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Teledata

Tele Data

Mobile Subscribers Yearwise comparision

Growth Avenue: Rural areas offer new opportunities for expansion

June 03, 2013

Rural markets which were previously underexplored are now gaining prominence as a growth avenue for the Indian telecom industry. The urban markets, with a teledensity of over 146.96 per cent as of March 2013, are nearing saturation and have little to offer to telecom operators. This has shifted service providers’ focus to rural areas in order to achieve the next phase of growth.

Over the years, these areas, which account for over 60 per cent of the country’s total population, have been showing a growing demand for voice services.

In fact, the rural segment has also been witnessing a steady uptake of value-added services (VAS). Mobile broadband has become an important tool to empower the rural population. There is increasing demand for data-intensive applications and 3G services in the rural areas. For instance, Idea Cellular’s 3G subscriber additions have largely come from rural and suburban areas, with most of the additions being recorded from remote villages in Maharashtra, Madhya Pradesh, Assam, Bihar and Uttarakhand.

Operators are now focusing strongly on their rural strategy and are devising solutions to address issues related to the affordability and attractiveness of telecom services in these areas. They are specifically targeting rural customer needs and developing business models to tap this market.

The targets for rural growth set under the National Telecom Policy, 2012 will be a key growth driver for this segment. The policy aims to achieve a rural teledensity of 60 per cent by 2017 and 100 per cent by 2020. Understanding the diverse customer base in these areas and developing customised service models will be key to increasing rural telecom penetration. Going forward, this segment will play a significant role in driving telecom growth in the country.

Current status

As of March 2013, the rural subscriber base stood at 349.22 million, accounting for around 39 per cent of the total telecom subscriber base. Rural teledensity stood at a little over 40 per cent. No doubt, these figures are modest when compared to the urban telecom subscriber base of 544.86 million and teledensity of 146.15 per cent. However, the growth in rural telephony is commendable when compared to the status in December 2009, when the rural subscriber base stood at 174.53 million and teledensity at 21 per cent. Moreover, the share of rural users in total users has been rising steadily, and stands at over 50 per cent for operators such as Idea Cellular and Vodafone India.

Operator-wise, Bharti Airtel has the highest number of GSM rural subscribers in the country. As of April 2013, it had 83.82 million rural subscribers, followed by Vodafone India with 83.42 million and Idea Cellular with 66.64 million.

 Key trends and industry initiatives

Several factors have led to the development of telecom infrastructure and services in rural areas. Operators have resorted to infrastructure sharing, introduced several affordable tariff plans, and collaborated with VAS providers, content developers and handset manufacturers to make inroads into the rural areas. The government has also played a key role in improving the rural ecosystem. Some of the key trends in this space are:

  • Availability of localised and relevant content: The limited use of telephony and broadband services in rural areas can be largely attributed to the lack of awareness about these services. Operators are making concerted efforts to address user needs by providing relevant services in local languages.

In February 2013, Bharti Airtel launched Apna Chaupal – a one-stop solution portal for VAS in rural and semi-urban regions. The portal enables customers to access services and information related to agricultural techniques, mandi rate updates, government jobs and entertainment applications in regional languages. The operator has formed a joint venture (JV) with Indian Farmers Fertilizer Cooperative Limited to offer low-cost handsets and provide voice-based services for disseminating agriculture-related information.

Idea Cellular, in collaboration with handygo Technologies, also offers a rural information service called Behtar Zindagi. The VAS player has partnered with several organisations such as the India Meteorological Department, Aviva Life Insurance and Hariyali Kisaan Bazaar for providing information related to the weather, livestock, mandi rates, and finance- and health-related schemes in local languages. Idea has also partnered with Reuters for providing an agricultural information SMS service – Reuters Market Light.

Tata Teleservices Limited (TTSL) and Nokia have been providing Nokia life tools, an SMS-based subscription information service on health care, agriculture, education and entertainment. TTSL has also collaborated with the Maharashtra government to launch MahaOnline, a portal that offers various online services to over 10,000 rural citizens in the state. The portal provides customers with online birth and death certificates, no-objection certificates, solvency certificates, etc.

Similar services such as m-Health and m-Education, and job portal applications have been launched by operators like TATA DOCOMO, Aircel, Vodafone India and Uninor. Aircel and Apollo Hospitals have entered into a partnership to help patients in rural areas avail of medical services remotely.

•   Distribution channels: Operators have also been making significant attempts to augment their distribution channels serving the rural population. For better service adoption, operators have been offering telecom services at affordable rates and have also been partnering with local bodies and panchayats for efficient distribution of these services and products. For instance, Vodafone India has opened several Vodafone Mini Stores to get a foothold in the rural market. These stores are managed by a local resident, who is generally a member of the village panchayat. Currently, the company has over 5,000 such stores across the country.

Reliance Communications (RCOM) had launched a JV with Krishak Bharati Cooperative Limited (KBCL), a multi-state cooperative society, to distribute the operator’s products and services. RCOM has been leveraging KBCL’s network of over 25,000 cooperatives and 60 Krishi Seva Kendras to expand its rural presence.

•   Device ecosystem: According to a research study by Accenture, “simplicity” continues to be a key driving factor for the adoption of telecom services in rural areas. Rural users demand services that are simple and devices that are cheap and easy to operate. Voice continues to be the top priority for these customers. Vendors and handset manufacturers have realised the rural potential and have made significant innovations in their product portfolios to cater to this market more efficiently. For instance, the Nokia 110 series of mobile phones has an inbuilt flashlight and dust-resistant keyboard. Similarly, Motorola has come up with low-cost handsets with a long battery backup to cater to the power-deficit rural market. Recently, several operators have started launching low-cost handsets and tablets to enhance device affordability in these regions. Bharat Sanchar Nigam Limited (BSNL) has been a pioneer in this space and has launched several products specifically designed for the low-end consumer segment.

•   Infrastructure roll-out: Rolling out infrastructure in rural areas is not a very lucrative proposition for operators as it requires huge investments. Moreover, the return on investment is not very high as these areas are generally characterised by low ARPUs. As a result, most of the rural regions suffer from non-availability of backhaul and last mile connectivity. Over the years, operators have resorted to infrastructure sharing for optimum utilisation of the existing tower infrastructure in these areas.

In addition, the government incorporated the Universal Service Obligation (USO) Fund in 2002 to provide financial assistance for rolling out telecom infrastructure in rural areas. So far, Rs 157.84 billion has been disbursed by the fund under various schemes. Consequently, around 62,000 village public telephones, over 7 million rural household direct exchange lines and about 7,300 towers have been installed across rural areas through subsidies provided by the USO Fund.

BSNL currently has the largest rural network and serves around 150,000 of the country’s total 250,000 panchayats. It has partnered with the central government and has launched various schemes to reach out to the rural population for effective governance through common service centres (CSCs). The operator recently set up about 1,300 CSCs in Meghalaya, Mizoram and Tripura.

Another key step taken by the government to enable effective project execution and ensure service availability in rural areas is the implementation of the National Optical Fibre Network (NOFN) project. Under the project, broadband connectivity will be provided to 250,000 gram panchayats through an optic fibre cable network.

Infrastructure roll-outs in the rural areas have largely been undertaken by the government. However, of late, more and more operators are turning towards the rural areas for revenue generation.

•   Financial inclusion: The large rural population lacks adequate banking facilities. Telecom operators are looking to plug this gap by using mobile connectivity to bring in financial inclusion. To this end, all the major operators have tied up with banks to enable rural subscribers to conduct basic financial transactions through their phones. For instance, Idea Cellular has, in partnership with Axis Bank, launched the Idea MyCash application that allows Idea’s customers to avail of services such as cash deposits and withdrawal, balance enquiry and money transfer. Vodafone India has collaborated with ICICI Bank to launch a similar initiative. The service has been launched in Kolkata, West Bengal, Bihar and Jharkhand, and is slated to be rolled out in other parts of the country over the next 12-18 months. Bharti Airtel’s Airtel Money Super account allows customers to open a no-frills account for banking transactions.

•   Energy management: About 50 per cent of the total telecom towers are located in the country’s rural and sub-urban areas.  These areas are characterised by unreliable power supply and poor grid connectivity. Thus, most of these towers are operated on diesel, which is a costly proposition. Several energy management practices such as the use of alternative energy sources have been implemented in the rural segment to operate the towers. Operators have partnered with renewable energy companies to set up power infrastructure for towers in off-grid regions as well as in areas with poor grid connectivity. For instance, Bharti Airtel has signed an agreement with OMC Power to set up micropower plants to energise telecom tower sites in the rural areas using renewable sources. This has reduced the use of diesel-powered gensets at tower sites and has benefited rural households in the vicinity by supplying them electricity to power fans, lights, televisions, water pumps, etc.

•  Broadband initiatives: Broadband connectivity in rural regions has been poor so far. This is mainly due to inadequate transmission media connectivity in villages, high service roll-out costs and lack of a viable business model. Currently, BSNL has over 25,000 ADSL DSLAMs in rural areas. The operator has also set up a vast wireline broadband network in collaboration with the USO Fund. As per the rural broadband schemes under the fund, BSNL is required to provide 861,459 wireline broadband connections to individual users and government institutions by 2014. Further, over 360,000 broadband connections are being provided across rural exchanges in the country.

Meanwhile, private operator initiatives have largely been missing in the rural broadband space. However, the scenario is expected to change with the roll-out of the NOFN, which will provide non-discriminatory access to the fibre network to all operators, who, in turn, can provide services through this platform to rural consumers.

Conclusion

The once underexplored rural market has come a long way today. Operators which had been using urban strategies for rural areas are now modifying their approach, based on detailed customer segmentation and analysis of rural customer needs.

It will, no doubt, take some time for this segment to become a mainstream source of revenue for operators. However, with all industry stakeholders – operators, VAS providers, vendors, handset manufacturers and the government – stepping up their focus on the rural market, the telecom sector can expect the next wave of growth to come from these areas.

 
 

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