Mobile Phone Growth Slows as Mobile Devices Saturate the Market Grant Potter | October 29, 2013

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ore than 3.4 billion people own at least one mobile phone in 2013.1 This is equal to nearly half of the world's population.2 In addition, as of 2010 more than 90 percent of people worldwide were covered by a mobile phone signal, so most people at least have access to a mobile network.3 The number of mobile subscriptions—that is, the number of active accounts that have access to a mobile network—far surpasses the number of phone owners. It grew from 1 billion subscriptions in 4 2000 to a projected figure of more than 6.8 billion by the end of 2013. (See Figure 1.) This number is so much higher than the number of phone owners because many people own multiple mobile devices 5 or multiple SIM cards for one phone. As a result, the number of mobile subscriptions is expected to surpass the number of people in the world in early 2014 according to the International 6 Telecommunication Union, a U.N. agency. However, the annual rate of growth has already begun to slow as markets become increasingly 7 8 saturated. Annual additions to mobile subscriptions peaked in 2010 at 680 million. (See Figure 2.) The subscription rate began to dip in 2011, and it is estimated that 424 million new subscriptions will 9 be added in 2013—some 250 million fewer than in 2010.

8000

Figure 1 | Cumulative Mobile Phone Subscriptions Worldwide, 2001-13 6,835

7000 6000 Mobile Subscriptions (in Millions)

5000 4000 3000 2000 1000

962

Source: ITU, 2013

0 2001

2002

2003

vitalsigns.worldwatch.org

2004

2005

2006

2007

2008

2009

2010

2011

2012* 2013*

1

Figure 2 | New Mobile Phone Subscriptions, 2002-13 800 Source: ITU, 2013

680

Mobile Subscriptions (Millions)

700 600 500

424 400 300 200 100 0 2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

There are nearly 4 billion more active mobile phone subscriptions in the developing world than in the 10 11 industrial world. This is not surprising, given the distribution of world population. (See Figure 3.) But on a per capita basis the picture is far different: on average, industrial countries have 128 12 subscriptions per 100 people, compared with 89 per 100 people in developing countries. (See Figure 4.) But the figure in developing countries is expected to top 100 subscriptions per 100 people in 13 2014. The future of the mobile phone industry will be less about adding new subscriptions and more about improving existing service. The most common mobile network in the world uses 2G (second generation) technology that allows users to talk and send text messages. 2G accounts for nearly 4.7 14 billion mobile subscriptions today. In the developing world, 2G is the dominant mobile platform because the network is very inexpensive to install, costing less than fixed-line networks for wired 15 phones. The ability to set up 2G networks on difficult terrain without a lot of pre-existing infrastructure has led to “leapfrogging,” in which many users skip landline technology altogether in favor of mobile phones. For example, Afghanistan had 2 million cell phone subscribers in 2010 compared with only 16 20,000 landline phones. As mobile networks are upgraded, 2G networks will be transitioned into 3G or 4G networks that give users access to mobile broadband Internet (colloquially known as data) or, when available, fixed wireless Internet (known as Wi-Fi). These networks now cover over 50 percent of the world 17 population. They account for approximately 75 subscriptions out of 100 in industrial countries but for 18 only 20 subscriptions out of 100 in developing countries. Although “Active mobile-broadband subscriptions” have already displaced 2G as the dominant technology in industrial countries, the 19 reverse is true in developing countries, where 2G has nearly 3.5 times as many users. (See Figures 5 and 6.) This ratio is expected to shift in the next five years, however. Estimates indicate that by 2018 there will be 9.3 billion mobile subscriptions, with most of the added growth occurring in developing vitalsigns.worldwatch.org

2

Figure 3 | Mobile Phone Subscriptions and World Population, Industrial and Developing Countries

(Millions)

8,000

7,000

Developing Countries

6,000

Industrial Countries

5,000

5,235

4,000

5,675 Source ITU, 2013 UNDP 2012

3,000

2,000

1,000

1,600

1,241

Mobile Subscriptions (2013)

World Population (2013)

0

countries, and that mobile-broadband subscriptions will account for 6.3 billion of those devices— 20 roughly two thirds of the total market. Perhaps one of the most important side-effects of the growing mobile phone industry in the developing world is that financial services have become tethered to mobile phone use in poor regions. Areas with high poverty tend to have mobile subscriptions rates of 50 out of 100 people, while only 37 percent of 21 people living there have access to a physical bank branch. Financial institutions have begun to leverage the existing infrastructure for mobile phones so that a host of financial transactions—such as opening a savings account, paying bills, or transferring money—can be conducted at local mobile retail 22 stores. Mobile phones also present great opportunities for development and aid groups. Development organizations use mobile phones to provide information and services to their clients because people read approximately 97 percent of their text messages compared with only 5–20 percent of their e23 mails, making a text message one of the most effective ways to convey important news. For example, health organizations in some African countries have begun sending weekly reminders to AIDS patients to take their antiretroviral drugs instead of sending health workers out to different 24 communities. This reaches a wider audience more often and greatly trims the organizations’ travel 25 costs. Mobile phones have also helped improve farmers’ incomes in developing countries. Some mobile applications, like MFarm in Kenya, provide market rates for farmers looking to sell their crops and 26 prevent abuse from go-betweens who might capitalize on a lack of price transparency. A study in Niger revealed that grain traders with mobile phones had 29 percent higher profits than traders without 27 phones.

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Figure 4 | Mobile Phone Subscriptions per 100 People, Industrial and Developing Countries

Mobile Subscription (per 100 Inhabitants)

Developing Countries

Industrial Countries

Source: ITU, 2013

108.3

102.0

112.5

115.0

119.0

78.3

123.6

84.3

128.2

89.4

69.0

58.3 49.1

39.1

2007

2008

2009

2010

2011

2012*

2013*

One of the most dramatic uses of mobile phones was during the Arab Spring protests in 2010. One Egyptian activist explained, “we use Facebook to schedule the protests, Twitter to coordinate, and 28 YouTube to tell the world.” The Dubai School of Government found that 9 out of 10 Egyptian and 29 Tunisian protestors used Facebook to coordinate and popularize their protests. Although social media, such as Facebook, are available on a computer, more people in Egypt own phones than computers, and mobile phones were preferred in street protests because they could be carried 30 anywhere and easily concealed. Although governments may shut down their mobile and Internet service in the face of mass protests, they do so at a high cost. When President Mubarak took Egypt offline in January 2011, it cost the country $18 million a day in lost revenue and, more important, 31 contributed to increasing participation in anti-government demonstrations. Although mobile phones offer a lot of benefits to the developing world, their production and disposal create problems there too. The war-torn Democratic Republic of Congo has 60–80 percent of the world’s deposits of columbite-tantalite (also known as coltan), a critical component in nearly all mobile 32 devices. In addition, Congo has a wealth of other minerals used in these devices, such as gold, 33 tantalum, and tungsten. The sale of these minerals has exacerbated the deadly conflict in this 34 country. So far, efforts to reduce sales have backfired, as mine operators have partnered with armed 35 groups to smuggle their minerals out of the country. The manufacture of mobile phones has also involved severe labor abuses. Factories get contracts from phone companies to produce the devices as cheaply as possible, and as a result they cut corners in ways that can have severe impacts on workers’ health. In an investigation by China Labor Watch, labor violations in Apple factories included overtime in excess of 150 hours a month during peak production season, working for months without a day off, assembly-line workers having to stand for 11 36 hours a day with minimal breaks, and poorly ventilated factories where workers breathe metal dust. Nor is Apple the only company with a problematic supply chain. Samsung’s suppliers in China have been accused of excessive overtime, exhausting conditions, inhumane treatment of workers, and the vitalsigns.worldwatch.org

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hiring of underage workers. In 2011, as a result of improper ventilation, an explosion at a factory in 38 Chengdu, China, that was producing iPads killed 4 people and injured 18. Mobile phones also create certain health and environmental problems when they are thrown away or 39 recycled improperly. Americans replace their mobile phones once every two years on average. In 40 2010, over 150 million phones were thrown away or recycled by Americans alone. Old phones, along with other so-called e-waste, are often exported to countries like India and China, where the valuable materials contained in them are extracted in ways that endanger the health of the workers and that 41 pollute the local environment with dangerous toxics. Exposure to the phones’ components can have severe neurological effects, especially on the children who are most often the ones involved in this extraction.

Figure 5 | 2G and 3G/4G Networks in Industrial Countries 2G Subscriptions 3G/4G…

42%

Source: ITU,

58%

Figure 6 | 2G and 3G/4G Networks in Developing Countries 2G Subscriptions 3G/4G Subscriptions

22%

Source: ITU, 2013

78%

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Grant Potter is a Development Associate at the Worldwatch Institute.

Vital Signs Online provides business leaders, policymakers, and engaged citizens with the latest data and analysis they need to understand critical global trends. Subscribe now for full access to hard data and research-based insights on the sustainability trends that are shaping our future. Worldwatch Institute th 1400 16 St., NW, Suite 430 Washington, DC 20036 Phone: 202.745.8092 vitalsigns.worldwatch.org

Notes 1

A.T. Kearney and GSMA, The Mobile Economy 2013 (London: 2013). U.N. Department of Economic and Social Affairs, World Population Prospects: The 2012 Revision (New York: 2012). 3 InfoDev and World Bank, Infographic: Maximizing Mobile for Development (Washington, DC: 2012). 4 Figure for 2000 from InfoDev and World Bank, Information and Communications for Development 2012: Maximizing Mobile (Washington, DC: 2012); 2013 data from International Telecommunication Union (ITU), Measuring the Information Society 2013 (Geneva: 2013). 5 A.T. Kearney and GSMA, op. cit. note 1. 6 ITU, “ITU Releases Latest Global Technology Development Figures,” press release (Geneva: 27 February 2013). 7 GSMA, Scaling Mobile for Development: A Developing World Opportunity (2013). 8 ITU, Statistics (Geneva: 2012). 9 Ibid. 10 Ibid. 11 Ibid. 12 Ibid. 13 GSMA, op. cit. note 7. 14 ITU, op. cit. note 8. 15 ITU, Measuring the Information Society 2012 (Geneva: 2012). 16 Malcolm Foster, “Cell Phones Vital in Developing World,” Associated Press, 27 January 2007. 17 ITU, op. cit. note 4. 18 ITU, The World in 2013: ICT Facts and Figures (Geneva: 2013). 19 Ibid. 20 Ericsson, Ericsson Mobility Report on the Pulse of the Networked Society (2012). 21 Darrell West, “Alleviating Poverty: Mobile Communications, Microfinance and Small Business Development Around the World,” Center for Technology Innovation, Brookings Institution, Washington, DC, 16 May 2013. 22 Ibid. 23 Mark Cohen, “Text-Message Marketing,” New York Times, 23 September 2009. 24 Courtney E. Martin, “Medicine by Text Message: Learning from the Developing World,” The Atlantic, 4 April 2013. 25 Ibid. 2

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Olivia Solon, “MFarm Empowers Kenya’s Farmers with Price Transparency and Market Access,” Wired Magazine, June 2013. 27 InfoDev and the World Bank, op. cit. note 4. 28 Ibid. 29 Carol Huang, “Facebook and Twitter Key to Arab Spring Uprisings: Report,” The National, 6 June 2011. 30 InfoDev and the World Bank, op. cit. note 4. 31 Ibid. 32 Office of the High Commissioner for Human Rights, Democratic Republic of the Congo 1993-2003, UN Mapping Report: Violence Linked to Natural Resource Exploitation (Geneva: 2010). 33 Ibid. 34 Ibid. 35 U.N. Security Council, “Letter Dated 29 November 2011 from the Chair of the Security Council Committee Established Pursuant to Resolution 1533 (2004) Concerning the Democratic Republic of the Congo Addressed to the President of the Security Council, New York, 2011. 36 China Labor Watch, Beyond Foxconn: Deplorable Working Conditions Characterize Apple’s Entire Supply Chain (2012). 37 China Labor Watch, An Investigation of Eight Samsung Factories in China (New York: 2012). 38 Charles Duhigg and David Barboza, “In China, Human Costs are Built Into an iPad,” New York Times, 25 January 2012. 39 Leyla Acaroglu, “Where do Old Cellphones Go to Die?” New York Times, 4 May 2013. 40 Ibid. 41 Ibid.

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