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Operator Strategies - Initiatives to increase rural connectivity

June 15, 2009
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As the next level of growth will come from the rural areas, over the past two years, telecom operators have increased their focus on these regions and have customised their strategies to target rural users. They are, for instance, offering local language-based subsidised handsets, lower tariffs and applications that are of use to farmers and village communities.

Many operators are also selling handsets with their value-added services (VAS) content pre-embedded in the phones and are devising consumer-friendly VAS applications that can be accessed by just twothree keys since complicated applications deter rural consumers.

In order to expedite network rollout in these regions at reduced costs, operators are opting for infrastructure sharing in a big way. Bharti Airtel, Vodafone Essar and Idea Cellular have formed a common tower infrastructure company, Indus Tower, at an enterprise value of Rs 150 billion, with the primary focus on building telecom towers in small towns and rural areas.

A look at the strategies adopted by leading telecom operators to accelerate their push into the rural regions...

Bharti Airtel

With rural users accounting for about 30 per cent of its total subscriber base, Bharti Airtel is leading in the rural mobile space. The company started focusing on rural markets in 2007 and has since made significant progress. Today, rural subscribers constitute 57-60 per cent of the company's monthly subscriber additions. Its rural penetration has increased from 6 per cent in 2007-08 to about 13 per cent as of early 2009.

In 2008, the company partnered with public sector fertiliser major Indian Farmers Fertiliser Co-operative Limited (IFFCO) to provide telecom services to rural households, a joint venture (JV) that has clearly been successful. Riding on IFFCO's cooperative network, the JV is selling subsidised handsets with Airtel connections to farmers.

To extend its rural penetration, the company also relies heavily on distributors and retail outlets. It has customised its service delivery platform for rural markets and is using marketing strategies targeted specifically at this segment. It iprovides useful rural-specific information on mandi prices, weather forecasts, pest control and dairy farming.

With approximately 400 different dialects prevalent in the country, the company intends to serve local communities in their language and has set up 18,000 Airtel service centres in villages for this purpose.These centres are empowered to sell and exchange sim cards, activate, reactivate, recharge and provide suitable value-added services. The company intends to increase this number to over 100,000 centres. It has also tied up with Nokia to roll out over 200 vans that sell mobile phones along with Airtel connections.

Estimating the potential of the rural mobile market to be around $10 billion by 2010, the company intends to extend its rural coverage to 500,000 villages by 2010, up from approximately 400,000 at present.

Reliance Communications

Besides targeting a larger share of the GSM subscriber pie, Reliance Communications (RCOM) is relying heavily on rural subscriber growth and has launched products aimed specifically at the rural consumer.

About 53 per cent of the company's subscriber additions in 2007-08 comprised rural users. As of December 2008, RCOM had 12.28 million rural subscribers, accounting for 20 per cent of its total subscriber base.

This was the result of its concerted efforts to increase its rural footprint. One such initiative was the Rural Direct Exchange Lines Project that involved providing telephone connections to over 737,000 new subscribers in 203 short distance charging areas (SDCAs) covering over 40,000 villages till March 31, 2007 under the Universal Service Obligation (USO) Fund. About 912 base transceiver station (BTS) towers were installed by the company in these SDCAs.

RCOM plans to extend its coverage to 550,000 of the 593,000 inhabited villages in the country. The company hasadopted a two-pronged strategy involving both conventional and non-conventional channels for penetrating these regions.Besides using conventional telecom outlets, the company is also using local shops, farming outlets and hardware shops that have an understanding of the local market. For local businessmen, this offers a good opportunity to increase their business avenues.

RCOM's CDMA technology supports the data platform and Reliance World services have been customised to meet rural requirements in terms of regional languages, mandi rates, etc. The company is also offering an e-recharge facility that allows easy recharging for rural customers.

In the rural areas in Tamil Nadu, the company is expanding its distribution reach to 13,500 of the 15,000 villages in the state and has appointed around 100 distributors to reach 4,000 rural outlets, including tailor shops, and grocery, fertiliser and seed sellers. These outlets will sell products like the company's mobile connections (bundled with handsets or otherwise), fixed wireless phones and data cards. In West Bengal, the company is handling an e-governance project along with the state government to provide ekiosks in villages.

RCOM is also conducting Wi-Max trials in rural areas. With industry experts estimating that nearly 20 per cent of internet users are emerging from the hinterland, the company is planning a major rural push for its high speed wireless internet service and is targeting a 30 per cent share of the rural internet subscriber base over the next one year. In order to achieve this target, RCOM intends to roll out the service on a pan-Indian basis across 400,000 villages and 20,000 smaller towns.

Clearly, the company is driving its rural expansion on all fronts –­ wireline, wireless and internet.


Even as private operators expedite network rollout to increase their rural reach, incumbent Bharat Sanchar Nigam Limited (BSNL), which accounts for over 99 per cent of the rural wireline market, is developing strategies to increase its rural subscriber base. The company has earmarked around 6,000 of its 7,871 new towers for these areas with support from the USO Fund.

The state-run company has also started installing public telephones in 50,000 newly identified villages. These 50,000 villages include new villages with a population of less than 100 people and those that had been left out earlier. With this, all the villages in the country will be covered by public telephony services.

On the wireless front, BSNL's GSM coverage extends to about 256,000 villages, which accounts for over 43 per cent of the total number of villages. The company's rural wireless subscriber base stood at 16.29 million as of December 2008.BSNL also covers 75 per cent of the villages through its WLL network. The company has, moreover, brought 30,500 villages under broadband cover.

In a bid to improve telecom services, Department of Telecommunications and BSNL have come together in a venture to install wireless broadband links in rural and remote areas. The scheme, which will be supported by the USO Fund, is targeted at institutional customers like common service centres and will be set up by the Department of Information Technology.

Other players

Rural telephony is a key part of other operators' growth plans as well. Vodafone Essar, the country's third largest mobile operator, has earmarked 70 per cent of its capex for building its rural infrastructure. It has also introduced special tariff packages for rural customers.

The company is promoting its services through TV and local activities. For instance, it uses mobile vans which give product demonstrations and provide information on tariff plans and services. Vodafone Essar's rural subscriber base, at 19.19 million as of December 2008, accounts for 31.49 per cent of its total.

Similarly, for Idea Cellular, the rural subscriber base accounts for 33.82 per cent of its total subscriber base. It is taking several initiatives to increase its presence in these areas. In an attempt to address the erratic power supply problem in villages, the company installed biodiesel-powered mobile base stations as early as 2007.

The rural areas are clearly a strong focus area for telecom operators. With specific strategies drawn up for this key segment, the momentum for rural connectivity is all set to grow.

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