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Rural Connect: Operators bank on VAS to expand beyond urban markets

June 03, 2013

Over the past few years, the untapped rural telecom market has gained importance in terms of revenue generation for telecom players. With saturated Tier 1 and metro circles, operators have shifted focus to rural areas to stem the rapidly declining ARPUs and improve their bottom lines.

To drive the adoption of telecom services in rural areas, operators are looking to fine-tune their value-added service (VAS) portfolio, with an emphasis on voice-based services and localised content. They are offering packages that include rural-specific value-added content and have entered into partnerships with vendors and cooperatives that have large distribution channels. Operators have expedited network roll-outs by sharing passive infrastructure. Besides, they are offering low tariffs on voice and data plans, and applications relevant to farmers and other village communities.

As a result of these steps, small towns and rural areas now account for the bulk of total subscriber additions. According to the Telecom Regulatory Authority of India’s (TRAI) performance indicator report for the October-December 2012 quarter, rural customers accounted for 54.39 per cent of Idea Cellular’s overall user base. Moreover, the overall rural customer base increased from 315.33 million in December 2011 to 338.54 million in December 2012. As compared to this, the urban subscriber base declined from 611.19 million to 556.96 million during this period.

tele.net takes a look at some of the operator initiatives in this space...


Bharat Sanchar Nigam Limited (BSNL) has the biggest rural footprint among the operators. The company provides wireless local loop services to over 400,000 villages and GSM services to more than 350,000 villages. It also offers broadband services in over 170,000 villages.

BSNL has about 650,000 km of optic fibre cable (OFC) networks across the country, which is significantly higher than any other player’s at present. This infrastructure is being leveraged by the government to promote broadband services in rural areas. For instance, the Department of Information Technology has launched the National Optical Fibre Network project in collaboration with the operator to connect 250,000 village panchayats through an OFC network.

Besides, BSNL has recently launched a programme in collaboration with the government to improve connectivity in the rural and tribal areas of the Northeast. The programme entails establishing close to 1,300 common service centres in the region.

 Bharti Airtel

According to the Cellular Operators Association of India (COAI), Bharti Airtel led the rural telecom market with a subscriber base of 83.82 million as of end-April 2013. During this month, the operator added about 1.66 million users and displaced Vodafone India as the leading operator in the rural market.

As a key rural initiative, the operator launched the Apna Chaupal portal for value-added services (VAS), targeted at the rural and semi-urban markets. The portal offers information across several categories such as agriculture and cricket matches in various regional languages.

In 2012, the company collaborated with handygo Technologies to launch the Behtar Zindagi interactive voice response-based service. This facility targets farming and allied communities across Rajasthan and provides access to information on weather updates, mandi rates, agriculture, livestock, fisheries, health, education and finance.

 Vodafone India

As per COAI, the operator added 1.18 million users during April 2013, taking its total rural customer base to 83.42 million by the end of the month. Company officials attribute this growth to Vodafone India’s new rural distribution model, under which people, mostly representing the local panchayats, are appointed to sell the company’s products.

Another key initiative has been the launch of the M-Pesa service in collaboration with ICICI Bank, which allows Vodafone India’s customers to make cash deposits and withdrawals from the company’s designated outlets as well as cash transfers to any mobile handset or bank account in the country. To enable the service, the operator issues a mobile wallet to its customers, which allows them to open a mobile money account with ICICI Bank. The service also allows customers to shop at select merchant outlets and avail of facilities such as mobile recharge and DTH recharge and utility bill payments.

The company has formed a similar tie-up with HDFC Bank, under which the operator acts as a business correspondent for the bank. The pilot phase of this service has been launched in Rajasthan.


Reliance Communications’ (RCOM) rural footprint spans 24,000 towns and over 600,000 villages. RCOM recently signed an agreement with the State Bank of India to offer services such as account balance enquiries, mini statements, fund transfers, chequebook issuance, mobile recharge and bill payments through handsets. In 2011, the operator formed a joint venture, Kribhco Reliance Kisan Limited (KRKL), with Kribhco with the key objective of providing state-of-the-art telecom products and services in rural areas. Through its network of over 25,000 cooperatives and 60 Krishi Seva Kendras, KRKL aims to develop a distribution model to cover the majority of the country’s rural population.


With the aim of “banking the unbanked”, Tata Teleservices Limited (TTSL) recently formed a strategic tie-up with ICICI Bank through its wholly owned subsidiary MMP Mobi Wallet Payment Systems for launching a money transfer service.

As per the agreement, MMP acts as ICICI Bank’s business correspondent. Customers can avail of the money transfer facility, through which funds are transferred to the payee’s bank account via electronic fund transfer mechanisms.

 Idea Cellular

As of December 31, 2012, the operator had a presence in 293,139 villages and 4,633 towns. The company claims to have the highest share of rural customers in the overall subscriber base amongst the GSM players. These subscribers account for two-thirds of its total revenues. In fact, two of the company’s every three new subscribers belong to rural/semi-urban areas. According to COAI, Idea’s rural subscriber base stood at 66.64 million in end-April 2013.

The rural segment is a key focus area for the company. To strengthen its presence in this market, the operator has launched innovative VAS. For instance, it has introduced a special weekend recharge voucher in Tamil Nadu. Priced at Rs 4, the recharge coupon allows users to make local calls at Re 0.10 per minute within Idea’s network and at Re 0.30 per minute on other networks.

The operator is also offering the Idea MyCash m-banking facility in partnership with Axis Bank. Besides offering basic banking services like cash deposits, withdrawals and balance enquiry, the mobile-based financial inclusion initiative allows transfer of money by the migrant population in cities to beneficiaries in rural areas.

Net, net, industry analysts are of the view that the rural market will continue to witness significant activity going forward. However, operators still face a number of challenges while providing services in these regions. One of the major challenges is the high customer acquisition cost. As per industry estimates, the cost of acquiring a subscriber in rural areas is 50 per cent higher than that in urban markets, owing to high sales and distribution costs. Moreover, operators have to incur 25 per cent additional expenditure in providing services to a rural customer as against an urban subscriber. This increases the overall cost of operations in the rural market.



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