By Piotr Markowski and Shaowei Ying

One of the great changes in modern times has been how fast and how widely the communications revolution has spread. Even in urban squatter settlements or remote villages in the poorest countries, it is routine to see people talking on cell phones.

So far, mobile usage in emerging markets—from Africa to South America to Asia—has been associated with the pay-as-you-go (or “pre-paid”) model, in which consumers pay for a set number of minutes and then top them up as required. As incomes rise and prices fall, however, consumers are likely to shift to the contract (or “post-paid”) model, in which they pay a regular fee, typically by the month. In the Philippines, for example, post-paid service has been growing at 7% a year, more than twice as fast as pre paid.

The advantages of having a larger percentage of post-paid subscribers are considerable. For a start, operators are assured of a more stable revenue stream and lower churn rates. Operators also capture back the margins given to the third-party channel distributors, which are extensively used in emerging markets for selling prepaid top-up airtime. Such margins could range from 10% to 20% of face value. In addition, with access to important information, such as mailing addresses and usage patterns, smart companies are in a position to create targeted campaigns and payment systems  that offer differentiated services.

There are also risks, though. Post-paid service is costlier to provide and the risk of bad debt is higher. Moreover, companies can lose good consumers in the transition.

Here’s how telecoms providers can get ahead of the curve and manage the migration to the post-paid world.

1. Create a compelling value proposition.

2. Choose your customers—and check them out.

3. Leverage retail operations.

To see the discussion on these three points,and to read the rest of the article, download the PDF.