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Rural Promise: Operators explore untapped potential

July 20, 2016
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While the telecom sector has witnessed significant growth in urban India, whether it is transitioning from voice to data or adopting 3G and 4G technologies, rural areas have largely remained excluded from India’s telecom success story. However, the situation has improved in recent years as operators have turned to rural areas to compensate for saturating growth in the voice market in urban areas. Rural subscribers account for close to half of the total subscriber base for incumbent operators. They have strengthened their distribution reach in these markets and have introduced several rural-specific products and services. In addition, there are several handset players today that are catering exclusively to users in Tier III cities and rural areas. Further, national-level projects such as BharatNet and Digital India have been envisaged to pave way for rural users to experience the same telecom revolution as is being witnessed by their urban counterparts.

According to the Telecom Regulatory Authority of India, India had 449.17 million rural subscribers as of March 2016, accounting for 42.42 per cent of the total subscribers. The teledensity stood at 51.37 per cent. However, when compared to the urban teledensity of 154.01  per cent, there seems to be considerable growth potential in the rural market. Rural India comprises 68 per cent of the country’s total population, the majority of which remains underserved.

Changing rural dynamics

Shift towards data: Even as voice services continue to dominate the telecom space in rural areas, data services are catching up. Significant growth is taking place in rural areas in terms of the adoption of innovative services like m-banking and m-governance, and new technologies like machine-to-machine and internet of things. M-governance services like Mobile Seva, mKisan, Behtar Zindagi, Apna Chaupal and private services like m-paisa are gaining momentum. Further, there is a rise in data uptake in rural areas owing to the proliferation of attractively priced 3G-enabled smartphones. In rural areas, data services are used mainly by the youth to download songs, movies and entertainment clips.

Innovative business models: Unlike urban users, rural subscribers are extremely price sensitive with little or no brand loyalty. Thus, operators have devised innovative acquisition and retention strategies for these areas. For instance, operators have launched many low-cost recharge options as most of the rural subscribers are prepaid users.

They have also resorted to infrastructure sharing in rural areas to enhance coverage with the aim of providing better coverage in a cost-effective manner. They have collaborated to overcome infrastructural challenges in these areas. In addition, operators have introduced attractive and affordable tariff plans such as lifetime prepaid cards, micro prepaid cards and low-cost handsets to improve mobile penetration in rural areas. Moreover, operators have made efforts to strengthen their sales and distribution channels for the better provisioning of services in rural regions. Bharti Airtel has developed a multilayered distribution network and employed small retailers in rural pockets to ensure the easy availability of recharge coupons. Similarly, Vodafone India has launched Associated Distributor Vodafone Mini Stores to strengthen its footprint in the rural market. These are managed by local residents, often members of the village panchayat. Meanwhile, Idea Cellular has set up several rural service centres and camps for customers. Reliance Communications (RCOM) has formed a joint venture (JV) with Krishak Bharati Cooperative Limited (KBCL), a multistate cooperative society, for distributing its products and services. The operator has been leveraging KBCL’s network of over 25,000 cooperatives and 60 Krishi Seva Kendras.

Relevant content for better uptake: Unfamiliarity with devices and technology has discouraged the rural populations from using mobile phones and broadband services. As per industry estimates, 70 per cent of non-data users at present are unaware of the benefits offered by the internet. Therefore, internet education is crucial to make users aware of the benefits offered by broadband-based services like m-health, m-education and m-banking.

To this end, operators are now engaging more with people to educate them about the use of telecom services. They are taking initiatives to develop the rural telecom ecosystem by providing relevant and customised applications in local languages and spreading awareness about mobile broadband and its potential in order to create a strong and receptive consumer base. There are many mobile-based applications for farmers to seek information regarding crop prices, weather forecasts, new farming methods, etc. Handygo’s Behtar Zindagi, an IVR-based value-added service (VAS) that is targeted at the rural population, has seen significant uptake. Operators like Idea Cellular, Bharti Airtel and RCOM have collaborated with Handygo to extend this service to the rural segment. It provides information on agriculture, market rates, weather forecasts, livestock, finance, education, as well as health care for women and children. Since its launch in 2009, farmers have been using Behtar Zindagi for planning crop seeding during the monsoon season. This has enabled them to get timely weather updates even during rains and continue with the planting process accordingly. The availability of the service in local languages is proving to be a big advantage. Vodafone India has launched an initiative called Kisan Mitra to enhance the productivity of farmers. Bharti Airtel had launched a similar programme, Airtel Kisan Mitra, in 2010. This project reiterated the benefits offered by IFFCO Kisan Sanchar Limited, a JV between Bharti Airtel and the Indian Farmers Fertiliser Cooperative. M-banking and mobile money services are also emerging as key VAS offerings for the rural segment.

Government initiatives: Over the past few years, the government has undertaken a wide range of reforms to drive inclusive growth across the country. The focus has been on improving the lives of people in rural areas by giving them access to basic information and a host of valuable services by leveraging information and communication technology. At present, the central and state governments along with private players are delivering a number of e-services for the rural population in areas like agriculture, health care, education and banking.

Further, the country has more than 100,000 common service centres (CSCs) covering 600,000 villages. These centres serve as front-end delivery points for providing government, private and social sector services to the rural population. The wide CSC network has helped the government adhere to the concept of e-governance in a better manner, by improving service access, enhancing transparency and reducing response times. The reach of e-services is expected to grow in the future as the government’s Digital India initiative takes shape. In addition, the BharatNet project is a step in the right direction for bringing rural high speed broadband access to rural customers.

Challenges continue

While rural telephony is undergoing major transformation, the progress remains slow. The rural telecom space does not present a satisfactory business case as low minutes of usage and MBs of data translate into lower revenues and profits for operators. Further, the cost of providing services in rural areas is huge owing to the challenges involved in laying fibre and cables. The infrastructure roll-out process is highly capital intensive in these areas, with rough and inaccessible terrain adding to costs. Besides, the situation of grid availability at tower sites continues to be disappointing, forcing operators to explore alternatives, which, in most cases, is a diesel generator set. High diesel costs, coupled with transportation challenges, lead to an almost fourfold increase in prices, as compared to regions with adequate grid power supply.


In spite of several infrastructural bottlenecks that are impeding the progress in rural areas, the segment is slowly gaining operator attention. This is because of the huge untapped potential in terms of data and voice services as well as other services like m-banking, m-health and m-education. Rural subscribers are potential users of high-bandwidth data owing to their appetite for entertainment services.

The telecom situation in rural areas is likely to improve as the BharatNet and Digital India initiatives gather steam. The two projects are expected to increase broadband penetration as well as private sector participation in rural areas.

In addition, the recently released mobile virtual network operator (MVNO) guidelines would also improve telecom dynamics in rural areas. MVNOs can help the incumbents by reducing customer acquisition costs in rural markets. The right set of operator strategies, coupled with strong government initiatives can go a long way in reshaping the telecom scenario in rural India.

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