Friday, October 30, 2009

Strategies for mobile industry to maximize rural India opportunity

HYDERABAD, INDIA: According to a new report from Ovum, rural India presents significant growth opportunities for the mobile industry. However, due to low ARPU and the higher cost of providing services in rural India, operators face the challenging task of serving these areas profitably.

”Due to huge population base, low teledensity and strong socio-economic developments, rural India is becoming an important growth frontier for the mobile industry”, said Amit Gupta, Principal Analyst, based in India. However, half of the rural population is too poor to afford even the cheapest handset, and among those who can afford one, a mobile phone is likely to be a family device as opposed to an individual one.

“Despite a huge rural population and low teledensity, the addressable market in the short to medium term is less than 200 million unique subscribers out of a total population of more than 800 million.” explains Gupta, author of this research.

While low spending power of end customers has adverse impact on adoption and ARPU, limited electrification, a lack of backhaul and the poor state of road connectivity make deploying and operating a wireless network in rural areas expensive. Therefore, mobile business case in much of rural India is very challenging.

To overcome these challenges, operators need to shift their primary focus from increasing ARPU and penetration to maximising total revenue and profit from the servable rural subscribers.

It can be achieved by adopting a comprehensive rural strategy comprising service and product innovation and operational excellence; partnering with the government, non-government organisations and non-telecoms players; and employing local entrepreneurs. “These levers are mutually reinforcing and can help industry players to meet the dual objectives of increasing revenues and reducing costs,” adds Amit Gupta.

The industry’s success in rural India so far can be attributed to efforts in the areas of service and product innovation, operational excellence, partnering with non-government organizations, and employing local entrepreneurs. “However, we believe that the industry needs to further explore partnership opportunities with the government and non-telecoms companies,” said Gupta.

Amit Gupta says: “Operators can circumvent the poverty constraints of rural India to a certain extent by forming partnerships with the government and non-telecoms companies to charge them, rather than the poor end customers, for providing mobile services”. “The government and non-telecoms companies get a reliable medium to connect with rural India, and operators get new revenue streams. It’s a win-win solution.”

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