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The idea that global companies can do good and do well at the "bottom of the pyramid"-that is, among the poor populations of developing countries-has generated excitement among corporations, governments, and NGOs in recent years. But most of the resulting initiatives by multinationals have missed the very poor, the 2 billion people in places like Haiti and Bangladesh who live on less than two dollars a day and have been virtually ignored by the corporate world and cut off from the global marketplace. The multinationals seem not to have noticed the examples of Telenor and Digicel, innovative mobile phone companies that have found opportunities to earn profits and simultaneously improve local economic landscapes by serving the very poor.

Telenor was drawn to Bangladesh and Pakistan, and Digicel to Haiti, by low-wage workforces and the potential for creating local consumer markets, despite endemic poverty. Both companies refused to accept the low-purchasing-power status quo and have been systematically building up local consumer markets. They are now boosting economic growth by generating jobs, tax revenue, and investment.

Their success should come as no surprise. Indeed, the argument that companies can improve poor economies while making profits by selling consumer goods was put forth by C.K. Prahalad and Allen Hammond in their article "Serving the World's Poor, Profitably" (HBR September 2002) and by Prahalad in The Fortune at the Bottom of the Pyramid (Wharton School Publishing, 2004). Since the publication of the article and the book, multinationals have begun "creating the capacity to consume" among the poor. In India, for example, Procter & Gamble sells single-use sachets of detergent and shampoo that are affordable for the poor.

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SOMETIME in the next few months, the number of mobile phones in use will exceed 3.3 billion, or half the world's population. No technology has ever spread faster around the globe: the mobile phone took less than two decades to reach this degree of penetration. But the ever-restless wireless industry has already set its sights on getting the other half connected. Two recent reports analyse how to add the "next billion" to the subscriber list.

In practice, that means finding ways to make mobile phones more affordable to people in the developing world, since most people in the developed world already have phones. The single largest barrier for would-be mobile subscribers, according to a report by Portio Research, a market-research firm, is the cost of a handset. So the industry has been doing its best to cut prices, with Motorola, an ailing American equipment-maker, taking the lead. Its cheapest phones now cost less than $30. John White of Portio believes that prices for simple, voice-only handsets could fall to $10 in five years.

But affordable phones are only part of the picture. Operators in developing countries have been inventive in their efforts to reach rural customers. In Bangladeshi villages "telephone ladies" rent out their handsets, one call at a time. China Mobile, the world's largest operator by subscribers, offers rural customers an agricultural-information service alongside the ability to make calls. Smart Communications, an operator in the Philippines, sells text messages for as little as $1.80 per 100 messages, and allows subscribers to pass airtime to phone "buddies" at a cost of less than $0.03 per minute.

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By Katherine Nightingale

Projects that use innovative information and communication technologies (ICTs) in developing countries were honoured at the Stockholm Challenge Awards, Stockholm, Sweden, last week (22 May).The awards, which offer a €5,000 (around US$7,800) prize to winners, seek to reward projects that overcome social and economic disadvantage in six areas: culture, health, environment, economic development, education and public administration.

One hundred and forty five projects from fifty countries were shortlisted and invited to the biannual awards ceremony.

Digital Green - a project that uses digital video to disseminate training techniques to farmers - won the culture category.

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And it's not just big businesses getting involved. Mikkel Vestergaard-Frandsen is the CEO of a Geneva-based company that makes a variety of disaster relief products.

Mikkel Vestergaard-Frandsen: Entrepreneurs have a can-do attitude that is highly needed to develop new tools, new ideas, new innovation.

So far, Vestergaard-Frandsen's best selling product is a malaria net. But it's the need for clean water that is driving entrepreneurs like him to produce some of the most interesting innovations.

Vestergaard-Frandsen recently developed the LifeStraw. You can stick the 12-inch tube into the filthiest river or lake and suck out clean water. In the last couple of weeks, aid organizations have ordered more than 40,000 LifeStraws to send to Myanmar and China.

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South Africa's MTN is considering a reverse takeover of India's Reliance Communications as part of talks to combine the pair and create an emerging markets telecoms giant, people familiar with the matter said.

The proposal would follow the same structure as one abruptly rejected at the weekend by Bharti Airtel, India's biggest mobile operator by sales, which until last week was locked in takeover talks with MTN.

Under the plan, Reliance Communications' chairman, billionaire industrialist Anil Ambani, would accept MTN stock in exchange for his 66 per cent holding in the Indian company. This would in turn make him the biggest single shareholder in the enlarged MTN.

MTN, which has a market value of about $38bn, would also make a cash tender offer to the minority shareholders of Reliance Communications, India's second- largest mobile phone operator by subscribers, which has a market capitalisation of about $28bn.

A takeover of Reliance Communications by MTN would create one of the world's top emerging markets telecoms groups with a combined market value of close to $70bn and nearly 120m subscribers across Africa, the Middle East and south Asia.

Reliance would gain access to MTN's global network, while MTN would win a significant foothold in the fast-growing south Asian market.

Reliance said yesterday it was opening exclusive talks with MTN for up to 45 days to discuss a potential combination. Mr Ambani said the partnership "would provide investors, customers and the people of both companies a unique and global platform for exponential growth".

The company declined to give further details on the deal and people familiar with the talks said no valuation was available as talks were in the opening stages.

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From The Economist Print Edition

Has "a dollar a day" had its day?

In December 2007 the World Bank unveiled the results of the biggest exercise in window shopping in history. Scouts in 146 countries scoured stalls, supermarkets and mail-order catalogues, recording the price of more than 1,000 items, from 500-gram packets of durum spaghetti to low-heeled ladies' shoes.

This vast enterprise enabled the bank to compare the purchasing power of many countries in 2005. It uncovered some statistical surprises. Prices in China, for example, were much higher than earlier estimates had indicated, which meant the Chinese income in 2005 of 18.4 trillion yuan ($2.2 trillion at then-market exchange rates) could buy less than previously thought. At a stroke, the Chinese economy shrank, in real terms, by 40%.

Since then, many scholars have wondered what this economic demotion means for the bank's global poverty counts. It famously draws the poverty line at "a dollar a day", or more precisely $1.08 at 1993 purchasing-power parity (PPP). In other words, a person is poor if they consume less than an American spending $1.08 per day in 1993. By this yardstick 969m people suffered from absolute poverty in 2004, a drop of over 270m since 1990. The world owed this progress largely to China, where poverty fell by almost 250m from 1990 to 2004.

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India's Reliance Communications has made a fresh approach to acquire MTN, reviving its earlier interest in joining up with the South African mobile carrier to create an emerging markets telecommunications giant.

News of the move follows the sudden collapse at the weekend of talks between MTN and Bharti Airtel, India's biggest cellular operator by subscriber numbers and Reliance's arch-rival. The talks with Bharti broke down amid differences over how to structure a proposed merger of the two companies.

Reliance declined to comment yesterday. But, like Bharti's proposed deal for MTN, an offer by Reliance - India's second-largest mobile carrier and owned by Anil Ambani - was likely to be structured as a merger with the South African operator paid for with cash and shares, people familiar with the matter said.

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For India's Reliance Communications, the breakdown of talks between its arch-rival Bharti Airtel and MTN must be a relief.

A combination of Bharti, India's number one mobile operator by subscribers, and South Africa's MTN would have created a formidable competitor with 130m subscribers across 22 fast-growing markets in south Asia, Africa and the Middle East.

Now, as Reliance pursues its own deal with the South African operator, Bharti's experiences may hold some lessons for India's second- largest mobile operator - and for any other foreign group eyeing MTN.

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Even as America's economy teeters on the brink of recession and many European economies are slowing, central bankers in rich countries fear rising inflation. Yet the risks they face are smaller than those in emerging economies, where inflation has risen far more over the past year to its highest for nine years. There are also an alarming number of similarities between developing economies today and developed economies in the early 1970s, when the Great Inflation took off. Are the young upstarts heading for trouble?

China's official rate of consumer-price inflation is at a 12-year high of 8.5%, up from 3% a year ago (see chart 1). Russia's has leapt from 8% to over 14%. Most Gulf oil producers also have double-digit rates. India's wholesale-price inflation rate (the Reserve Bank's preferred measure) is 7.8%, a four-year high. Indonesian inflation, already 9%, is likely to reach 12% next month, when the government is expected to raise the price of subsidised fuel by 25-30%.

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The last decade has seen a dramatic growth in the communication sector in India. Until the 1980s, a telephone was considered a luxury. There was a waiting list of 20 million. Thanks to the liberalization in government policy and the entry of private players, the situation has changed beyond recognition. Few wish to have a landline today. India represents one of the fastest growing economies in terms of mobile communication penetration with millions of new users being added every month. What makes the transformation remarkable is the diffusion of the technology to the grassroots level. It is quite common to see construction workers, cab drivers, fruit and vegetable vendors, maintenance crew and farmers using the mobile phone as if they were born with the gadget. Consider the following:

• Fishermen in the Southern Indian state of Kerala routinely use mobile phones to ascertain the price of their catch before heading back to the shore.
  Stock Brokers use the device to exchange information about price movements in real time and make buy / sell decisions in seconds.
• Farmers know when to expect rain and can even be warned about any impending natural disaster such as a cyclone.
• Vegetable, fruit and flower growers are directly accessing market information bringing in the process an unprecedented level of disintermediation.
• The young generation finds it an absolute necessity to keep in touch with friends and of course with parents.

In all of this, the most notable feature is that the government has merely been a facilitator. Looking at similar success stories in IT and BT, one is tempted to infer that whenever the government decides to play only a facilitating role, the sector does very well. There is no dearth of either the entrepreneurial spirit or the willingness to take risks and take on the world on its terms. What is needed is a supportive environment.
When the mobile communication technology was introduced in the 1990s, the price of a handset was beyond the reach of an ordinary person. Call rates were as high as 75 cents per minute. Today, with both CDMA and GSM technologies complementing each other, one can get a handset with a pre-paid connectivity and a few hundred free calls for as little as $25. Call rates, including long-distance calls, are just about 2.5 cents per minute. As scale economies are exploited and a critical mass is reached, call rates may go down further.

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