

support classifying them into higher priority

interventions, interventions that merit further

exploration, and lower priority interventions.

3.2 Higher priority interventions

3.2.1 Higher priority intervention –

device ﬁnancing

Device ﬁnancing represents one of the

most common interventions in promoting

smartphone access.

Converting the upfront cost of smartphones

into instalment payments makes devices

affordable for those unable to save enough

money to cover the purchase price of the

device. Effective designs for device ﬁnancing,

Strategies Towards Universal Smartphone Access

Table 1: Classiﬁcation of case study interventions

Classiﬁcation Intervention Case study count

Higher priority interventions

Device ﬁnancing 12

Taxes and import duties 8

Improved distribution channels 11

Interventions that merit further

exploration

Device subsidies 11

Reuse of preowned 6

Lower priority interventions

Local manufacturing 3

Smart feature phones 6

like affordable loans with ﬂexible payments,

help to make 4G devices easily available and

enable control of payment patterns according

to incomes. Customers can access device

ﬁnancing through Mobile Network Operators

(MNOs), formal and informal ﬁnancial

institutions, alternative credit providers, or

government initiatives.

Opportunities for device ﬁnancing

Photo credit: ©ITU

Flexible options to help customers ﬁt their

payments to their income

Customers who earn money daily often ﬁnd

it difﬁcult to set aside funds for monthly or

even weekly payments. Steps that make it

easier for customers to meet their ﬁnancing

obligations lower the risk that device ﬁnancing

programmes must bear.

In addition, a large population of low-income

customers live on unpredictable income cycles

that are prone to economic and seasonal

ﬂuctuations.

Most of such individuals do

not have access to Internet-enabled mobile

devices. Many device ﬁnancing schemes fail

to consider that customers (like small-holder

farmers) may have lumpy income streams.

Having ﬁxed payment structures may force such

customers to default on their payments.

MNOs, device manufacturers, and other

ﬁnanciers have become increasingly open to

helping such individuals by providing them

with greater ﬂexibility in setting the payments in

their device ﬁnancing schemes.

Mobile money to improve customers’

repayment options

Mobile money provides smartphone ﬁnanciers

with a cost-effective way to collect regular

payments from customers dwelling in remote

areas with relatively low transfer fees. This is

especially helpful to customers who cannot

afford the regular travel costs to service centres

to pay in cash. Smartphone ﬁnanciers have

taken advantage of mobile money platforms

for promoting digital and ﬁnancial inclusion

and have witnessed signiﬁcant uptakes among

regions with active mobile money users.

Alternative credit assessment to include

customers with no formal credit history

Unorthodox credit rating mechanisms are

especially helpful to customers whose only

other option to purchase a smartphone would

have been to carve out cash from their savings.

Financiers can use information from mobile

money transactions, such as current income

levels, transaction records, saving patterns,

utility bill payments, and cash ﬂow data to

assess the creditworthiness of potential

recipients of device ﬁnancing. Financiers

can also use mobile money data to observe

repayment patterns of active loans, which help

them manage and reduce default risk. Such

mechanisms are especially helpful for the

underbanked populations with no formal credit

histories.

Other non-traditional methods for assessing

creditworthiness, such as assessing airtime,

data consumption, and household expenses,

allow for vast expansion of smartphone access

while also improving ﬁnancial inclusion in

communities that need it the most. Globally,

there are more than 200 start-ups with

promising innovations on alternative credit

assessment.

Device locking mechanisms to reduce the

risks of bad debt and theft

Device locking mechanisms allow lenders of

smartphones to remotely lock an Internet-

enabled phone if it is stolen or if customers fail

Strategies Towards Universal Smartphone Access

Section 3

to make their repayments. This technology is

especially helpful for customers vulnerable to

theft and those whose creditworthiness cannot

be determined.

Today, manufacturers use innovative

technologies to implement effective hardware

and software locks. Smartphone manufacturers

have devised their own methods to lock

smartphones, including Google’s Device Lock

Controller (DLC), which operates on Android,

and Samsung’s Knox. With the advancement

of the locking technology, software companies

like PayJoy and NewPath have specialized in

smartphone ﬁnancing with remote locking and

partnered with various lenders to offer device

ﬁnancing services.

Partnerships with outside organizations to

share ﬁnancing burden

MNOs and device manufacturers often partner

with ﬁnancial institutions to take the burden off

their balance sheet and share the risks.

Formal ﬁnancial institutions can rely on

traditional approaches to credit assessment

to provide smartphone ﬁnancing. Formal

institutions have a signiﬁcant advantage in

being able to efﬁciently assess their customers’

credit risk based on bank account tenure,

incomes, and credit histories when those data

are available.

Informal ﬁnancial organizations like

microﬁnance institutions (MFIs), self-help

groups, joint liability groups, and cooperatives

can help expand digital inclusion to

underbanked communities by utilizing their

established credit scoring mechanisms or

existing group liability programmes to help

their customers access smartphones.

Governments can partner with formal banks or

MFIs to provide device ﬁnancing by providing

risk capital for smartphone loans and low or

zero interest liquidity. Governments can use

their involvement in such partnerships to target

populations that would beneﬁt the most from

increased smartphone access.

Challenges for device ﬁnancing

Large initial capital requirement to ﬁnance

devices

Firms offering device ﬁnancing need ﬁrst to

purchase the devices and then recoup that

investment through instalments payments

from customers over several months. Any actor

seeking to offer device ﬁnancing must thus

raise a signiﬁcant amount of capital to ﬁnance

the purchase of the devices and then carry the

value of the devices on their balance sheets.

Risk of bad debt

Individuals targeted by device ﬁnancing

initiatives, especially those aiming to use low

and ﬂexible instalment plans, might not be able

to repay these loans. This in turn requires ﬁrms

offering device ﬁnancing to incur costs for bad

debt. Financiers who do not have information

about their creditworthiness must necessarily

charge higher interest rates to compensate

for their higher bad debt costs. This effectively

increases the price these customers must pay

to acquire mobile phones, which makes them

less accessible.

Lack of handset insurance for ﬁnanced

devices

The customer base that needs device ﬁnancing

the most also requires protection against

damage and theft, as they cannot afford to

continually pay for repair or for new handsets.

However, adding insurance against theft or

damage increases the overall price of the

smartphones, which the customers may not be

able to afford.

Further, the smartphones purchased among

the low-income households are entry level

devices, a difﬁcult segment for insurance

companies’ risk assessment.

Strategies Towards Universal Smartphone Access

Photo credit: © WHO / Faith Kilford Vorting

Gender bias in credit assessment

Several analyses by MFIs have shown that

women are often lower risk customers than

men.

Despite such evidence, alternative

credit score assessment algorithms have been

reported to be unintentionally biased against

women. For example, using credit scoring

thresholds for the number of SMS sent, time

spent on calls, or the number of top-ups might

be biased against women. This can result in the

widening of the gender gap in mobile Internet

usage, as creditworthy women are more likely

to be denied credit than creditworthy men.

Empirical evidence for device ﬁnancing

Device ﬁnancing appears to be the most

frequently pursued programme for increasing

smartphone access. The Working Group

identiﬁed 20 case studies on device ﬁnancing

and proﬁled 11 of them in depth for this report.

Flexible payment options were implemented

by seven case studies. Seven case studies

expanded upon partnerships with ﬁnancial

institutions, ﬁve of which were long-running

initiatives. Four programmes employed device

lock technologies and four used alternative

credit scoring mechanisms. Four initiatives used

mobile money for efﬁcient payment processes.

The report also evaluated three case studies on

government device ﬁnancing initiatives.

The sheer number of initiatives on device

ﬁnancing demonstrates its popularity and

relevance in addressing key barriers to

smartphone access. This study also conducted

extensive key stakeholder interviews and focus

group discussions with industry experts to

drive deeper understanding about smartphone

ﬁnancing. The following are some key elements

of device ﬁnancing observed in different case

studies from the analysis.

Empirical evidence for ﬂexible payment

options

Seven case studies in this research conﬁrmed

that successful device ﬁnancing programmes

allowed customers to choose between daily,

weekly, or monthly regular payment options

according to their convenience.

As an example, MTN Uganda offered their

customers a scheme to purchase their 4G

MTN Kabode smartphones through six-month

instalment loans. This initiative allowed early

payments, daily, weekly, or monthly payments

so long as the required amount of UGX 50,000

(USD 5.7) was paid per month.

M-KOPA offered one of the most popular mid-

tier phones (Samsung A12) for a deposit of

KSH 4499 (USD 40) and daily payments of KSH

70 (USD 0.6) over twelve months. In the retail

market, the same phone would cost an upfront

payment of KSH 19,199 (USD 171). They also

helped customers who have seasonal income

by assisting them to make their micropayments

in advance depending on when they have

ﬁnancial inﬂows.

Safaricom’s device ﬁnancing partnership with

Google known as Lipa Mdogo Mdogo (which

means ‘pay little and often’ in Swahili) allows

existing customers with 2G or 3G phones and

no pending loans to purchase their ﬂagship

Neon Ray 4G device and other smartphones.

The above initiatives also allowed for ﬂexible

payments where customers were encouraged

to make payments higher than the required

amount when they could.

Empirical evidence for device ﬁnancing for

marginalized communities

Sonata Finance and Vodafone Smart Snehidi

initiatives, both in India, addressed the key

gender gap between men and women

Strategies Towards Universal Smartphone Access

Section 3

accessing smartphones by focusing on women

entrepreneurs of microenterprises to help them

acquire Internet-enabled devices to aid their

businesses. Such women-centric approaches

are especially helpful in India where women are

around 21% less likely than men to use mobile

Internet.

Smart Snehidi provided microloans

to low-income women entrepreneurs for the

purchase of smartphones. Sonata Finance also

took the additional initiative to help educate

people about the advantages of women using

mobile Internet and owning smartphones

by building a rapport with the elders of rural

communities and directly addressing the

cultural barrier of female smartphone access.

Empirical evidence for use of mobile

money platforms for device ﬁnancing

Device ﬁnancing programmes have depended

on several enabling technologies. Over the

past decade, mobile money has become a

mainstream ﬁnancial service. There are an

estimated 1.35 billion registered mobile

accounts carrying out over USD 1 trillion

transactions in a year.

Four device ﬁnancing initiatives studied in this

report—Fenix International device ﬁnancing,

Mobisol device ﬁnancing, (now called Engie),

Safaricom Lipa Mdogo Mdogo, and M-KOPA—

use mobile money. Safaricom indicated that

M-PESA was a vital part of their device ﬁnancing

programmes, helping them not only to improve

their customers’ repayment experience but also

to screen and qualify them for device ﬁnancing

using M-PESA data. As of December 2021, the

M-PESA app was downloaded by more than 4.2

million users.

M-KOPA ﬁnanced a signiﬁcantly higher

number of smartphones in countries with

deeper penetration of mobile money, such

as Kenya, Ghana, and Uganda, despite lower

customer purchasing power compared to

regions like Nigeria, where mobile money is still

developing.

Safaricom, in partnership with CBA, launched

M-Shwari, a savings and loan product that

utilized mobile money data to analyse their

existing customer base and extend six-month

loans to provide smartphone access.

Empirical evidence for alternative credit

scoring

Four case studies reviewed in this report

involved innovative methodologies for

assessing customer credit when traditional

measures of creditworthiness were unavailable.

The use of alternative credit scoring gives

ﬁnanciers a chance to reduce bad debt risk by

pre-vetting the potential borrowers.

For example, MNOs like Vodacom use network

data to assess their existing customers for loan

eligibility by monitoring their talk time, top ups,

SMS rates, data consumption patterns, and

number of years on the network.

Mobisol, a solar energy company in East Africa,

used data points such as family size, household

income and expenses, and land tenure, to build

a reliable credit proﬁle for their customers.

Safaricom employs its own scoring system

based on machine learning algorithms that

assess users’ creditworthiness. It uses data

gathered from M-PESA payments to qualify

their customers for device ﬁnancing.

While these credit assessments may not

provide as much insight as traditional measures

of creditworthiness, they facilitate providing

digital and ﬁnancial inclusion to people who

would otherwise not be able to enjoy those

beneﬁts.

Empirical evidence for device locking

technologies

Three device ﬁnancing programmes in this

study implemented some form of device

locking technology. Safaricom’s Lipa Mdogo

Mdogo uses device locks technologies to

reduce bad debt expenses by nudging

customers to make regular payments. When

the customer is delayed in their payment,

MNOs take a series of steps until the payments

resume. Device locking helped reduce default

rates for this programme to as low as 10%.

Strategies Towards Universal Smartphone Access

Vodacom launched the Easy2Own device

ﬁnancing programme in 2021 to accelerate

migrations from 2G and 3G devices to 4G

devices with two complementary solutions,

both of which used device locking mechanisms.

Initially, Easy2Own targeted Vodacom’s

current 2G and 3G customers, assessing their

creditworthiness based on the company’s

experience with them and carrying the ﬁnancial

risk on its own balance sheet. Vodacom now

partners with PayJoy and other commercial

ﬁnancing institutions to offer ﬁnancing to

non-Vodacom customers, with their ﬁnancing

institutions carrying the risk instead. In both

cases, device locking technologies help

reduced bad debt risk.

Trustonic’s locking system sends full screen

warning messages on smartphones upon

late payment and locks the device upon

non-payment. An anonymous Trustonic

MNO customer conﬁrmed that smartphone

delinquency reduced from 35% to 11% due

to Trustonic device locks, reducing MNO risk

of bad debt and device theft. It also attested

that Trustonic locks allowed it to reduce bad

debt by 70% and to recover bad debt 39%

faster, reducing it from over a month to less

than ﬁfteen days, with 70% increase in debt

collection rates. With lowered commercial risk,

credit application approvals increased over

100%, allowing the MNO to offer loans to more

customers and broaden digital inclusion.

While the results from programmes with device

locks look impressive, it is important to note

that most of these initiatives are fairly new (the

above have been available for less than three

years) and that detailed data on their impact on

the willingness to extend credit remain scarce.

Further studies are needed to demonstrate

concrete success in device ﬁnancing.

Empirical evidence for strategic

partnerships with formal ﬁnancial

institutions for device ﬁnancing

Device ﬁnancing programmes have also

beneﬁted from strategic partnerships with

formal and informal ﬁnancial institutions. In

total, seven case studies evaluated in this

research showed the beneﬁts of MNOs, device

manufacturers, and other mobile phone

creditors seeking out ﬁnancial partners to take

the large investments off their balance sheets

and share the burden of high risk.

The First National Bank (FNB) of South Africa

partnered with MNO Cell-C in 2015 to provide

device ﬁnancing to FNB customers through a

programme called FNB Connect. This initiative

was able to provide loans for up to 24 months.

The resulting prices are cheaper than the retail

prices for the same phones. Over 800,000

customers had employed FNB Connect’s

ﬁnancing scheme to purchase smartphones by

2020, which earned FNB Connect the Virtual

Network Operator of the Year award in2022.

In Vodacom’s Easy2Own initiative, PayJoy

was one of the ofﬁcial ﬁnancial partners that

allowed Vodacom to open up its programme

for existing prepaid customers to any customer,

including those who lacked creditworthiness

information. As the ﬁnancial partner, PayJoy

carried the full risk of all ﬁnancing extended to

customers without credit histories, which led it

to charge them higher prices for smartphones

than Vodacom was able to charge its existing

customers. Since its launch in December 2021,

the Easy2Own PayJoy initiative has reached

20,000 customers.

Similarly, the M-KOPA device ﬁnancing

programme in Africa partnered with MNOs

in Kenya, Uganda, Nigeria, and Ghana to

acquire 1 million smartphone customers in

just one year, enabling approximately 750,000

customers to purchase a smartphone for the

ﬁrst time.

This programme has beneﬁtted

from synergies with M-KOPA’s longstanding

programme for ﬁnancing for solar home

systems.

Equity Bank in Kenya partnered with Airtel

Kenya in 2015 to launch their own MVNO

called Equitel. Equitel offered affordable loans

for dual SIM Samsung and Alcatel smartphones

between a four to twelve-month loan period

through their “Loans for Smartphones”

initiative.

Warid, a Pakistani MNO, partnered with Bank

Alfalah to offer its postpaid customers owning

Strategies Towards Universal Smartphone Access

Section 3

Bank Alfalah Credit Cards an instalment plan to

purchase smartphones at 0% interest over six to

twelve months. The programme also includes 8

GB of free Internet per month for the duration

of the loans.

Empirical evidence for strategic

partnerships with informal ﬁnancial

institutions for device ﬁnancing

Informal MFIs and other informal institutions,

like MFIs, such as cooperatives, self-help

groups, and joint liability groups, have

the advantage of pre-existing networks of

individuals which can offset the high risk

through group collateral systems. For example,

Sonata Finance leveraged their pre-existing

joint liability groups to offer credit to women

entrepreneurs belonging to low-income

households to purchase smartphones without

the prerequisite of collateral.

Informal ﬁnancial institutions are also partnering

with MNOs to provide affordable handsets to

their customers. For example, Vodafone India’s

Smart Snehidi microloan programme partnered

with nonproﬁt organization Hand in Hand and

utilized the strong network of women in self-

help groups and used the group liability model

as a contract for settlement.

Empirical evidence for government

initiatives for device ﬁnancing

This report evaluated three case studies on

government initiatives for device ﬁnancing, two

of which partnered with MNOs to meet their

socioeconomic goals of improving smartphone

access.

In Pakistan, the government of Punjab

partnered with Tameer MFI and MNO Telenor

to increase smartphone access among

approximately 490,000 small-holder farmers

in the province by distributing Rs. 79 billion

(USD 11.4 million) in interest-free loans. These

smartphones also had preinstalled agriculture

related apps for their target customer base to

help them increase their income.

In 2013, the Malaysian Government

encouraged 3G smartphone purchase among

its youth by offering USD 45 rebates on USD

112 handsets. MNOs acted as a channel to

facilitate the rebates between the customers

and the government.

In 2016, the President of Argentina launched

the “Plan Mobile Internet Access” initiative

to help 8 million individuals to migrate from

2G feature phones to 4G smartphones by

providing asset ﬁnancing for the same.

Empirical evidence for customer

engagement to support device ﬁnancing

Many initiatives lacked an integrated approach

to smartphone ﬁnancing that addressed other

barriers to adoption. It is difﬁcult to generate

demand for smartphones when ﬁnancing

initiatives do not make efforts to engage with

their customers and address issues like lack of

conﬁdence or awareness.

Safaricom’s Lipa Mdogo Mdogo initiative

helps their customers by engaging with them

through their sales team, interacting with

them through customer value management

(CVM) models, bringing distributors to their

areas, and guiding the customers through the

journey of smartphone acquisition. This holistic

approach has helped Safaricom acquire new

customers, improve customer loyalty, and

improve smartphone access by being proactive

in increasing their device ﬁnancing application

approvals.

It is important to highlight that this study did

not come across sufﬁcient evidence to draw

strong conclusions on customer journey

assistance being necessary for device ﬁnancing,

but it is helpful in making the device ﬁnancing

programmes more effective.

3�2�2 Higher priority intervention – taxes

and import duties

Taxes such as excise taxes, VAT, and import

duties are components of the total device

cost. Higher taxes and import duties translate

into higher retail prices for smartphone

devices. They also create an environment that

encourages black markets (which mainly sell

Strategies Towards Universal Smartphone Access

illegally imported devices) to become the main

distribution channel for smartphones. These

black-market phones are often of lower quality

and poorer purchase experiences. A reduction

of taxes and import duties has the potential

to reduce device costs, which can improve

affordability and result in increased access to

smartphones and boost the digital economy.

However, taxes are important to support an

economy, and reducing dependence on

imports helps in protecting local industry.

Thus, a balanced approach is required towards

adjusting taxes and import duties.

Opportunities for taxes and import duties

Increased consumption of digital services

Governments express concerns that the

reduction and/or removal of taxes and import

duties can negatively impact revenue targets.

However, evidence indicates that reductions in

taxes lead to increased penetration of Internet-

enabled devices (smartphones), which in turn

translates into increased consumption of digital

services and other services accessible through

digital platforms.

In 2021, mobile technologies and services

generated USD 4.5 trillion of economic value

added, or 5% of GDP, globally. Reduction

in taxes for mobile handsets and services

reduces the total cost of mobile ownership

to customers, thus increasing demand

for smartphones and mobile Internet and

contributing to the global GDP. The mobile

industry is also rigorously increasing jobs and

investments, which has a further positive impact

on the economy.

In Africa, the International Telecommunication

Union (ITU) estimated that a 10% increase

in mobile broadband penetration would

yield a 2.5% increase in GDP per capita.

Taxes on smartphones provide short-term

revenue gains but may prolong or dampen

other government initiatives aimed at

increasing levels of digital connectivity.

Increased connectivity generates revenue for

the government through higher economic

activities and taxes levied. Furthermore, digital

connectivity positively impacts foreign direct

investment as investors ﬁnd countries with

higher Internet-related services and digitally

engaged consumer markets to be attractive

investment opportunities. Governments may

also consider studying the short- and long-

Strategies Towards Universal Smartphone Access

Section 3

Recommendations for device ﬁnancing

The large number and longstanding persistence of device ﬁnancing case studies attests to

the popularity and effectiveness of these programmes. This well-received intervention can

be implemented by stakeholders with some learnings in mind.

• Allow customers to choose the frequency of their instalments to enable them to control

their ﬁnances and increase conﬁdence in loan repayments

• Design targeted ﬁnancing for marginalized communities, such as women, people from

remote locations, and low-income individuals

• Integrate device ﬁnancing initiatives with mobile money to support customer

repayment practices and provide potential ﬁnanciers with creditworthiness data

• Use device lock technologies to reduce the cost of device ﬁnancing

• Take a holistic approach by increasing customer engagement with the ﬁnancing service

and guiding them through the whole process of acquiring and using a smartphone

term economic and social beneﬁts of reducing

taxes and import duties on smartphones and

other ICT devices. This study can also include

the economic beneﬁts of increased use of

e-government and e-commerce services.

Joining trade blocs reduces taxes and

duties

Another opportunity for reducing taxes and

import duties is an increase in regional trading

blocs. As an example, African countries can

participate in the African Continental Free

Trade Area (AfCFTA). This agreement allows

for free movement of goods. Given that

the number of smartphone manufacturing

factories are increasing on the continent, there

is an opportunity that AfCFTA could play an

important role in reducing taxes and import

duties.

Challenges for taxes and import duties

Replacement of taxes/import duty revenue

reductions with new digital taxes

Taxes and import duties contribute signiﬁcantly

to government revenue. Any attempts to

reduce and/or eliminate these taxes and import

duties are often met with resistance from

ministries of ﬁnance. To compensate for lost

revenue, some governments are introducing

new forms of taxes, mainly focusing on digital

services. These taxes result in an increase in

the overall cost of mobile ownership to the

customer, raising the affordability barrier and

limiting smartphone penetration.

Beliefs that mobile phones have reached

critical mass

There are also indications that some

governments believe that mobile phones have

reached a saturation point. This has resulted in

governments levying taxes on these devices in

the same bracket as luxury goods.

Empirical evidence for taxes and import

duties reform

In this study, mobile-related tax policies of 13

countries were evaluated. Evidence shows

that the taxes imposed on customers are a

signiﬁcant determining factor of affordability.

Consumer taxes are approximately 19% of

the total cost of mobile ownership globally.

Countries with highest mobile-related taxes

report to have the highest total cost of mobile

ownership.

Consumers from low-income

backgrounds are particularly sensitive to price

changes in mobile services, and over-taxation

on digital goods and services can limit their

adoption of the mobile Internet.

Research found that lowering the burden of

taxes for customers is associated with higher

potential for mobile connectivity, especially

with low-income populations. Countries with

lower taxation levels have more affordable

mobile services and better connectivity

performance.

Empirical evidence for different

approaches to taxes and import duties

In 2021, the Tanzanian authorities announced

a value-added tax exemption on smartphones

to encourage the use of telecommunication

services and increase Internet penetration

from 46% to 80% by 2025.

The government

believed that the budget proposal would

encourage increased data consumption in

the country and would expand the number

of citizens who are ﬁnancially and digitally

included, although discussed later, the beneﬁts

of this tax cut were mitigated by the increase in

taxes on mobile money transactions.

Similarly, in 2016, to make basic smartphones

more affordable, the Colombian government

removed VAT from mobile devices costing

less than USD 225. Most importantly, this cost

threshold led mobile device manufacturers to

re-price handsets that were just above the VAT

exemption threshold to just below it, making

medium and lower tier mobile phones even

more affordable for Colombians. Countries

such as Rwanda and Senegal also exempted

handsets from VAT.

Strategies Towards Universal Smartphone Access

On the contrary, in 2009, authorities in Kenya

exempted mobile handsets from VAT, only

to reverse course in early 2022 by imposing a

10% excise duty on the importation of cellular

phones in addition to a KSH 50 excise duty on

every imported ready-to-use SIM card. Pakistan

increased import duties by 240% in 2021 to

encourage local production. Similarly, the

Ugandan government also imposed 10% tax on

imported smartphones in 2020.

Empirical evidence for the contribution of

tax reductions to increasing smartphone

penetration

Reductions in value-added taxes and excise

duties reduce the total cost of ownership of the

nation’s mobile users, improving affordability

for smartphone access. However, it is important

to note that the tax reforms must be studied

over an adequate period to make a reasonable

cost-beneﬁt analysis.

Vodacom reports show after the reduction of

VAT in Tanzania, smartphone penetration and

data use increased. Smartphone penetration

in Tanzania improved from 31.2% to 33%

between August 2021 and May 2022. However,

it is noteworthy to indicate that the increase in

smartphone penetration and data use cannot

be entirely attributed to VAT reduction given

that Vodacom had other initiatives.

Smartphone adoption in Colombia before

the VAT exemption was well below regional

averages, but it had one of the region’s highest

mobile ownership rates after the tax reform.

Samsung Colombia reported a 28% increase in

units sold in the ﬁrst quarter of 2017 compared

to the same period in the previous year. Huawei

reported that their sales increased, since 80%

of their sales constituted medium-to-low range

devices that fell within the VAT exemption.

In 2016, Pakistan also removed the 16% VAT

on mobile handsets. Handset sales increased

by 25% in Pakistan after the VAT exemption,

compared to an average of around 3% in India

and Bangladesh.

The 2009 exemption of 16% VAT on mobile

handsets in Kenya resulted in over 200%

increase in the sales of mobile devices

and increase in unique mobile subscriber

penetration from 29% to about 40% in the

following three years. During these three

years, the contribution of mobile to the Kenyan

economy grew by over 250%, and employment

related to mobile services increased by 67%.

Although there is insufﬁcient evidence of the

latest impact of VAT reduction/exemption on

mobile phone penetration in these countries,

the immediate results that followed the tax

reforms suggest that they led to substantial

improvements in mobile affordability.

Empirical evidence for substitution of tax

reductions with other tax increases

Several countries explored compensating

for the loss in revenue due to mobile tax

reductions with an increase in taxes on Internet-

related services. One such example is an

increase in mobile money taxes. Most of the

customers beneﬁting from mobile money are

from marginalized groups who were previously

ﬁnancially and digitally excluded. Increases in

taxes on mobile money can have a large impact

on their mobile usage patterns and negatively

affect their livelihoods.

For example, shortly after the VAT exemption

for smartphones in Tanzania, the government

imposed a levy on mobile money of TZS 10,000

(USD 4.29) per transaction.

Many mobile

money agents lost more than half of their

customers when the tax was imposed. The

Vodacom Group reported that their revenue

from international operations was dragged

down by over 40% due to the concomitant

introduction of a tax on mobile money

transactions.

Peer-to-peer transactions on

mobile money in Tanzania dropped by 38%

from 30 million to 18 million per month.

The

government reduced this tax soon after the

backlash to TZS 7,000 (USD 3) per transaction

and then in June 2022 to TZS 4,000 (USD 1.72)

per transaction.

In 2017, at the same time the Colombian

government exempted mid-low range

smartphones from VAT, it increased VAT

on mobile services from 16% to 19% and

Strategies Towards Universal Smartphone Access

Section 3

imposed an additional 4% consumption tax

for mobile data plans above USD 16, which

had serious implications for the country’s data

consumption.

The increase in tax burden on customers due

to taxes on sectors related to smartphone

access has raised concerns in many countries,

with experts worrying that the higher taxes may

reverse the improvements made in ﬁnancial

and digital inclusion.

For example, in 2019, the Ghanaian

government increased the communications

service tax from 6% to 9%, announcing that

the higher rate was intended to develop

the foundation for the creation of a viable

technology ecosystem in the country. During

the COVID-19 pandemic, Ghana reduced its

communications service tax from 9% to 5% in

mid-2020 to assist people who work remotely

and use online services. Ghana also imposed a

1.5% tax on mobile money transactions above

USD 13 after the pandemic, which popularly

came to be known as e-levy. This resulted

in the population of Ghana turning back to

paying with cash rather than using electronic

payments, resulting in substantial losses to the

industry and forgone beneﬁts to consumers.

Research shows that increasing taxes on mobile

services, including electronic transactions, may

not signiﬁcantly increase the tax base but can

overturn achievements in access and inclusion.

Low-income earners are most sensitive to

price changes in digital services, and such

taxes discourage and disincentivize them

from smartphone and mobile Internet usage.

For example, the total contribution of mobile

money taxes in Kenya represented less than 1%

of total tax revenue, which is negligible for the

government but imposes high economic costs

on low-income customers.

However, reduction in such taxes can bring

signiﬁcant economic beneﬁts. GSMA estimates

that the removal of 4.2% excise duty on mobile

services in Argentina would result in mobile

penetration increasing by 1 million unique

subscribers, a 2.1% increase. As a result, GDP

can grow by USD 1.83 billion.

Empirical evidence of the ineffectiveness of

import duties in protecting local industries

Many countries in the emerging markets

impose customs duties on imported

smartphones. Often, these increases in

import duties are imposed to encourage local

manufacturing. Research shows that import

duties do not yet have a clear impact on

protecting domestic industries.

In 2021, Pakistan increased import duty on

smartphones by up to 240%. According to

the Pakistan Bureau of Statistics, the import of

smartphones still increased by 7.43% in the ﬁrst

ten months of the 2021-22 despite the increase

in local manufacturing.

The government of Uganda imposed a 10%

import duty on smartphones in 2020 with

the aim of increasing the adoption of locally

manufactured devices as the country was

gearing up for the mass production of its ﬁrst

smartphones.

The study did not ﬁnd any

information on the overall reduction of costs to

customers due to local manufacturing.

Increased import duties raise the cost of

ownership to customers of impacted phones,

limiting mobile Internet penetration. A report

by the GSMA found that a reduction in customs

duties of 35% to 12% in Argentina would

increase unique subscribers by 0.17 million.

Reﬂecting this insight, Colombia has decided

to exempt digital services from import duties to

decrease the cost of acquiring these services to

customers and improve ICT adoption.

Empirical evidence for removal of VAT

exemptions

In its Finance Budget of 2022, the Tanzanian

government announced the removal of VAT

exemption for smartphones, as they believed

it did not lead to reduction of ﬁnal prices to

customers but only beneﬁted traders.

Analysts

report that there are no data to support this

claim.

Tax reforms on mobile usage take time to reap

beneﬁts and demonstrate success on a national

scale. Besides, quick changes to such taxes can

Strategies Towards Universal Smartphone Access

cause an environment of instability and would

discourage international investments in the

mobile sector.

3.2.3 Higher priority intervention -

improved distribution channels

Photo credit: ©Asian Development Bank

Efﬁcient distribution channels address the

issue of lack of availability of handsets for those

living in remote locations with limited retail

stores, ensuring that the handsets reach people

at lower costs. In these areas, customers are

susceptible to inﬂated prices due to low supply

and distance from nearby towns.

On average, existing retail and wholesale

distribution channels in emerging markets do

not sufﬁciently cater to all potential customers.

Opportunities exist to ﬁll this gap and

provide better service while reducing costs to

customers. New opportunities for partnerships

with different stakeholders have emerged to

improve last-mile distribution networks due to

the common interest of the parties to increase

availability and affordability of smartphones.

Opportunities for improved distribution

channels

Expanding retail footprints

MNOs, device manufacturers, and other

stakeholders can collaborate with established

retail chains to widen their reach. Retail outlets

can also help by raising awareness of the

services offered and provide a trusted point of

contact with local communities.

Agent-based distribution models

In areas with limited retail presence, agent-

based models are utilized. These models

depend on a network of agents who are trained

to make orders of smartphones on behalf of

customers and to help them select a device

Strategies Towards Universal Smartphone Access

Section 3

Recommendations for taxes and import duties

• Design tax reforms to consider the beneﬁts of mobile broadband penetration.

• Set a long-term, balanced approach to taxation to meet domestic revenue collection

objectives and provide a conducive environment for digital inclusion and economic

development.

• Examine the total cost and net impact of mobile ownership when designing tax

reforms.

• Reduce taxes for devices below certain thresholds to incentivize smartphone

manufacturers to cut prices to make their smartphones eligible for tax reduction/

exemption.

• Provide a simple, progressive, equitable and stable tax system to attract international

investments and facilitate a nation's transition into a digital economy.

based on their needs. Agents must also have

the capacity to manage liquidity and accept

deliveries.

Online marketplaces

Online platforms and social media platforms

provide options for accessing new and

refurbished low-cost Internet-enabled handsets

without having to travel to speciﬁc locations

that have established retail stores.

Organized communities for distribution

Many emerging markets have established

savings-based cooperatives and joint liability

groups. These groups typically have strong

interpersonal networks with high engagement

and trust levels among their members. Further,

they also serve as a base for device ﬁnancing

initiatives.

Replacement for parallel markets

Parallel markets, also known as black markets,

for electronics proliferate particularly in rural

and low-income areas. Mobile devices sold

through these markets are often of low-quality

with no maintenance or warranty offerings.

Even though devices sold in these markets

seem cheaper, customers often end up

receiving very less value for the money they

spend on such smartphones.

Challenges for improved distribution

channels

First-time smartphone buyers’ preference

to see devices before purchasing them

Some low-income customers in emerging

markets still distrust e-commerce platforms

and would prefer to physically examine the

products before purchasing them. This is

particularly true for smartphones, which are

costly. Even in the agent-based distribution

model, most sales agents only have a catalogue

or tablet with product ranges shown and

typically do not carry any sample phones to

show customers.

Low skills of some agent-based distribution

channels

The effectiveness of agent-based distribution

models is highly dependent on the skills of

the agents. If the agents are not well-informed

about the smartphone products offered,

customer acquisition can be limited. Some

agents are also not aware of the supportive

offerings provided by distributors, like saving

schemes or ﬁnancing, which could vastly help

customers acquire smartphones and increase

the company’s customer base.

Empirical evidence for improved

distribution channels

This research studied eight cases on

distribution channels and found that effective

ways to provide last-mile coverage for

distribution channels, especially to rural and

low-income people, have the potential to

broaden reach and improve smartphone

access. The distribution of these case studies

was as follows: two case studies on expanding

retail footprints, one case study on structured

agent-based distribution models, three case

studies on online marketplaces serving as

substitutes to retail outlets, and three case

studies on leveraging organized communities

for improved distribution channels.

The study found that rural and low-income

communities have less time on their hands

and lower disposable income, especially for

women. Bringing handset offerings to their

doorstep reduces the time and cost barriers to

smartphone ownership. The following are some

of the key ﬁndings of the research.

Empirical evidence for expanding retail

footprints

MNOs can broaden their customer base in

rural areas by partnering with pre-established

retailers in nearby areas. For example, MTN

South Africa partnered with the Edcon retail

group during the launch of their ﬂagship MTN

Steppa phones. MTN leveraged the footprint of

Edcon group through this alliance, which had

1,273 stores nationally.

Strategies Towards Universal Smartphone Access

Tecno Mobiles operates a franchise retail

distribution network in Ghana, Cameroon,

Nigeria, Mozambique, Kenya, Tanzania,

Uganda, and Ethiopia to sell Tecno Mobiles’

devices. In countries like Tanzania, this retail

franchise network has established a strong

presence in rural areas, improving smartphone

access to populations that are typically harder

to reach.

Tecno Mobiles has sold more than

45 million mobile phones in the African market

and accounts for approximately 50% of the

market share.

Empirical evidence for structured agent-

based models for rural distribution

Structured networks of agents help meet

the demand for smartphones in peri-urban

and rural areas. They communicate with

local residents and provide them product

catalogues. They may also offer an individual or

group-based savings plans to assist customers

in purchasing the device of their choice. Some

networks also offer mobile money as a method

of making payments.

Copia, launched in 2013, is a consumer

catalogue order and delivery company which

uses the agency model to sell smartphones

to the base of the pyramid (BoP) customers.

Copia’s strategy is to recruit small business

owners who have established relationships with

local populations and train them to be sales

agents.

With the Copia agent-based distribution

model, a typical rural customer from Kenya

could avoid KSH 500 (USD 5) on a roundtrip

bus fare to the nearest town to acquire a

smartphone. Customers can also have a savings

plan with the local sales agent through a

“layaway plan,” where they deposit money with

the agents until they have accumulated enough

capital to purchase a smartphone. However,

some Copia sales agents are not well-versed

in Copia’s offerings and often need focused

training sessions to assist their customers.

Copia customers also reported being unsure of

buying smartphones from catalogue pictures or

application-based information.

Empirical evidence for online marketplaces

to improve distribution

In 2015, Alibaba partnered with China Telecom

to launch a pilot programme that relied on

e-commerce to sell low-cost mobile handsets

to rural and underserved populations across

China. The “Tianyi Taobao” handsets in this

initiative came with pre-installed Taobao

shopping applications or the YunOS mobile

operating system developed by Alibaba as

a default feature, depending on the target

customer base. Alibaba also leveraged the

15,000 retail outlets of China Telecom in rural

China for this project.

In 2016, Kilimall Uganda partnered with device

manufacturer Inﬁnix Mobility to launch the

Inﬁnix Note 3 mobile devices at approximately

USD 148 and the Hot 4 mobile device at

approximately USD 115. This partnership also

sold refurbished Apple smartphones. Kilimall,

in partnership with Safaricom, allowed its

customers to purchase subsidized smartphones

online using their Bonga loyalty points. The

Kilimall messenger delivery network allows

delivery of the smartphones to rural areas

across Kenya and Uganda.

Jumia partnered with MTN Kenya and

MTN Nigeria to sell a range of sub-USD

100 smartphones on their online platform.

They sold the MTN-branded Smart S720i

(USD 57) and Smart Mini S620 (USD 47).

Jumia also partnered with Tigo in Ghana to

sell smartphones on their online platform

witha1GB free data bundle offering. MTN

and Tigo beneﬁtted with higher customer

acquisition during their partnership with

Jumia.

However, research shows that some rural

and low-income communities still distrust

e-commerce platforms to make purchases of

such high expenditure products.

Empirical evidence for leveraging

organized communities

Mara Phones in Zambia launched a pilot project

to sell and ﬁnance smartphones that utilized

pre-established and organized cooperatives

Strategies Towards Universal Smartphone Access

Section 3

such as tea farmers, coffee farmers, private

security guards, teachers, and nurses. These

cooperatives acted not only as institutions to

offer device ﬁnancing but also as aggregated

delivery points for distributing smartphones

purchased by its members.

RUMA (Rekan Usaha Mikro Anda) collaborates

with community-based savings groups to

enable its members to acquire smartphones

in rural and peri-urban Indonesian regions by

employing dedicated and authorized RUMA

agents to facilitate the process. RUMA offers a

catalogue ordering model, similar to Copia, to

help the savings group members in rural areas

access mobile Internet at fair prices.

Similarly, Savex, an electronic distributor that

manages the supply chain process for Samsung

smartphones, partnered with Sonata Finance,

an MFI in India, to launch a programme that

distributed Samsung J2 smartphones to rural

areas in North India.

3.3 Interventions that merit further

exploration

3.3.1 Intervention for further

exploration - device subsidies

Device subsidies are one of the most universal

ways of making smartphones affordable to

customers who do not have mobile Internet

access. Many MNOs, governments, handset

manufacturers, and third-party ﬁnancers

provide device subsidies to promote

smartphone access. They often bear a part

of the device cost to lower the price for the

customers by investing large amounts of

money into subsidy programmes. Smartphone

providers aim to reduce the price of handsets

at the point of sale by identifying potential

cost-saving opportunities at different points in

the supply chain and by focusing on only the

essential features required by the population

being served.

Opportunities for device subsidies

Private sector device subsidy programmes

Several MNOs and device manufacturers

have researched the essential needs of

their customers to provide the most robust

smartphone experience at lower costs. Price-

conscious customers ﬁnd it challenging to

afford high-end smartphones with multiple

functionalities, most of which they may not use.

Device manufacturers and MNOs strategize

to reduce the cost of production of the

smartphones at the manufacturing level by

optimizing device hardware and software to

only provide customers with the services that

are beneﬁcial to them.

With improved technology, the development

of lightweight mobile operating systems

allows cost savings in the manufacturing level,

Strategies Towards Universal Smartphone Access

Recommendations for improved distribution channels

• Partner with local retail chains and community organizations with whom local customers

already engage have high levels of trust.

• Invest in training sales agents so they can effectively assist customers through the

process of smartphone purchase and acquisition. This can also help to expand the

awareness of potential customers on various services available.

• Provide agents with sample handsets to help ﬁrst-time and price-sensitive customers

decide on smartphone purchases.

which translates to lower price for customers.

Such operating systems are also optimized to

consume less data, reducing the ongoing costs

of owning the smartphones.

Device manufacturers also save manufacturing

costs and offer lower prices by omitting

higher-end features of smartphones that

are not essential to the everyday lives of

their customers. They must balance low-cost

components with maintaining a good quality

end product by keeping in mind the price-to-

quality ratio as the customers who need device

subsidies will also require robust handsets that

last longer to give them value for their money.

Strategies to reduce device costs

Improving efﬁciency throughout the value chain

reduces the per unit cost of manufacturing

handsets, allowing smartphone providers to

reduce the overall price charged to customers.

There are several ways for device manufacturers

to reduce procurement costs, including:

•

Facilitating centralized procurement to

achieve purchasing economies and joint

marketing.

•

Vertical integration, where a company that

owns more than one part of the supply

chain can restructure costs and reduce

prices.

For example, when a company

owns and controls both design and

distribution channels of a smartphone, they

can subsidize the handset price for the end

user.

•

MNOs partnering with device

manufacturers to produce smartphones

under their own brand name avoid royalty

fees and proﬁt from bulk purchases,

passing on the cost reduction to the

customers.

An overall assessment of joint marketing

indicates that this initiative is growing in

popularity and is contributing towards

addressing smartphone access, especially in

emerging markets. Innovative approaches

to selling devices developed jointly by key

stakeholders deliver acceptable services while

keeping prices down. Joint marketing can

leverage common goals pursued by different

entities. Some of the key opportunities for

collaborations are among MNOs, emerging

mobile phone manufacturers, and emerging

software developers who are thriving towards

optimized customer experiences that fully

leverage the device’s capabilities with an

attempt to break the monopoly of international

companies.

Government initiatives

Governments are partnering with MNOs to

effectively subsidize smartphone devices for

people belonging to low-income, rural, and

marginalized populations. These subsidies

are often paired with mobile data bundles to

help customers access the Internet as soon

as they acquire a smartphone and aid their

data consumption. Government subsidies

usually focus on targeted groups like low-

income households, telehealth workers,

microentrepreneurs, teachers, students,

and persons with disabilities. Governments

also provide allocated funds to third parties

involved in improving smartphone access in

their nations.

Another possibility is the use of Universal

Service Funds (USFs) to subsidize devices.

USFs are public funds, ﬁnanced primarily

through contributions made by MNOs

and other telecommunication companies,

intended to expand communications services

to underserved areas and populations.

Currently, USFs are used primarily to build

higher-bandwidth infrastructures and provide

better mobile coverage. But without affordable

devices to access the Internet, higher coverage

cannot be productive in improving connectivity.

USFs can be used to provide device subsidies

to communities that need them the most and to

expand mobile Internet usage.

Various reports have demonstrated the

underutilization of USFs in many countries

across the globe, estimating that USD 408

million were left unused in 2017 across Africa

alone.

This fund is said to be sufﬁcient to

provide smartphone access to over 6 million

women. As of 2021, Latin America and the

Caribbean has at least USD 7 billion in USFs

Strategies Towards Universal Smartphone Access

Section 3

that are not being used for the purpose of

telecom projects.

Device replacement to facilitate the

transition from 3G to 4G/5G

There is consensus among MNOs and

regulators on the need to transition customers

from 2G/3G to 4G/5G networks. The potential

beneﬁts associated with new generation

technologies (4G/5G) include faster speeds

and powerful advanced applications. The

advanced technologies also beneﬁt service

providers as they are economical to maintain.

Currently, higher income countries are at the

forefront of transitioning customers to next

generation technologies, but this process

is also gaining traction in LMICs which

are capitalizing on several opportunities.

Stakeholders are offering subsidized devices to

accelerate the adoption of 4G devices and limit

legacy technologies, arguing that 4G network

offers near-nationwide coverage and better

user experience for voice and data trafﬁc.

Challenges for device subsidies

Requirement of large up-front investments

Device subsidy initiatives require a large initial

investment from the parties providing the

subsidies. There is not enough evidence to

prove that this large investment will be entirely

covered by new customer acquisition and

increased data consumption from the device

subsidy programmes.

Ongoing costs of owning smartphones

Even if customers can pay the subsidized

upfront cost of smartphones, they may not

be able to afford the on-going maintenance

and usage costs.

Accessing mobile Internet

through smartphones requires reasonably

priced data plans and a consistent source of

electricity for charging mobile phones, which

may not be available to all customers. Among

the device subsidy programmes analysed in

this study, a considerable number of them

omitted provisions of free data bundles or

discounted data offerings along with reduced

device costs. Apart from the Pay As You Go

schemes, many initiatives also did not provide

any solutions to address the electricity costs of

owning a smartphone.

Risk of theft or sale of the device

Theft of subsidized devices necessarily

prevents the ﬁrm underwriting the subsidy from

recovering any of the beneﬁts from data usage.

In addition, customers who receive valuable

devices at a discount or for free can make

money by reselling the device for something

close to the full price.

Empirical evidence for device subsidies

In this report, device subsidy emerged as the

second-most common mechanism used by

different parties for improving smartphone

access, including MNOs, device manufacturers,

and governments. In this research, 13 examples

of device subsidies were identiﬁed, out of

which ﬁve were documented, along with

conducting stakeholder interviews and desk

Strategies Towards Universal Smartphone Access

research. Seven case studies involved private

sector device subsidy initiatives, and two were

on government subsidies. Four case studies

identiﬁed methods to improve efﬁciency gains

to provide subsidies, and two case studies

demonstrated the utilization of USFs for

smartphone subsidy programmes. Most of the

device subsidy initiatives were long-running

and well-established, having been around (on

an average) for four years or more.

Device subsidies have been reliable in

increasing smartphone access as they

provide relief to customers who cannot

afford the average retail price of good quality

smartphones. Our research-based case studies

had the following ﬁndings on device subsidies.

Empirical evidence for the popularity of

private subsidy programmes

Seven case studies in this research consisted

of private sector device subsidy initiatives.

Four of the most prominent among them were

programmes in which private sector parties

such as device manufacturers and MNOs

partnered to optimize the operating system

and hardware components of the smartphones

to address only the most essential needs of the

customers.

For example, Safaricom launched the Maisha

Ni Digital (Life is Digital) campaign in 2018

by partnering with Google to provide entry-

level smartphones to low-income customers

at reduced prices, particularly among women

in rural areas. These phones ran on Google-

owned Android (Go Edition) designed

speciﬁcally for low-end and ultra-budget

smartphones, which uses less memory, storage,

and data than the base-level operating system.

Safaricom’s ﬂagship Neon Ray smartphone

costs KSH 3,999 (USD 35) making it one of

the cheapest 4G enabled smartphones in

Africa. Smartphones with similar speciﬁcations

cost over USD 60 in the retail market. Device

subsidies through this programme were so

successful that over 900,000 smartphones

were sold in Kenya through this initiative in

the ﬁrst three years.

As of July 2022, 2 million

Safaricom devices had been sold through

Maisha Ni Digital, and the programme remains

ongoing.

Similarly in South Africa, MTN teamed up

with Qualcomm in 2013 to help customers

upgrade from feature phones to smartphones

by launching the MTN Steppa phone. This

phone ran on a customized version of Android

Gingerbread and Qualcomm Snapdragon

processor with pre-loaded applications to serve

the needs of their customer base, undercutting

the cheapest phones available at the time.

The MTN Steppa device subsidy resulted in

over 200,000 smartphones sold in just the ﬁrst

four months of the initiative.

Some MNOs did report transitioning away

from subsidies in favour of device ﬁnancing

programmes. For example, Safaricom has

invested over 1 billion KSH (USD 10 million)

on subsidizing smartphones between 2018

and 2022, requiring subsidies as high as USD

13 per device. Safaricom has reduced its

reliance on device subsidy programmes to less

than 15% of earlier investments in favour of

increasing its focus on device ﬁnancing.

Empirical evidence for programmes to

address the ongoing costs of smartphone

ownership

A few private subsidy programmes also

addressed the customers’ ongoing costs

of owning a smartphone. For example, the

customers of the Vodafone Smart Kicka phones

received ﬁve free 50 MB power bundles,

which functioned as an additional incentive to

purchase and to continue mobile Internet use,

increasing data consumption. Making its device

subsidy programme more attractive with data

bundles helped Vodacom sell over 3 million

low-cost smart devices in just one year.

Empirical evidence for strategies to reduce

the costs of device acquisition

Four case studies in this research showed that

attempts to reduce costs at every level of the

supply chain go a long way in subsidizing the

selling price to customers.

Strategies Towards Universal Smartphone Access

Section 3

For example, MTN’s centralized procurement

for the entire MTN Group approved a set of

handsets for all businesses within a country

which helps them reduce costs across the value

chain.

Vodafone leveraged central purchasing centres

to create the Vodafone-branded device line

up, optimizing costs. More than 100 million

Vodafone-branded devices have been sold

worldwide. Moon Senegal manages both the

design of its smartphones, which balances

affordability with high-quality, and the

implementation of door-to-door distribution

by a network of Moon agents to reduce overall

cost of devices.

In some cases, MNOs have partnered with

phone manufacturers to reduce device costs.

Vodacom partnered with manufacturer Alcatel

to launch a Vodacom-branded smartphone

called the Smart Kicka. Orange, in partnership

with Google, also launched a smartphone

under its own brand, allowing them to offer

smartphones for less than USD 30 by avoiding

royalty fees on branded handsets.

Such cost reductions at different levels of the

supply chain get passed on to the customer as

device subsidies.

Empirical evidence for strategic

partnerships with providers of

complementary services

In other cases, device manufacturers teamed

with advertising providers to reduce costs.

Social Eco devised a pilot Humanity $1

Smartphones initiative that utilized pre-

loaded advertising applications on Social Eco

smartphones that cost on average USD 50 as an

alternative way to generate funding to reduce

per device cost to customers. This programme

decreased the price of a smartphone by up to

98% for low-income individuals, slashing the

cost to low-income households by about USD

49. Social Eco expanded the advertisement

strategy to provide USD 10 smartphones

as well. Social Eco also encouraged donors

on their platform to help support their low-

income customer base either by purchasing a

smartphone for them or by supporting them by

funding their monthly broadband connectivity

bills which range from USD 5 to USD 10 per

month.

KEIPhone is a Ugandan company that assists

unconnected women by providing them

free smartphones and solar power chargers

to promote gender equality and female

empowerment.

These smartphones are paid

for by ad-based revenue models. Customers

with KEIPhone devices get personalized

advertisements, video content, and surveys that

pay for the cost of both the mobile devices and

the smartphone chargers.

Empirical evidence for government

initiatives, including USFs

Governments are important stakeholders

that can afford the large initial investments

required for device subsidy programmes to

help communities access the mobile Internet.

Two case studies showed that governments

can successfully help their citizens purchase

smartphones at lower costs.

For example, the Government of Colombia

executed the “Internet Móvil Social para la

Gente” policy in 2016 to provide smartphone

and mobile data subsidies to low-income

communities. The Colombian Government

allocated USD 90 million over three years for

this initiative. In 2017, Colombia was ranked

ﬁrst among 58 developing nations for providing

affordable Internet access to its citizens.

The Malaysian government provided subsidies

for smartphones and data plans to provide

the Bottom 40 (B40) with affordable Internet

access. Supported by government subsidies,

Malaysia’s smartphone market grew by 10.6%

in 2021, with over 12 million devices sold.

Two case studies demonstrated how countries

can leverage USFs to help their marginalized

communities access smartphones through

device subsidies. However, many countries

have massively underutilized their USF budgets.

In 2014, the Malaysian government launched its

Smart Device Subsidy initiative to use USFs to

provide a selection of smartphones at reduced

Strategies Towards Universal Smartphone Access

prices to communities in rural areas.

Eligible

individuals received a subsidy of RM 250 (USD

56) and a free Internet subscription for one

year.

The government of Pakistan utilized their

Universal Access and Service Funds to enable

30,000 working women from low-income

households to purchase smartphones to

improve digital inclusion. The smartphones

provided in this programme were preloaded

with a balance of Rs. 250 (USD 1.9) per month

on the phones. The government also used

this programme to disburse income support

through m-money and e-government.

Some governments have subsidized other

types of devices. For example, the US

government’s Affordable Connectivity

Programme offers eligible households a one-

time discount of up to USD 100 to purchase

a laptop, desktop computer, or tablet if they

contribute more than USD 10 and less than

USD 50 toward the purchase price.

Empirical evidence for device replacement

to facilitate the transition from 3G to 4G/5G

Countries are taking different approaches to

network upgrades. In Hungary, for example, the

national regulator is facilitating the transition to

4G/5G, whereas in most LMICs, such transitions

appear to be led by MNOs.

In September 2019, Vodacom deployed 3G

and 4G sites in Wakkerstroom, South Africa

and later moved over 1,500 farm workers from

2G feature phones to 3G- and 4G-enabled

smartphones. Vodacom partnered with

BPG Langfontein, a farming business in

Mpumalanga province, to turn Wakkerstroom

into South Africa’s ﬁrst smartphone-only town.

This device-swapping programme cost ZAR 1.9

million (USD 114,000). The initiative provided

3G and 4G smartphones to drive digital

inclusion and access to services and currently,

Wakkerstroom enjoys 100% Internet access for

all Vodacom customers. The initiative reported

some key results.

•

Many rural dwellers participated in the

digital economy for the ﬁrst time. Examples

include farmers receiving their salary via

their mobile phone, and receiving skills

tutorials to enhance their learning and job

skills.

•

Through 4G digital devices and

connectivity, the people of Wakkerstroom

could connect with each other in new

ways. They also used the Internet to

access essential government services and

e-commerce.

•

The area experienced a 40% increase in

data usage, data trafﬁc grew by 205%

year on year, with data active customers

increasing by 82%.

•

School children could access the Internet

and use Vodacom e-School free of charge.

•

Job seekers could use their smartphones

to apply for jobs over the Internet on

Vodacom’s zero-rated platforms through

Vodacom ConnectU.

In Hungary, customers are offered subsidies

to purchase 4G/5G devices in exchange for

their 3G devices. In the initial phase, Hungary’s

telecoms regulator, the National Media &

Infocommunications Authority (NMHH), offered

a subsidy scheme for owners of 2G and 3G

devices to claim HUF 20,000 (USD 55.40). To

accelerate the transition, in the second phase

the regulator doubled the maximum individual

allocation for upgrading a 2G/3G phone to a

4G/5G device to HUF 40,000 (USD 100).

3�3�2 Interventions for further

exploration – reuse of preowned

smartphones

Reuse of preowned smartphones represents

another widely used potential strategy for

improving smartphone access across the globe.

This strategy requires evaluation of the quality

of used devices. Preowned devices are sold “as

is” or with necessary refurbishment (normally

comprising of physical intervention on the

devices e.g. changing the battery).

Existing evidence does not sufﬁciently validate

the contribution of refurbished devices towards

improving smartphone access, especially in

countries with signiﬁcant barriers to device

access. Two main concerns regarding

refurbished devices are that the retail prices

Strategies Towards Universal Smartphone Access

Section 3

for refurbished devices may not be sufﬁciently

different from those of new devices to attract

incremental demand and that customers may

have concerns about the quality of refurbished

devices.

Nonetheless, there are several opportunities

for device refurbishment which entities such as

Vodacom are capitalizing on.

Opportunities for reuse of preowned

smartphones

Substantial supply of preowned devices

The demand for new smartphones with

new features remains strong. The global

smartphone shipments for 2022 are expected

to reach 1.3 billion units.

Although this marks

a decline from past year shipments, future

annual shipments are expected to grow as most

services, including basic services, move online.

The persistence of demand for new devices

ensures the existence of a steady supply of

preowned devices potentially available for

resale.

Frequent upgrades and replacements of

smartphones

Many MNOs around the world offer ﬁnancial

inducements to customers who trade in their

old devices. Smartphones are also status

symbols in some markets, which leads many

individuals to purchase new devices even when

Strategies Towards Universal Smartphone Access

Recommendations for device subsidies

While device subsidy initiatives are some of the most common, well-established, and

long-running interventions for improving smartphone access, industry experts are slowly

moving away from them or reducing their investments in subsidy programmes due to

previously discussed long-term challenges. Some key lessons from the research can

assist stakeholders in providing subsidies to manage their risks and extend support to the

underserved populations.

• Identify partners willing to ﬁnance the large investments required for device subsidy,

which would otherwise take a heavy toll on a single company’s balance sheet.

Governments must consider the development and coordination of national device and

connectivity subsidy programmes in collaboration with other partners.

• Reduce ongoing costs of smartphone ownership by pairing device subsidy with data

bundles. This is especially helpful for customers who cannot afford the ongoing costs of

accessing mobile Internet through smartphones.

• Encourage better utilization of USFs. The strategy for meaningful utilization of USFs for

connectivity should extend to include smartphone affordability and adoption.

• Budgeting for device swapping during upgrading of networks 2G/3G to 4G/5G as

most devices owned by users might not work on the new generation network.

• Partner with providers of complementary services, such as advertisers. However, this

study did not ﬁnd sufﬁcient evidence to prove that such ad-revenue based device

subsidies are sustainable and can improve smartphone access over the long-term.

Some studies also found that the advertisements that run on the smart devices may

be irrelevant to low-income household individuals who cannot afford an average

smartphone.

their current device has substantial usable

life left. In addition, corporations bound by

company policies often regularly upgrade

electronic devices, including smartphones,

laptops, and tablets. All of these phenomena

create sources of second-hand devices that can

be reused by other institutions and individuals.

Upgrades prompted by COVID-19

restrictions

Recent developments have heightened the

demand for preowned devices. The shift

toward working from home accelerated

by the COVID-19 pandemic has led many

consumers to upgrade their mobile devices to

smartphones, while the general curtailment of

economic activity has made many customers

increasingly price sensitive. In addition, sharp

increases in the cost of new semiconductor

chips caused by the disruption of supply chains

have made preowned devices more attractive.

Mobile network upgrades

Globally, MNOs are pursuing programmes

to transition their customers from 2G/3G to

4G/5G. Mobile network upgrades to 4G/5G

often require customers to upgrade their

devices. MNOs, with support of regulators, are

offering subsidies for customers to purchase

4G devices as they move towards shutdown

of 3G networks.

Devices swapped during

network upgrades, especially those with 3G

capabilities, can be reused in countries still

using 3G, although the ongoing shift toward

4G networks limits the long-term potential of

this.

Enactment of e-waste management and

environment protection measures

Electronic waste has increased substantially

in the past few years, and it is expected to

reach 75 million metric tonnes by 2030.

Device reuse can help reduce the amount

of e-waste by extending the devices’ useful

lives.

Higher income countries, especially

within the European Union, are imposing

strict e-waste regulations.

The enactment of

environmental policies promoting responsible

disposal and management of electronic waste

can strengthen incentives to promote device

reuse.

Challenges for reuse of preowned

smartphones

The lack of middle- and lower-tier

preowned devices

Many reuse programmes focus on premium

devices, such as iPhones. The high cost of these

devices means they remain unaffordable to

many people even taking into account the 20%-

30% discount applied to preowned devices.

Complex coordination and organization of

device collection

Device reuse requires several steps, including

device collection, evaluation and potential

refurbishment, distribution, and disposal.

These processes are often complex and

challenging. Unorganized channels and

strategies increase the cost of device collection

and often result in limited intake of devices.

Within the telecommunication sector, only

a few companies have established networks

between higher income countries and LMICs to

coordinate device sourcing.

India presents different models for device

collection, including remote diagnostics, which

can be applied for device collection.

Absence of standardized quality checks

Another important consideration on sourcing

of preowned devices is quality inspection.

There appears to be no standardized quality

assurance for preowned devices, forcing

different entities to develop their own criteria

and processes.

Regulations on device importation,

retailing and disposal

Some countries impose stringent registration

requirements on sellers of used goods.

Although protecting purchasers of preowned

devices is appropriate, the level of these

restrictions has a direct impact on their

Strategies Towards Universal Smartphone Access

Section 3

affordability. In addition, reuse of devices

transfers the responsibility for the eventual

disposal of the device from the exporting

countries to the importing countries, many of

which do not have any regulations governing

e-waste disposal.

Negative customer perceptions

On the demand side, customers can regard

preowned devices as being of lower quality.

Reports that refurbished devices sometimes

stop working after less than six months of use

reinforce these concerns. The association of

smartphone ownership and social status is

another reason consumers may shun second-

hand.

Empirical evidence for reuse of preowned

smartphones

Device reuse has met with greater success in

some regions of the world than in others. It

is most developed in India, where observers

estimate that the market for preowned

smartphones reached USD 5 billion in 2021

and is expected to grow to USD 10 billion

by 2026.

Leading entities in India include

Cashify, HyperXchange, InstaCash, and Yaantra.

These entities buy and sell devices both online

and ofﬂine through a website and an app.

They also partner with smartphone makers

including Apple, Samsung, and Xiaomi. Indian

companies have begun expanding to other

regions. Cashify is expanding operations

to countries including the UAE, Turkey and

Bangladesh. HyperXchange has launched

operations in the UK and the Netherlands.

The market for preowned smartphones is

picking up in other regions of the world as well.

For example, Vodacom launched its Good As

New initiative to distribute refurbished iPhones

in South Africa in mid-2022.

Empirical evidence for sources of

preowned smartphones

Resellers of preowned devices have taken

different approaches to sourcing devices.

Indian company HyperXchange relies on

e-commerce returns and factory seconds as the

primary source of its devices.

Others use retail establishments to gather

preowned devices. For example, as of 2019,

Yaantra, which was recently acquired by

Flipkart, relies on a network of 35,000 retailers

across 600 towns as sources of preowned

devices. InstaCash established central locations

for collecting smartphones, conducting

assessments, and making repairs, as well as

mobile e-waste kiosks and collections through

couriers. Cashify has traditionally focused

on buying and selling devices via its online

platform, although it has expanded its network

of retailers as well.

América Móvil in Latin America has also

implemented various device recycling and

reuse initiatives across their subsidiaries. They

source devices with collection bins placed in

stores and corporate ofﬁces. América Móvil

has effectively collected over 272,000 devices

for recycling during 2021 and such devices

are refurbished to recover 70-80% of their

components for recycling into new devices.

At a national level, the Ministry of ICTs in

Namibia facilitates device collection from

corporations for distribution to institutions, such

as schools and health facilities. The Ministry

Strategies Towards Universal Smartphone Access

has established partnerships with different

corporates to source devices such as laptops

and tablets.

Empirical evidence for improving customer

perceptions of preowned devices

Entities selling preowned devices are devising

mechanisms to reassure customers on their

quality. As an example, Vodacom named their

programme for preowned devices Good As

New. In addition, Vodacom sells these devices

with a 12-month warranty that covers all repairs

on internal components, software reloads,

and updates, as well as the battery. It utilizes

its aftercare centre (normally reserved for

corporate clients) for repair and refurbishment

of devices. Indian sellers of preowned devices

HyperXchange and Yaantra similarly offer one-

year warranties, while Cashify offers up to a

six-month warranty on repaired devices.

Companies are also taking steps to verify

the quality of devices in order to improve

the conﬁdence of customers. For example,

Vodacom only imports devices that receive a

grade of A+ under its quality tests. The quality

tests focus on battery life (acceptable devices

must achieve at least 80% capacity), screen, and

software.

InstaCash also offers digital assessment and

diagnostics of devices both online and ofﬂine.

HyperXchange uses AI-based diagnostics to

assess device quality.

Empirical evidence for regulatory

restrictions on resale

In South Africa, entities selling preowned

devices are required to secure clearance from

the South African regulatory authorities and

obtain licenses from the police and department

of trade.

Empirical evidence for e-waste

management

Engagements with experts produced

consensus that device refurbishment

was part of the solution towards e-waste

management. Device manufacturers indicated

that smartphones are designed to ensure

durability. Some stakeholders, like América

Móvil, partnered with specialized e-waste

management ﬁrms locally during their device

reuse initiatives to help them source and

recycle old devices with minimal waste.

Engagements with the Ministry of ICTs in

Namibia indicated that the country was

developing and implementing e-waste policies

to regulate the disposal of electronics.

3�4 Lower priority interventions

3�4�1 Lower priority intervention – local

manufacturing

Many observers have long pointed to local

manufacturing as a potential strategy to reduce

the cost of smartphones and thereby improve

smartphone access in emerging markets. There

are different levels of local manufacturing,

ranging from complete manufacturing of

smartphone components to assembly of

completed components imported from other

countries. Local manufacturing is often held

out as a potential way to lower the high retail

costs of imported devices by reducing labour

costs, avoiding import duties and taxes, taking

advantage of government incentives to attract

investments, reducing the need for foreign

currency deﬁcit, and enabling design for local

needs.

Opportunities for local manufacturing

Strategies Towards Universal Smartphone Access

Section 3

High retail prices of imported smartphones

The retail prices of smartphones in most LMICs,

relative to average income, remain high. In

part, these high retail prices are attributed to

the fact that most smartphone devices sold in

these countries are imported. The import costs

of smartphone devices are also compounded

by the high taxes and import duties on devices

imposed by governments, especially in LMICs.

Local manufacturing appeals as a way to lower

total device costs by reducing labour costs and

eliminating import duties/taxes/VAT and other

logistics costs.

Attractive government incentives and

policies

Governments across the globe are designing

policies and offering incentives to attract

foreign investments to boost local economies

and address high unemployment. As an

example, South Africa hosts the South

African Investment Conference annually to

solicit investments. Other countries such

as Rwanda and Ethiopia are creating a

conducive environment (economic zones)

through policy reforms and infrastructure

development to attract foreign investors. Other

signiﬁcant incentives offered to investors by

governments include seed capital, grants,

and tax exemptions. To boost consumption

of locally produced products, governments

are also implementing initiatives to support

local manufacturers, including placing these as

preferred government vendors.

Foreign currency deﬁcit and reliance on

imports

The import of smartphone devices requires

signiﬁcant foreign currency, a resource which

most emerging markets have in limited supply.

As such, reducing imports of smartphones,

at times viewed as luxury goods, can lower

foreign currency requirements.

Design considerations for local needs

In addition to costs, imported smartphones are

often designed with limited considerations for

features relevant to the local context. There is

a growing need for smartphones (and other

devices) which account for local needs, and

local manufacturing appears to be a relevant

mechanism to achieve this.

Strategies Towards Universal Smartphone Access

Recommendations for reuse of preowned smartphones

• Pursue strategic sourcing of devices to reduce total costs of collecting devices for

refurbishment and beneﬁt from economies of scale. The procurement of preowned

devices should also include middle- and lower-tier devices that would be sold at more

affordable price points in LMICs.

• Standardize device quality testing and assurance to ensure that only devices that

satisfy the required standards are imported. Such standards have been established for

other types of preowned electronic equipment.

Aligned to this, sellers of preowned

devices should also provide warranties of at least six months and an acceptable lifespan

of a device. There are suggestions this should at least be two to three years for a

refurbished device.

• Establish regulations on the importation, resale, and disposal of preowned devices that

also avoid putting an undue burden on the distribution of refurbished devices.

Challenges for local manufacturing

Lack of local industrial ecosystems

Many LMICs attempting to improve their local

manufacturing output lack the infrastructure

and skilled labour needed to manufacture

smartphones. Inventory management also

proves to be a challenge as manufacturers

have to bear the losses in cases of supply-chain

disruptions and unexpectedly weak demand.

LMICs often lack the industrial ecosystem to

adjust to such variations.

The need to achieve scale

Smartphone manufacturing is subject to

signiﬁcant economies of scale that require

production to reach certain volumes for the

device to be produced at minimum cost.