Affordability of global mobile services barely changed in 2020

Withstanding the impact of the pandemic, mobile users across the 48 markets covered by Kagan spent approximately 1.29% of their real personal disposable income on mobile services in 2020.

Click here to see the underlying data in Excel format (clients only).

Restrictions in many countries around the globe in response to the COVID-19 pandemic brought an unprecedented increase in the use of information and communication technologies to stay connected. Now more than ever, mobile connectivity has become more important for most people. However, affordability remains a barrier to enjoying mobile services in some markets.

To measure the affordability of mobile services across different markets in a comparable manner, Kagan has 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 affordability.

We calculate the mobile affordability index of each market by taking annualized service average revenue per user and dividing it by real personal disposable income per capita. ARPU is the closest proxy measure that we have available for the amount each person spends on mobile services. This metric is available for all 50 markets in our coverage.

For income, we use real personal disposable income, or income that accrues to all individuals in a market after adjustments for taxes, government transfers and inflation. Taking out these adjustments is necessary to give us a clearer picture of the amount that people consider when spending for their needs. This metric is sourced from the Economist Intelligence Unit and is only available for 48 markets.

Real disposable income per capita and annualized service ARPU have a positive correlation coefficient of 0.87, which means that markets with high disposable income per individual tend to also have high mobile ARPU. The ratio between these two is what allows us to make valid affordability comparisons across markets.

The aggregate mobile affordability index for the 48 markets in our coverage stood at 1.29% in 2020. Jordan had the worst index value at 4.08%, and Hong Kong had the best at just 0.47%. For comparison, the mobile affordability index of the U.S. is 0.89%.

This suggests that on average, mobile users in Jordan spent a larger portion of their personal disposable income on mobile services than their counterparts in the U.S. and Hong Kong in 2020. In other words, mobile services are the least affordable in Jordan out of the 48 markets on our list.

It is apparent from the rankings that there is a disparity in the affordability of mobile services between emerging and developed markets. Emerging markets in Asia-Pacific and Africa had the least-affordable mobile services, whereas developed markets in Europe and Asia-Pacific had the best affordability.

Africa had the worst mobile affordability index in 2020 at 2.11%, followed by Asia-Pacific at 1.86%. In contrast, more developed regions such as Europe and North America had the best index values at 0.76% and 0.93%, respectively.

Regions with wide income differences — namely Africa, Asia-Pacific and the Middle East — also appeared to have the largest affordability variances. Take for instance the Middle East, where Jordan is the least affordable market as mentioned earlier. In the same region, however, is Turkey with a mobile affordability index of 0.78% that is more in line with the weighted index value in Europe.

The same can be said for Morocco (3.22%) versus Egypt (1.34%) in Africa, and Thailand (2.69%) versus Hong Kong (0.47%) in Asia-Pacific.

It is important to emphasize that affordability and price are different metrics. Although emerging markets such as Jordan may have cheap prices for mobile services as measured by annualized service ARPU, this does not necessarily translate to better affordability.

For instance, Canada had the most expensive price for mobile services among the 48 markets on our list. However, since 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 last year, such as offering free or discounted data services, caused the aggregate service ARPU for the 48 markets in our coverage to drop by 5.22% in 2020. Asia-Pacific had the largest drop in price 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 all 48 markets declined by 1.80%. This resulted in a slight improvement in the mobile affordability index, from 1.33% in 2019 to 1.29% in 2020. This change, however, is not statistically significant at a 95% confidence level. This means that the affordability of mobile services remained essentially the same in 2020 despite the effects of the pandemic.

Wireless Investor is a regular feature from Kagan, a media market research group within S&P Global Market Intelligence's TMT offering, 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.