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Friday, October 17, 2003

Cellular Phone Company Gains by Thinking Small

Ms. Gazo, a 33-year-old housewife who lives 600 miles south of Manila in Davao City, is one of more than 100,000 mobile phone users who re-sell Smart's cellular services through a new prepaid service called Smart Buddy e-Load. With a special, $20 chip for her mobile phone, Ms. Gazo can transfer bits of air time to her friends' and acquaintances' phones - as little as 30 pesos worth (about 55 cents)....

.....Prepaid customers buy a computer chip known as a SIM card for their phone that they register with the cellular network by entering a personal identification number. When the chip runs out of credit, they can buy a card with a new PIN allowing them to replenish their credit.

Smart was offering such cards in denominations of as little as 300 pesos. But even that was too much money for many potential rural customers to pay. Printing and distributing more cards to collect smaller sums, however, would add to the company's costs.

Smart discovered a solution in one of its most advanced services. In December 2000, the company introduced something called Smart Money, which enables customers to use their mobile phones to transfer cash from their bank accounts to a MasterCard cash card. Not only can they add funds to their own cash card over their mobile phones, but they can also transfer it to someone else. Husbands can transfer money to their wives without leaving the golf course. Teenagers can get their allowance without leaving the video-game arcade. Smart says 300,000 of its customers are now regular Smart Money users.

Smart then adapted the software for Smart Money to the same philosophy Unilever and Procter & Gamble have used for decades to break into rural markets in Africa and India. A villager might not be able to buy an entire bottle of shampoo or a box of laundry detergent, but he or she can afford to buy enough for a single washing. So Smart decided to miniaturize its prepaid cellular packages.

"This is telecommunications in sachets," said Ramon R. Isberto, Smart's head of public affairs.

Customers with $20 can buy a Smart Buddy SIM card that gives them 1,000 pesos worth of air time, or 100 minutes. They can then sell as little as 30 pesos worth of air time - 3 minutes - to other Smart prepaid customers just by messaging the network the phone number of their customer.

Smart will not say just how much air time is being bought over Smart Buddy, but analysts say more than a third of the companies' prepaid use is already being carried by the service. For Smart, that reduces the need to print and distribute prepaid cards for calls.

Best of all, Smart Buddy buyers can request such a card from re-sellers like Ms. Gazo by phone wherever they happen to be. Ms. Gazo says she has one customer who lives two hours away. Selling to distant customers means selling on credit, but Ms. Gazo said she did not mind.

"It's actually fun," she said.

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