Rural Markets Next Frontier for Telecom Operators

by Abhinna Shreshtha & Muntazir Abbas    Jun 03, 2009

A vast and relatively untapped rural market in India can be the next
frontier for mobile service providers. Despite government efforts, and
operator initiatives, a lot of groundwork is still required for mobile
telephony to truly penetrate the Indian rural market

According to the Telecom Regulatory Authority of India (TRAI), India currently has more than 400 million wireless subscribers. Tele-density (phones per hundred) has also reached the 37.94 mark; of which rural density is still low at 12.62 per cent.

The scenario may soon change. Telecom operators and OEMs have realized the importance of the rural India. Bharti Airtel has already announced its intention of becoming a ‘rural company’ in the near future (currently, about 30% of Bharti’s wireless subscriber base is from rural areas).

Not to be left behind, Reliance Communications is also extending its rural presence. Speaking to CXOtoday, S.P Shukla, president (wireless) of Reliance Communications admitted that the future growth of telephony is in rural areas. According to him, prepaid service will be especially attractive to users in rural areas as it prevents the customer from getting tied down to a fixed cost.

The government too is leaving no stone unturned when it comes to promoting rural telephony. In 2002, the Indian government had set up the Universal Service Obligation Fund (USOF), to promote efforts towards increasing rural tele-density. The USO fund works as a sub-department of the Department of Telecommunications (DoT).

The resources for implementation of USO are raised through a universal service levy (USL) which has presently been fixed at 5% of the Adjusted Gross Revenue (AGR) of all telecom service providers. Till now, The USOF has been allocated funds of around Rs. 20,000 crore, however, only about Rs 6,000 crore has been allocated and disbursed till now. TRAI is now recommending that the USOF be revamped and made an independent body.

Meanwhile, OEMs are also looking to get a piece of the rural mobile market pie. Take the example of Nokia, the mobile giant has tied up with service providers like Airtel and Idea for launching an educational initiative in order to give rural users a live experience on mobility services that include hands-on training on making the first phone call and sending SMS with localized content.

"Our retail strategy is focused on making Nokia handset available in every town or village that has a mobile retail outlet and mobile network. To further reach out to tier 3-4 towns and villages and to educate rural consumers on the benefits of mobility, we have deployed Nokia vans across the country," said Vipul Sabharwal, director of sales at Nokia India.

Related links:

Rural India Getting Mobile Savvy
Affordable Services must for Rural Telephony 

MTS Forays into Indian Mobile Telephony Market
Better Handsets, Smart phones for CDMA Subscribers