Affordability of global mobile services barely changed in 2020
Despite the impact of the pandemic, mobile users in the 48 markets covered by Kagan spent around 1.29% of their actual personal disposable income on mobile services in 2020.
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Restrictions imposed in many countries around the world in response to the COVID-19 pandemic have led to an unprecedented increase in the use of information and communication technologies to stay connected. Today more than ever, mobile connectivity has become more important to most people. However, affordability remains an obstacle to the enjoyment of mobile services in some markets.
To measure the affordability of mobile services in different markets in a comparable way, Kagan introduced its “Mobile Affordability Index”, a ratio that measures the proportion of income an individual spends on mobile services for each market in our coverage. A lower index value reflects better accessibility.
We calculate the mobile accessibility index for each market by taking the average annualized revenue of the service per user and dividing it by real personal disposable income per capita. ARPU is the closest proxy measure we have for the amount each person spends on mobile services. This measurement is available for the 50 markets in our coverage.
For income, we use actual personal disposable income, or income that returns to all individuals in a market after adjustments for taxes, government transfers and inflation. Removing these adjustments is necessary to give us a clearer picture of how much people consider when spending for their needs. This metric comes from the Economist Intelligence Unit and is only available for 48 markets.
Real disposable income per capita and annualized ARPU for services have a positive correlation coefficient of 0.87, which means that markets with high disposable income per individual tend to have high mobile ARPU as well. The relationship between these two is what allows us to make valid affordability comparisons across markets.
The overall mobile affordability index for the 48 markets in our coverage was 1.29% in 2020. Jordan had the worst value in the index at 4.08%, and Hong Kong had the best at just 0.47%. By way of comparison, the mobile affordability index of we is 0.89%.
This suggests that, on average, mobile users in Jordan spent a greater portion of their personal disposable income on mobile services than their counterparts in the United States and Hong Kong in 2020. In other words, mobile services are the least affordable in Jordan out of the 48. markets on our list.
Rankings show that there is a disparity in the accessibility of mobile services between emerging and developed markets. Emerging markets in Asia Pacific and Africa had the least affordable mobile services, while the developed markets of Europe and Asia-Pacific were the most affordable.
Africa had the worst mobile accessibility index in 2020 at 2.11%, followed by Asia-Pacific at 1.86%. In contrast, more developed regions such as Europe and North America have the best index values at 0.76% and 0.93%., respectively.
Regions with large income differences – namely Africa, Asia-Pacific and the Middle East – also appeared to have the largest affordability gaps. Take for example the Middle East, where Jordan is the least affordable market as mentioned earlier. In the same region, however, is turkey with a mobile accessibility index of 0.78% which is more in line with the value of the weighted index in Europe.
It is important to stress that affordability and price are different measures. While emerging markets such as Jordan may have low prices for mobile services as measured by the annualized service ARPU, this does not necessarily translate into better affordability.
For example, Canada had the highest price for mobile services among the 48 markets on our list. However, because real personal disposable income per capita in Canada is also high, mobile services were more affordable in Canada than in Jordan in 2020.
Measures introduced by mobile operators at the start of the COVID-19 pandemic in March of last year, such as offering free or discounted data services, caused ARPU to drop 5.22% of global service for the 48 markets of our coverage in 2020. Asia- The Pacific recorded the largest price drop at 8.44%, followed by Europe at 3.84% and North America at 3 , 39%.
On the other hand, real disposable income per capita for the 48 markets fell by 1.80%. This resulted in a slight improvement in the mobile accessibility index, from 1.33% in 2019 to 1.29% in 2020. However, this change is not statistically significant at a confidence level of 95 %. This means that the affordability of mobile services has remained essentially the same in 2020 despite the effects of the pandemic.
Wireless Investor is a regular feature of Kagan, a media market research group within the TMT offering of S&P Global Market Intelligence, providing exclusive research and commentary.
This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.