Indian Telcom Industry 2009Ver1

8/14/2019 Indian Telcom Industry 2009Ver1

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Project Report

Dated: December 2009

Subject: Rural MarketingTopic: Wireless Telecommunication towards Rural

Submitted to: Prof Shrijay Devaraje UrsSubject: Wireless Telecommunication towards RuralDepartment: Institute of Departmental StudiesUniversity: Mysore

State: Karnataka

Submitted by: Pradeep Kumar VSubject: Rural MarketingTopic: Wireless Tele Communication towards RuralCourse: MBA - AgribusinessDepartment: Institute of Departmental StudiesUniversity: Mysore

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CONTENTS

Title Page No

1.Indian Telecommunication Industry 3

2 Telecom Regulatory Authority of India (TRAI) 5

3.Industry Revenue (2002-2010) 16

4. Emerging Rural Mobile Market in India 20

5. What Next? 33

6. The Challenges 34

7. Rural Telecom Market an emerging market 35

8. The Pay Per Second Billing Model 40

9. Rural Telecom Strategies 43

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Indian Telecommunication Industry

In 1880, two Telephone Companies viz. The Oriental Telephone Company Ltd. andThe Anglo-Indian Telephone Company Ltd. approached the Govt. of India forpermission to establish Telephone Exchanges in India. The permission was however

refused on the grounds that the establishment of Telegraphs was a Governmentmonopoly and that the Government itself would undertake the work in the event ofsufficient demand. By 1881, Govt. of India changed their earlier decision and licenceswas granted to the original Oriental Telephone Company Limited of England foropening Telephone Exchanges at Calcutta, Bombay, Madras, Karachi andAhmedabad.

Introduction

The number of telephone subscribers in India increased to 464.82 Million at theend of June-09 from 429.72 Million in Mar-09, thereby registering a growth rateof 8.17%. With this, the overall Tele-density in India reached 39.86 as on 30th

June 2009.

Subscription in Urban Areas increased to 328.55 Million and Rural subscriptionincreased to 136.27 Million. Rural Teledensity reached 16.61 and urbanTeledensity 95.05 at the end of June-09. The share of rural subscribers increasedto 29.3% in total subscription.

Composition of Telephone subscribers

Urban Wireless

64.8%

Urban w ireline

5.9%Rural w ireless

27.1%

Rural Wireline

2.2%

Internet subscribers increased to 14.05 million at the end of June 2009registering a quarterly growth rate of 3.80%. However, this growth rate is lowerthan the growth rate seen in the previous quarter (5.3%).

Average Revenue Per User (ARPU) for GSM-Full Mobility service declined by 10%from Rs. 205 in QE Mar-09 to Rs. 185 in QE Jun- 09.

ARPU for CDMA Full mobility service declined by 7.2% from Rs. 99 in QE Mar-09 to Rs. 92 in QE June-09.

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ARPU for dialup Internet usage increased by 2.97% from Rs. 236.47 in QE March2009 to Rs 243.50 for the quarter ending June 2009.

MOU per subscriber for GSM Full mobility service continued to show a decliningtrend. It declined by 6.19% from 484 in QE Mar- 09 to 454 in QE Jun-09.

The outgoing MOUs declined by 5.30% and incoming by 7.04%. MOU persubscriber for CDMA-full mobility service declined by 4% from 357 (Q.E March2009) to 342 (Q.E June 2009). The Outgoing MOUs declined by 2.7% andIncoming MOUs declined by 5.2%.

Gross Revenue (GR) and Adjusted Gross Revenue (AGR) of Telecom Sector forthe QE June-09 has been Rs 39,108.33 Crore and Rs. 29,732.52 Crorerespectively. There has been a reduction of 3.3% in GR as compared to previousquarter. AGR has shown slight increase of 0.02% vis--vis previous quarter.Average license fee as percentage of AGR is 8.43% in June-09 as against 8.4% inprevious quarter.

The wire line Service Providers met the QoS parameters of Customer Care

Service (Closures) and Response time to the customer for assistance [%age ofcalls answered (electronically) within 20 sec]

The performance of Wireline service providers improved as compared to theprevious quarter, in respect of parameters Provision of Telephones, Faultsrepaired by next working day, Mean Time to Repair, Call Completion Rate, andCustomer Care Services (Shifts and Additional Facilities) and Time taken for\refund of deposits.

The performance of the wireless service providers has deteriorated in this quarteras compared to the previous quarter in respect of the following parameters:-

a. Call Set-Up Success Rate (Within Licensees Own network)b. Call drop rate.c. Response time to the customer for assistance

(I)%age of calls answered (voice to voice) within 60 sec.(ii)%age of calls answered (voice to voice) within 90 sec.

d. Complaints per 100 bills issued.e. %Age of complaints resolved within 4 weeks.

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History of Indian Telecommunications

Year Evolution of the industry-Important Milestones

2000 Dot becomes a corporation, BSNL

1999Cellular Services are launched in India. New NationalTelecom Policy is adopted.

1997 Telecom Regulatory Authority of India created.

1986

Conversion of DOT into two wholly government-ownedcompanies: the Videsh Sanchar Nigam Limited (VSNL)for international telecommunications and MahanagarTelephone Nigam Limited (MTNL) for service inmetropolitan areas.

1985

Department of Telecommunications (DOT) established,an exclusive provider of domestic and long-distanceservice that would be its own regulator (separate fromthe postal system)

1947

Nationalization of all foreign telecommunicationcompanies to form the Posts, Telephone and Telegraph

(PTT), a monopoly run by the government's Ministry ofCommunications

1932Merger of ETC and IRT into the Indian Radio and CableCommunication company (IRCC)

1923 Formation of Indian Radio Telegraph Company (IRT)

1883 Merger with the postal system

1881 Telephone service introduced in India

1851First operational land lines were laid by the governmentnear Calcutta (seat of British power)

2 Telecom Regulatory Authority of India (TRAI)

2.1 Mission

To ensure that the interests of consumers are protected and at the same time tonurture conditions for growth of telecommunications, broadcasting and cable servicesin a manner and at a pace which will enable India to play a leading role in theemerging global information society.

2.2 Role of TRAI

One of the main objectives of TRAI is to provide a fair and transparent policyenvironment, which promotes a level playing field and facilitates fair competition. Inpursuance of above objective TRAI has issued from time to time a large number ofregulations, orders and directives to deal with issues coming before it and provided

the required direction to the evolution of Indian telecom market from a Governmentowned monopoly to a multi operator multi service open competitive market. Thedirections, orders and regulations issued cover a wide range of subjects includingtariff, interconnection and quality of service as well as governance of the Authority.The functions of TRAI can be divided as : Recommendatory function and MandatoryFunction.

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2.3 Recommendatory Functions

Need and timing for introduction of new service provider

Terms and conditions of licences to a service provider

Revocation of license for non-compliance of terms and conditions of license

Measures to facilitate competition and promote efficiency in the operation tofacilitate growth in industry

Technological improvement in services by service providers

Inspection of type of equipment used by service provider

Measures for Technological development

Efficient Management of available spectrum

2.4 Mandatory Functions

Ensure compliance of terms and conditions of license

Fix the terms and conditions of there inter connectivity between service providers

Ensure Technical compatibility and effective inter-connection between differentservice providers

Regulate arrangements for sharing of revenues amongst service providers

Lay-down the standards of QoS to be provided by service provider, ensure this by

periodical survey

Lay-down and ensure time period for providing local and long-distance circuits oftelecommunication between different service providers

Maintain inter-connect agreement register

Ensure compliance of USO(universal service obligation)

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2. TELECOM SCENARIO IN INDIA

Third largest telecom subscribers in the world. Second largest wireless network in the world. Fastest growing telecom sector with an average addition of over 10-12 million

subscribers per month. 480 million telecom subscribers as on July 2009, with a CAGR of 45 per cent

during last five years.

442 million wireless subscribers as on July 2009, with a CAGR (Compound Annual

Growth Rate) of 65 per cent during last 5 years.

Target of 650 million connections by 2012.

Objective

Provide a platform and interactive session with prime movers of the Telecomsectors across various spheres like Government, Policy makers, Industrialleaders, Academic and Potential investors.

Focus on networking opportunities for exchange of ideas leading to futurebusiness alliances.

Provide opportunity to learn about practices, global experiences and showcasestate of-the-art technologies.

Focus on using Telecom successfully for achieving inclusive growth of thecountry.

The bottlenecks for ' Indian Telecom Industry ' are:

Slow reform process.

Low penetration.

Service providers bears huge initial cost to make inroads and achievingbreak-even is difficult.

Lack of infrastructure in semi-rural and rural areas, which makes it difficult tomake inroads into this market segment as service providers have to incur ahuge initial fixed cost.

Huge initial investments.

Limited spectrum availability and interconnection charges between theprivate and state operators.

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Reasons for growth

The two major reasons that have fuelled this growth are1. Low tariffs2. Falling handset prices

Subscriber Base & Teledensity Rural & Urban

SubscriberBase (Million)

Teledensity

Quarter ending Rural Urban Rural Urban

June 82.16243.62 10.12 72.01

September 90.56 263.1 11.13 77.35

December103.83280.96 12.72 82.15

March122.21307.51 14.93 89.44

June136.27328.55 16.61 95.05

Wireless Subscribers

Total Wireless Subscribers 427.29 Million

% Change During Quarter 9.07% 9.07%

Urban Subscribers 301.34 Million (70.5%)

Rural Subscribers 125.95 Million (29.5%)

GSM Subscribers 328.83 Million (77.0%)

CDMA Subscribers 98.46 Million (23.0%)

Teledensity 36.64

Urban Teledensity 87.18

Rural Teledensity 15.35

Rural Surge Quarterly

10.12 11.13 12.7214.93 16.61

72.0177.35

82.1589.44

95.05

010203040

5060708090

100

June 2008 September 2008 December 2008 March 2009 June 2009

Month

Subscriber Base (Million) for Quarter ending

Teledensity Rural Teledensity Urban

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82.16 90.56103.83

122.21 136.27

243.62263.1

280.96307.51

328.55

0

50

100

150

200

250

300

350

June 2008 September 2008 December 2008 March 2009 June 2009

Month

Subscriber Base for Quarter ending

Subscriber Base (Million) Rural Subscriber Base (Million) Urban

25.2%

74.8%

25.6%

74.4%

27.0%

73.0%

28.4%

71.6%

29.3%

70.7%

0%

20%

40%

60%

80%

100%

June-09 Sept-08 Dec-08 March09 June-09

Market Share - Rural & Urban

Rural Urban

Subscription in Urban Areas increased to 328.55 Million and Rural subscriptionincreased to 136.27 Million. Rural Teledensity reached 16.61 and urban Teledensity

95.05 at the end of June-09. The share of rural subscribers increased to 29.3% intotal subscription. TRAIs last quarter report has an interesting statistics that is aneye opener to many of the telecom players

- Of the 25 million customers added in the Apr-June quarter,- 8 million are from rural areas!

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Trends at a GlanceA. Wireline & Wireless Services

Wireless Subscriber Base (in Million)

QEJune2008

QE Sep2008

QE Dec2008

QE Mar2009

QEJune2009

%agechange

overJune2008

%agechange

overSep

2008

%agechange

over Dec2008

%agechange

overMar

2009

(12months

)

(9months)

(6months)

(3months

1) Subscriber's Base (in million)

i) Wireline 38.92 38.35 37.9 37.96 37.53 -3.57% -2.14% -0.97% -1.13%

ii) Wireless 286.86 315.31 346.89 391.76 427.29 48.95% 35.51% 23.18% 9.07%

Gross Total 325.78 353.66 384.79 429.72 464.82 42.68% 31.43% 20.80% 8.17%

Rural 82.16 90.56 103.83 122.21 136.27 65.86% 50.48% 31.24% 11.50%

Urban 243.62 263.1 280.96 307.51 328.55 34.86% 24.88% 16.94% 6.84%

2) Traffic (MOU) (minutes of use/ sub/month)

Wireless (full mobility)

i) GSM 505 499 496 484 454 -10.20% -9.00% -8.50% -6.20%

ii) CDMA 354 332 371 357 342 -3.20% 3.10% -7.70% -4.00%

3) Average Revenue Per User (ARPU) (Rs./sub/ month)

Wireless (full mobility)

i) GSM 239 221 220 205 185 -22.70% -16.40% -15.90% -10.10%

ii) CDMA 139 122 111 99 92 -33.80% -24.90% -17.20% -7.20%

4) Teledensity

Population in million(Estimated) 1150 1154 1158 1162 1166

i) Wireline teledensity 3.38 3.32 3.27 3.27 3.22 -4.78% -3.06% -1.58% -1.58%

ii) Wireless teledensity 24.95 27.32 29.96 33.71 36.64 46.86% 34.12% 22.30% 8.70%

Total Teledensity 28.33 30.64 33.23 36.98 39.86 40.70% 30.09% 19.95% 7.79%

Rural teledensity 10.12 11.13 12.72 14.93 16.61 64.11% 49.29% 30.55% 11.21%

Urban teledensity 72.01 77.35 82.15 89.44 95.05 32.00% 22.89% 15.70% 6.27%

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ServiceProviders

QE Jun2008

QE Sep2008

QE Dec2008

QE Mar2009

QE Jun2009

%agechange

overJun

2008

%agechange

overSep

2008

%agechange

overDec

2008

%agechange

overMar

2009

(12months)

(9months)

(6months)

(3months)

Bharti 69.38 77.48 85.65 93.92 102.37 47.55% 32.12% 19.52% 8.99%

Reliance 50.79 56.05 61.34 72.67 79.62 56.76% 42.05% 29.80% 9.56%

Vodofone 49.2 54.63 60.93 68.77 76.45 55.39% 39.94% 25.47% 11.17%

BSNL 41.96 43.86 46.23 52.15 54.36 29.56% 23.95% 17.60% 4.25%

Tata Tele 26.33 29.33 31.76 35.12 37.12 40.99% 26.57% 16.88% 5.70%

Idea 31.74 33.98 38.01 43.02 47.09 48.36% 38.58% 23.89% 9.46%

Aircel 11.92 13.88 16.08 18.48 21.8 82.88% 57.05% 35.56% 17.96%

MTNL 3.72 3.96 4.19 4.48 4.61 23.81% 16.31% 9.92% 2.81%

BPL 1.38 1.66 1.95 2.16 2.31 67.08% 38.89% 18.24% 6.74%

HFCL 0.34 0.36 0.38 0.39 0.38 13.00% 6.72% 1.11% -1.49%Shyam 0.11 0.12 0.37 0.6 1.19 981.00% 890.92% 221.38% 98.18%

Total 286.9 315.3 346.9 391.8 427.29 48.95% 35.51% 23.18% 9.07%

Circle wise Share as on Oct 2009

Circle A Circle C

ANDHRA PRADESH BIHAR

MAHARASHTRA HARYANA

TAMIL NADU ORISSA

KARNATAKA ASSAM

GUJARAT J & K

Circle B

NORTH EASTU.P.(EAST) Circle D

RAJASTHAN DELHI

MADHYA PRADESH MUMBAI

U.P.(WEST) KOLKATA

KERALA CHENNAI

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WEST BENGAL

PUNJAB

HIMACHAL PRADESH

38%

35%

15%

12%

Wireless Circlewise Share

Circle B Circle A Circle D Circle C

1,016,483,09

2

939,702,075

411,302,820

332,937,141

Wireless Circlewise Subscribers Share

Circle B Circle A Circle D Circle C

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Circle wise Companies Share as on Oct 2009

25.08%

18.65%

11.37%

6.41%

20.42%

21.43%

17.21%

14.59%

1.42%2.05%

1.35%

2.18%

4.82%

8.82%

6.48%

2.56%2.97%

1.53%

12.48%

16.01%

0.37%

0.12%

9.52%

22.81%

0.24%0.54%0.75%

8.76%

11.71%

5.73%

7.56%

0.03%

8.38%

1.81%

8.92%

0.12%2.17%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

BhartiAirte

Relia

nce

Voda

fone

Essa

BSNL

Idea

T

ataTe

lese

rvice

Aircel

MTNL

Loop

Tele

com

Pvt

.Lt

Sistem

aShya

mTeles

ervice

s

Spice

HFCL

Infotel

Telecom Companies

%ge

Citcle A Circle B Circ le C Circle D

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Company wise %ge as on Oct 2009

Bharti Airtel24%

Relianc

18%

Vodafone Essar18%

BSNL

13%

Idea

11%

Tata Teleservices9%

Aircel

5%

MTNL

1%

Loop Telecom Pvt.

Ltd.

1%

Sistema Shyam

Teleservices Ltd

0%

Spice

0% HFCL Infotel

0%

Bharti Airtel Reliance

Vodafone Essar BSNL

Idea Tata TeleservicesAircel MTNL

Loop Telecom Pvt. Ltd. Sistema Shyam Teleservices Ltd

Spice HFCL Infotel

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State wise No of Subscribers as on Oct 2009

State wise No of Subscribers as on Oct 2009

1.49%

2.40%

2.46%

5.00%

7.26%

7.81%

6.05%

7.09%

2.85%

4.07%

4.24%

5.37%

5.75%

5.28%

7.78%

0.96%

2.26%

3.59%

4.76%

5.92%

5.91%

0.89%

0.84%

0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00

ANDHRA PRADESH

MAHARASHTRA

TAMIL NADU

U.P.(EAST)

KARNATAKA

RAJASTHAN

GUJARAT

BIHAR

DELHI

MADHYA PRADESH

U.P.(WEST)

MUMBAI

KERALA

WEST BENGAL

PUNJAB

KOLKATA

HARYANA

ORISSA

CHENNAI

ASSAM

J & K

NORTH EAST

HIMACHAL PRADESH

States

Percent

%ge

3.Industry Revenue (2002-2010)

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According to a Frost & Sullivan industry analyst, by 2012, fixed line revenues areexpected to touch US$ 12.2 billion while mobile revenues will reach US$ 39.8 billionin India. India has become the second country in the world to have more than 100million CDMA-based (code division multiple access) mobile phone subscribers afterthe US, which has 157 million CDMA users. The Indian telecommunications industry

is on a growth trajectory with the GSM operators adding nearly 9 million newsubscribers in April 2009, taking the total user base to 297 million, a growth of 3.11per cent over the additions made the previous month.

Indian TelecomIndustry

The dynamics of the Indian telecomindustry are changing. Although the industryis experiencing the lowest tariffs globally, aggressive price wars have started owingto new entrants. This is having a dilutive impact on Average Revenue Per UserARPU). Further, with declining Minutes of Use (MOU) elasticity, top line of all theoperators has been impacted, as reflected in 2Q FY10 results. We believe that thefierce competition would hasten consolidation, as new players would find it difficult tosustain such intense price wars. Moreover, as the incumbents have also joined the

price wars, the top line should be impacted in the near term. Although a short-termimpact on revenue/profitability is expected, we believe this is beneficial for the long-term outlook. We also believe that the advent of 3G would enable the incumbents toarrest the fall in ARPU and differentiate themselves from the newer players. We cutour estimates and price target across the board, as we adopt a cautious view on thesector in light on the current changes. However, we believe that Bharti Airtel isfundamentally strong and is well positioned to sustain in this competitiveenvironment. Further, we believe that the company will have a first-moveradvantage in offering 3G services. We maintain our positive outlook on the stockfrom a long-term perspective. We maintain our neutral recommendation on thetelecom sector. Our top picks include Bharti Airtel, Idea Cellular, and On MobileGlobal (VAS Provider).

Key Takeaways from the 2QFY10 results:

Industry witnessing heightened competition The Indian telecomindustry is goingthrough a phase of heightened competition. This has led to aggressive price warsfrom new entrants as well as incumbents. Tariff wars brought about a steeper declinein ARPUs. With MOU elasticity also declining, revenue growth of most operators wasslower on YOY basis. However subscriber growth continues unabated.

Year Revenue(US$billion)

2002-03 92003-04 102004-05 112005-06 152006-07 202008-09 322009-

10(forecasted)43

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Revenue(US$ billion)

9 10 1115

20

32

43

0

5

10

15

20

2530

35

40

45

50

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

2008

-09

2009

-10(foreca

sted

Year

Reven

ue

Revenue(US$ billion)

Telecommunication

The economic renaissance affected in the early 1990s brought around a paradigmshift on the overall business scenario of India. The telecommunication companies inIndia went through a huge makeover during the implementation of the open-marketpolicy of India. The erstwhile closed market policy was replaced by a more liberalform of economic policy. A whole new form of Indian Telecommunication Policy wasdrafted to compliment the change effected in the economic policy of India. Theamendment affected the new telecommunication policy of India made huge changeswith respect to investments and entry of Foreign Direct Investments (FDI) andForeign Institution Investors (FII) respectively, into the virgin Indiantelecommunication market. This resulted entry of private, domestic and foreign

telecommunication companies in India.

The robust growth of Indian economy after the economic liberalization in the 1990sinduced massive change in the telecom policy and new draft was framed andimplemented by the 'Telecom Regulatory Authority of India' (TRAI) and 'Departmentof Telecommunication' (DOT), under the Ministry of Telecommunication governmentof India. The main aim of these telecommunication companies in India is to providebasic telephony services to each and every Indian.

With the advent of private telecommunication companies in India, the industrywitnessed introduction of mobile telephones into the Indian market and it becamepopular amongst the Indian masses in no time. Today two types of mobile phoneservice providers operates in the Indian market, like the following -

Global System for Mobile Communications (GSM) Code Division Multiple Access (CDMA)

The main binding objective for all the telecommunication companies operating inIndia is as follows

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To facilitate telecommunication for all Ensuring quick availability of telephone connectivity Achieve universal service access at affordable price covering all Indian

villages, as early as possible Providing world class telecommunication services Solving consumer complaints, resolve disputes, and special attention to be

given to public interface To provide widest possible range of services at reasonable prices To emerges as a major manufacturing base and major exporter of

telecommunication equipment To protect the defense and security interests of the country

Industry Sectors

Network Infrastructure Companies: Alcatel-Lucent, Cisco, EricssonTelecom Service Providers: Bharati-Airtel, Vodafone, Idea, Reliance.Telecom Equipment Manufacturers: Nokia, Motorola, SamsungTelecom Solutions Providers: Tech-Mahindra, Aricent, IBM India Wipro, Sicken.

The number of telephone subscribers in India increased from 427.29 Million in Mar-09 to 464.82 Million at the end of June-09, registering a growth rate of 8.17%. Theoverall Teledensity in India has reached 39.86 as on 30th June 2009.

Subscriber Growth

India added 130 million new customers in 2008-09, the largest globally. Thecountrys cellular base witnessed close to 50 per cent growth in 2008, with anaverage 9.5 million customers added every month. By April 2009, the total numberof telephone connections reached 441.47 million. With this growth, the overall tele-density reached 37.94 at the end of April 2009. According to Business MonitorInternational, India is currently adding 8-10 million mobile subscribers every month.

It is estimated that by mid 2012, around half the country's population will own amobile phone. This would translate into 612 million mobile subscribers, accountingfor a tele-density of around 51 per cent by 2012.

3G Spectrum allocation policy in India in 2009

In the conducive business environment, India Inc. awaits the rollout of 3G services.The Indian government plans to auction the spectrum for 3G services by inviting bidsfrom domestic, as well as foreign players and creating a competitive environmentthat offers better services to consumers. Therefore, the 3G spectrum is among themajor investment opportunities and growth drivers of the telecom industry.

The immense potential for 3G is reflected by the 30-40 per cent annual growth in

value added services

The global revenue for 3G is 60 per cent higher than that of other services

Cellphone manufacturers are striving to develop US$ 100-priced 3G handsets for the Indian market

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India expects to replicate its 2G growth in 3G services. The Indian market is well poised to leverage the 3G service offerings in content categories such as sports,games and music. In the present context, 3G technology is extremely relevant forIndia.

It offers voice capacity that is four to five times higher than that of 2G services.

Therefore, it is an ideal platform for low-cost cellular services

It can fulfill the need of fast developing mobile penetration in rural areas

It can meet the demand for high-speed data and content rich services in the urban landscape

It can play a vital role in augmenting the competitiveness of the countrys large BPO segment

It can be a way forward to achieve the Governments broadband objectives.

In addition, it will be a good solution for education, telemedicine, etc. Even if 2 per

cent of the 180 million cellular subscribers adopt 3G technology as soon as it islaunched, it is likely to create an initial subscriber base of 3.6 million. The market isslated to capture more than 11.3 per cent of all mobile subscribers by 2010, i.e.,21.3 million people. Therefore, it would not be incorrect to assume that 3G arepoised to create the next mobile revolution in India. In the race towards lowering theentry barrier for 3G services, companies plan to offer bundled service packages withsubsidized handsets. With regard to its business potential, many national playershave already completed 3G trials. BSNL has charted out a plan for launching 3Gservices in 250 cities. Private players, such as Bharti, Reliance and Idea, are alsoready to offer this service in 10-20 major Indian cities. However, Airtel and MTNL arevery keen on leveraging their first mover advantage in this field.

In June 2009 the DoT (Department of Telecom) in India has announced the radiospectrum that will be made available when 3G licenses are eventually auctioned off.It could be the case that just 4 Operators are given radio spectrum around Delhi -given that two incumbents (BSNL and MTNL) already have some licenses in eachzone, then that would be just the possibility of two new Operators coming to play. Inother areas, there is apparently going to be more provision for private players -meaning up to 11 Operators could enter business. The greater availability ofspectrum in these other zones is due to the Defense Ministry giving up some of itsSpectrum.

Currently there are disputes over how many operators can exist per zone, andwhether the relevant spectrum is sold in trenches, or in one go. Hopefully somethingwill be resolved soon, as India is beginning to really lag behind in 3G technologies,

particularly as many other countries are already at HSPA (3.5G) level, and going toHSPA+ (3.75G) soon

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Executive Summary & Trends at a Glance

List of Cellular Mobile (GSM & CDMA) Service ProvidersCurrently providing service [As on 30th June 2009]

Sino.Service

ProviderArea of Operation

1 Aircel GroupAP, TN, Karnataka, Assam, Bihar, Chennai, Delhi, HP, J&K,

Kerala, Kolkata, MH,Mumbai, NE, Orissa, UP(E), UP(W) & WB

2 Bharti All India

3 BSNL All India (except Delhi & Mumbai)

4 HFCL Punjab

5IDEA (Including

Spice)Delhi, Mumbai, AP, MP, Rajasthan, Punjab, Haryana, Gujarat,TN, Karnataka, Bihar, HP, Kerala, MH, Orissa, UP(E) & UP(W)

6Loop Telecom

Private LtdMumbai

7 MTNL Delhi & Mumbai

8RelianceTelecom

Kolkata, MP, WB, HP, Bihar, OR, Assam & NE

9Reliance

CommunicationsAll India (except Assam & NE)

10Sistema Shyam

TelelinkKolkata, TN, Kerala, Rajasthan & WB

11Tata Teleservices

All India

12 Vodafone All India

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Quarterly

According to data available with the Telecom Regulatory Authority of India, 48 millionrural consumers took a new mobile connection in the first six months of calendar2009 compared with just 32 million in the cities. In contrast, only 39 million newmobile users were added from the rural areas for whole of 2008.

Due to the surge in usage, there are now a total of 136 million mobile users residingin villages. While this is not much compared to the 329 million mobile consumers inthe urban areas, market watchers predict that the next 500 million mobilesubscribers will come mostly from the hinterland.

The cities and towns are saturated, with the tale-density as high as 95 per cent.However, the density-density in the rural areas is just 17 per cent, which meansthere is a huge unmet demand in these regions. The rural mobile user base is likelyto overtake the urban subscriber base in the next 3-4 years, said an official from theDepartment of Telecom.

Big gainers

The biggest gainers from the shift in mobile usage trend are Bharti Airtel, BSNL andVodafone Essay. While Airtels rural subscriber base grew from 15.76 millionsubscribers in March 2008 to 33.78 million by June 2009, BSNLs rural base improvedfrom 13.74 million to 29.64 million in the same period. Vodafone almost doubled itsrural user base from 13.14 million to 24.83 million.

Reliance Communications and Tata Teleservices, the two operators with both GSMand CDMA networks, have not been able to penetrate the rural market yet despitehaving a strong focus in this segment.

According to the TRAI data, Reliances rural user base has increased from 8.95million to 16.36 million and Tata Tele has only 2.96 million rural users.

But the impact of this urban to rural shift is weighing on the operators revenue. Lowtariffs combined with low minutes of usage have driven telecom operators revenueto a negative growth for the first time in Q2 2009. Compared to a combined revenueof Rs 32,211 crore in the first quarter of calendar 2009, the revenues for the secondquarter were Rs 29,507 crore, which is 9 per cent decline.

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While it is good that the rural tele-density is improving, operators should alsosimultaneously address the issue of declining revenues by bringing in applicationsand services beyond voice and SMS. Innovation through third generationtechnologies should help the operators improve their finances even as they continueto add more subscribers, said a market analyst.

4. Emerging Rural Mobile Market in India

The Indian mobile market has been continued to witness rapid increase in itssubscriber base over the past few years, largely due to the declining mobile tariffsand availability of low cost handsets in the country.

The country saw addition of an average of around 10 Million subscribers per month inits mobile subscriber base during 2008 with penetration approaching saturation inurban India. With this, mobile operators in the country are now vying rural India astheir next area for growth in the near future.

Meanwhile, a number of mobile handset manufacturers have been working to coverthe untapped rural mobile market, which will be the major driver for Indian mobilemarket in coming years.

According to our latest study on sector called, 'Emerging Rural Mobile Market inIndia', the mobile market in rural India has significant potential with number ofsubscribers anticipated to grow at a CAGR of around 32% during 2009 to 2012.

The report thoroughly discusses about the factor, which will drive the growth of rural

mobile market over the forecasted period.

The rural mobile market in India lies in the operators service pricing models coupledwith the availability of low cost handsets that support affordable access for ruralareas.

It is forecasted that sales of mobile handsets in rural India will grow at CAGR ofaround 17% from 2009 to 2012.

Availability of low-cost battery efficient handsets will drive the future sales in thissegment.

This report covers various aspects of the Indian rural mobile market. It gives detailedanalysis of the rural mobile market in terms of total subscribers, subscribers bytechnology and service providers.

Each section sufficiently explains the current and future market trends, anddevelopments in the Indian rural mobile market.

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Our research foresees immense opportunities for various industry players includingmobile operators and handset manufacturers.

Besides this, we have also comprehensively analyzed the mobile market in metrosand in various circles, rural mobile penetration in different states helping the clientsto understand the mobile market trends and developments across the country.

The study also evaluates various strategies that will boost the rural mobile market inIndia.

b) Rural does not mean poor!

While the term rural conjures up an image of tiny, remote villages engaged only inagriculture, the reality is quite different.

In 2008, the rural areas grew at a robust rate of 25 per cent as compared to 10 percent growth in urban retail market.

On account of negligible tax liability and little or no burden of loan repayments, theIndian rural population has a higher propensity to save. The rural areas account for33 per cent India's total savings.

In terms of economic output, rural India accounts for almost half (48%) of thecountrys economy.

So as a target market, it is attractive not only because of the size, but also becauseof impressive growth potential. Also, Rural GDP has been witnessing strong growth inthe last four years (average of 4 per cent).

Thus, there is no reason for one to any longer go by the belief that rural means poor.The rural Indians have been found to be very sensitive towards value for money.

They are constantly calculating and evaluating investment options with its returns.Though they have been found to be more comfortable with the sachet-pricing model,wherein they pay a small amount at a time for a product or service.

They certainly did not show inclination towards pricing models wherein they tend toget locked in for a longer period of time. Pay per use and smaller units are moreacceptable and have proven successful in the rural context.

Rural Indians are in fact willing to pay a price for products such as music and moviesthat their urban counterparts may not, simply because they have lack of options toget it from.

There is also a better sense of value for something that they have not had. Ourresearch on willingness to pay for an unmet need showed that more rural Indianswere willing to pay than have it for free.

This clearly demonstrates thatthey value information and would trust informationthat came at a cost.

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The bleak, endless landscapes of 600,000 villages in Indiawhere 70 per cent of thepopulation lives off the land and conducts meetings under ancient village treesisbecoming the next frontier for mobile handset makers to conquer.

Although 11,000 subscribers are being added every hour in India, this is happeningonly in the metros and tier-one and tier-two cities. The vast rural market, where

tele-density is 4 per cent and mobile density is not even mapped because it is sonegligible, lies untouched.

With 80 lakh (8 million) subscribers coming into the mobile fold taking the currenttotal to 26 crore today, India has become the fastest-growing telecom market in theworld. But for this growth to be sustained, new markets have to be explored.

Even as the rural market is growing attractive for India's telecom industry, theoperators face several challenges in rural penetration like illiteracy and low revenueper user.

The challenges include difficulty in the acquisition of rural consumers due to the low

affordability of telecom services, the low average revenue per user (ARPU), lack oflocally relevant content and the prevalent literacy levels, said the report.

Though the cost of owning and using telecom equipment and services has comedown considerably in the last few years, the rural consumer still finds it hard to putaside money for 'discretionary spend'.

'Tie-ups with state-owned banks could enable the rural consumers to purchasetelecom equipment and services at affordable rates.

The rural ARPU is not expected to be driven solely through voice services. Theavailability of data services is expected to have a positive impact on the rural ARPUs,

FICCI said.

To increase adoption, the report stated that it was essential to develop services likenews in local language, weather alerts for fishermen, and comparative 'mandi' rates,among other services.

'To derive maximum benefits from these services, it is essential for the consumers tohave basic reading and writing skills in place.'

c) Rural India registering new wireless subscribers at almost 80 % growthrateRural India has always received inferior treatment from marketers especially in

services driven economy with marketers mainly targeting the urban segment tonotch up quick revenue generation. But it is no secret that majority of India is stillbased in the rural parts and if one has to truly taste success in India then one has tomarket services, which find relevance in the rural ecosystem. It appears mobileservice providers in the country have precisely identified this aspect and are nowdiverting their resources to tap this huge segment comprising of more than 700million people. And the new focus is paying off big time as the uptake for mobileservices in the rural areas is seen growing at 80% on a yoy comparison.

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Indias mobile subscriber base in the rural segment stands at 125.95 million at theend of June09 as compared to 70.83 million on June 08, a growth rate of 77.8%.Mobile tele-density in rural India is 15.35 at end of June09 while it was 8.73 atJune08. Further while the market share of rural subscribers in the countrys totalsubscriber base for mobile services were 24.7 % in June08, the figures has nowincreased to 29.5 %.

Overall, the rural segment grew by 65.86 % for all telecom services i.e. includingmobile as well as Wireline services. Compare this to urban segment, which grew byonly 34.86%.

With urban areas reporting drop in revenues there is no doubt that only those serviceproviders will be able to sustain growth, which have strong presence in the ruralareas. And it is here where market leader Bharti Airtel is seen leading with a 26.82%market shares in the rural segment. Disappointingly PSU BSNL, which has the bestcoverage in the rural areas among all the service providers, could manage a marketshare of only 15.36% as on June09.

Idea Cellular registered the highest contribution from rural segment in its total

subscriber base with as many as 42.05% of the companys subscribers coming fromrural India. Another aspiring Telco, which is on expansion mode, Aircel followed Ideawith 40.47 % of the companys subscribers from rural areas.

d) MOBILE HELPS FIND RIGHT PRICE FOR FARMER PRODUCE

Two major problems plague the agriculture sector the first, lowering input costs andthe other, proper marketing. If these two are economic status will improve.

Though marketing fruits and vegetables at the right time becomes imperative to geta good price, the fact is many of our farmers are unaware of the daily market pricesand often depend on middlemen, who easily exploit them. Many of these brokersoften work on an established network and quote the same (low) price.

e). Wireless Service Providers (Market share)

Rural markets in India constitute a wide and untapped market for many products andservices, which are being marketed for the urban masses. There is a demand fortelecommunication services to be provided to in these areas. Till now it wasgovernment, which was trying to reach the villages through various initiates, but therural tele-density is very poor and can be improved only through the introduction ofmodern and suitable technology along with participation from the private operators.

India lives in villages, close to 72 percent of Indian population lives in rural areas. Inthe country we have 6.36 lakh villages out of which only 13 percent have populationabove 2000. The rural economy contributes nearly half of the countrys GDP, which is

mainly agriculture driven and monsoon dependant. More than 50 percent of the salesFMCG and Durable companies come from the rural areas. The McKinsey report(2007) on the rise on consumer market in India predicts that in twenty years therural Indian market will be larger than the total consumer markets in countries suchas South Korea or Canada today, and almost four times the size of todays urbanIndian market and estimated the size of the rural market at $577 Billion.

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f). Why go the rural way?

70 per cent of India's and 12 per cent of global population lives in rural India andcontributes 50 per cent of the country's GDP. Their population of 75 crore (750million) is more than that of US, UK, France, Japan, Italy and Germany put together.Government of India statistics reveals that even with the increasing urbanization and

migration, 63% of Indias population would still be living in rural areas in 2025.

Thus rural market has been, is, and will continue to be vitally important to the Indianeconomy. While overall communications market growth will be led by urban areas,rural appending growth of 9.5% over next 20 years is still noticeable.

Also, it is estimated that communications will be the fastest growing subcategory ofrural consumption as millions of households rise out of poverty and enter the ranksof rural aspirers. Although, we need to understand that Rural India is nothomogenous and in fact there is no one rural India.

An old saying captures the variations in rural India perfectly - Kos-kos par badlepaani, chaar kos pe baani; which translates to at every mile taste of water

changes and every four miles dialect (baani). Even within one state, the rural areashave demonstrated stark differences by virtue of their economy and exposure. Suchdiversity poses a great challenge to those who intend to serve this Rural Market.Surely, here one size would not fit all.

g) Mobile phones in rural India

Most of Rural India skipped the landline telecommunication and Internet age andleapt straight to adopt mobile telephony.

With mobile phones becoming cheaper, easier to procure and affordable networkcharges, an increasing number of rural audience adopted the technology.

The last two years have seen an accelerated adoption to mobile technology. Nowmajority of village families own at least one mobile phone. It is their first exposure towestern technology, and step ahead from their experience and usage of simplerinteractions and single button interfaces of television, calculator and radio.The most popular brand in rural areas was found to be the Nokia 1100 model as it isstrong, easy to use, people recommend it and provide value for money.

Today mobile phones have moved beyond their primary role of voice communicationsand have graduated to become an essential entertaining device for mobile users. Weare in an era where users buy mobile phones not just to be in touch, todays youthuse it to express their thoughts, for social networking, to show their interests, playgames, read news, surf on the internet, listen to music, chat instantly with friends &

families and even check their bank balances. There are various phone manufacturersproviding handsets.

However, Nokia is the dominant player on the GSM space, accounting for 63% of theinstalled base (phones currently in use) while LG rules CDMA with 48% of installedbase market share. On looking at urban India GSM/CDMA combined installed base,Nokia is at the top with 54% of installed base market followed by LG (14%). LG issecond most used handset manufacturer India primarily due to its dominant positionin the CDMA.

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h). Phone manufacturer usage

April 2009 ending quarterly Average - India Urban Mobile Phone Users (N=5,775)

Brands Installed base*

GSM CDMA Total (GSM +CDMA)

LG 4.4% 47.6% 14.4%

Motorola 7.8% 5.4% 7.2%

Nokia 62.6% 24.3% 53.7%

Samsung 9.0% 11.2% 9.5%

Sony-Ericsson 8.9% 6.8%

* Users currently using the phone model

On looking at the ability of manufacturers to gain market share via word of mouth,Nokia and Sony-Ericsson fare a lot better compared to the other three bigmanufacturers, with 2 out of 3 users for each of the two manufacturers mentioningthey are likely to recommend their handset to their friends.

Phone manufacturer usage

April 2009 ending quarterly Average India Urban Mobile Phone Users (N=5,775)

Model Installed base*

Likely to Recommend**

LG 57.6%

Motorola 41.0%

Nokia 68.6%

Samsung 55.7%

Sony-Ericsson 65.3%

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Rural vs. Urban phone subscribers in India

On an average rural Indians use their phones around 8.5 hours a month, up 10%over the past year. Of the next 250 million Indian wireless users, approximately 100million (40 per cent) are likely to be from rural areas, and by 2012, rural users will

account for over 60 per cent of the total telecom subscriber base, according to areport jointly released by Confederation of Indian Industries (CII) and Ernst & Young.As per The Telecommunications Regulatory Authority of India figures, subscriberadditions in rural areas exceeded additions in the metros.

i). Owning a mobile phone

Mobile Phone ownership is largely limited to the earning male or head of thehousehold. The primary reason is that women are unable to produce the proof ofidentity required to get a connection. Mobile Phone is a device, which gives its ownera status, power and freedom to communicate and that too, very easily. Theundercurrents strongly suggest that the rural society may not be ready to impartsimilar rights to the women of rural India yet and this could be impacting the gender

skew in ownership of mobile phones.

With an average household income of Rs. 4000/- per month, a rural Indian perceivesmobile phone as an investment, and not an indulgence. This is an interesting insight,which debunks the common perception wherein a mobile phone implies additionalexpense and thus becomes avoidable. Mobile Phone is fast catching on with a bicycle,radio, and alarm clock to be the first durable that a rural Indian is purchasing.

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The mobile phone seems to have greatly improved quality of living, simply becausealmost everyone now is contactable and there is no longer an information delay ofany sort, be it critical in nature or simply that of enquiring about well-being of lovedones. Knowing the whereabouts of family members and getting in touch with distantrelatives is the primary use of mobile phones in rural India.

The mobile phone is also seen as something with a lot of possibilities, much morethan what is present; which is largely that of making calls.

A person with a mobile phone is perceived to be efficient and one who values time.A person who gets a mobile phone is also eager to be perceived as one, and hence iseager to disseminate his new number.

For most rural Indians, mobile phone makes economic sense. A villager is able tosave time and money to travel to another village to meet his grandchildren, and isable to catch up with them for less than Rs. 1 per minute. Mobile phone is alsomaking business sense to farmers who can now find the best price for their produceby calling the wholesalers and checking with other farmers.

j). The sociology of mobile communication

During a research project in rural Gujarat, a group of young men were asked, So,how has mobile phone changed life in todays world? A young man promptlysmilingly replied Jab se mobile phone aaya hai, tabse sab log jhooth zyaada bolnelage hain. (Ever since mobile phones have come, people have started lying muchmore.). This simple yet profound statement has stirred the whole aspect ofsociology of communication. During the landline days, we used start by asking,How are you? to the other person; today, with mobile phones we start withWhere are you?

Mobile Phones have made our lives easier and facilitated communication but also

have impacted the nature of our relationships and the dynamics of communication.Rural audience is relatively more sensitive to the sociological impact of the mobilephones.

k). The all mighty retailer

Rural audience has their trust grounded in the wise known person. For generations,they have relied on the village elder or opinion leader to seek advice and opinion ontheir day-to-day life and issues related to it. For mobile phone users, this expert isthe local mobile phone retailer.

Mobile phone retailers are major influencers in rural India. Users in rural Indiarequire a lot of handholding and the retailers not only are the purchase point for

various products and services but also act as a guide to using them. The mostcommon need of the users is to know as to how to save contacts on the mobilephone.

The local rural retail store serves as a one-stop shop for all their mobile phonerelated needs. The retailer recommends the mobile handset, the service plan andeven guides the novice users into turning on the handset and using its features.

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There have been instances where information hoarding was observed around theusage of mobile phones. In rural India, information is important and renders powerto the one who has it.

The retailer is such an expert who has knowledge about mobile phones and isregarded with respect because of this. The rural users turn to the retailer in need and

are much gratified for his services.

The retailer was observed to not share the breadth and depth of his knowledge onmobile phones. His main drive is to maintain this edge.

A typical retail shop sells recharge coupons, mobile phone handsets and even piratedCDs. Some even have items like batteries and confectionary. New users at times lockthemselves out of the phone, and it is the retailer they turn to for help. The retailer isthus an effective channel to educate, influence and capture the rural audience.

l). Rural India realities

During the fieldwork across research studies in rural India, the experience has been

enriching and educative simply because the ground reality has almost always beensurprising. Rural India never ceases to amaze the stereotypical urban. Hence, thesociology of the rural Indian emerges as an important aspect to understand.

When asked how would they want a mobile phone designed for them to be like, afrowning farmer replied, Why should it be different than yours? Perhaps, they do notwish to be excluded but included.

Such paradoxical yet powerful thought wave challenges the philosophy of designingfor the rural Indians. The key is to be subtly powerful, in serving the need in aninclusive fashion. It is imperative to gather the ground level realities of the usergroup, which one intends to serve through a unique and new technology

m). Information is power

In rural India, information is scarce, valuable and held with the privileged. Theinformation source could be a sarpanch, who knows about the government schemeson kisanloans; an anganwadiworker who knows about the free meal scheme or thevillage teacher who has information on scholarships for higher education.

Caste, gender, money have been long known as the factors influencing the powerdynamics in rural India. Information has emerged as one potent power symbol.Information bestows immense powers to the ones who have it.

The information dissemination channels in rural India are not always fair and equal.

Mobile devices have a great potential to eliminate these inequalities that come fromthose who know deciding whom they will tell, say, about government healthprograms. Information is out there, the need is to provide it to the ones who need it.

A mobile phone can act as a neutral distribution channel, which empowers its ownerwith the option to seek information especially around livelihood, employment, andeducation. They need information that can help them achieve a better standard ofliving.

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Our research identified the key information areas, as unmet needs were agriculture,health and NEWS.

n). Rural does not mean farming!

For long, a rural Indian has been envisaged as one who is all about farming. Such a

stereotype has led to a lack of entertainment services for the rural audience.Entertainment is a human need.

A leading TV channel recorded 25% of interactive TV responses from rural areas inAndhra Pradesh. Interactive media programs receive excellent response from non-urban locations.

In a study to understand the entertainment needs of rural Indians, we found thatCricket is the largest source of entertainment for them. Another source of that hasbesotted the rural audience is bollywood content.

So really how different the rural audience is from the urban one when it comes totheir entertainment needs. While today, the largest provider of entertainment is the

television in rural India; there is a huge opportunity to provide this on the mobileplatform. With long power cuts, mobile phones should emerge as the newentertainment source for the rural Indian.

o). The literacy barrier?

According to census of India 2001, the overall rural literacy rate is 58.7%. [6] Thisrate however does not reflect on an individuals effectiveness and efficiency in usinga mobile phone. We now have mobile handsets which have been designed keeping inmind the rural user sturdy, affordable, with features like torchlight and a single,dust free, bilingual keypad. Even with these adaptations, the rural mobile phone userstill goes through a learning curve to perform tasks such as unlocking the handset,

saving contacts in address book and deciphering the iconography of the variousfunctions. Some of the iconography used in a mobile phone seems quite foreign; forinstance; wrench for settings does not convey its function.

During a study we found that most users were not aware of the # (hash) key ontheir mobile phones. They simply did not know where it was and what it did. Somewere confident that in fact there is no such key.One clear literacy issue relates to SMS. Though the rural audience has been foundcomfortable forwarding existing messages; most promotional messages, in English,are never read.

The interesting aspect is that this supposed barrier has not deterred the rural Indiansfrom adopting the mobile phones. They have in fact innovated some of their own

ways to use the mobile phone effectively. For instance, we observed rural userssaving a contact with an image from the default set provided is Nokia 1100. Nokia1100 is a simple, affordable and durable handset with a monochrome screen and istargeted at users who do not need advanced features beyond making calls and SMStext messages, alarm clock, reminders. It has torchlight and a single dust proofkeypad. They look for the image and press the green button to make a call. Soclearly the rural mobile phone users have adapted well to use the technology to theirbenefit.

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p). Value added services

There is a need to offer quality value added service to the rural users, which enhancetheir quality of life. With coverage expansion by operators reaching rural areas,mobile networks are penetrating geographies where there are few entertainment andinformation outlets other than television. In such areas mobile can be positioned to

function as an all-purpose device that provides entertainment, information andcommunications.

For instance, Qualcomm India, TATA Indicom, Astute and MSSRF have started a jointinitiative called Fisher Friend, a mobile application which provides vital real-timeinformation to fishing communities when and where they need it the most, at mid-sea. This includes when and where selling the fish through access to market prices,weather (e.g. sea wave heights, satellite scan data about fish shoals), governmentschemes, etc. Access to this data could drastically improve market transparency andthus earning capabilities for smaller fishermen.

Rural applications initiatives are likely to grow quickly in less developed geographiesbecause of the willingness to spend on services, which enhance livelihood.

q). Voice Recognition Technology

The next question is the medium of offering these services, the technology thatwould be best suited to offer the required service. Voice based interfaces have beenidentified for their potential to increase access to information services in a developingcountry like India where480 million illiterate people reside. Interactive Voice Response (IVR) is an automatedtelephony system that interacts with callers, gathers information & routes calls as peroption selected by user, who has to follow IVR directions to get to the requisiteinformation or content.

IVR will be a quick solution to providing regional content in local languages all acrossIndia. In rural areas where the literacy rate is low, IVR will be in great demandbecause of ease of use and local language support.

Voice as a technology has the ability to account for variations in the local languageand this is a huge advantage. Users are comfortable with spoken word compared towritten text. Voice services are key in the rural context.

Voice has been proven as an effective technology in rural banking transactions aswell. Dena Bank has come up with Kisan ATMs at Balwa village near Gandhinagarthat enables its rural consumers who cannot read or write to conduct their bankingactivities using voice guided animated screens without any hassles. Its key featuresinclude; Finger print verification; a feature close to their mental model of

thumbprints as identification instead of a personal identification number.

Mobile voice based technology cuts through the issue of literacy and connectivity inrural India. These interfaces follow the most natural interaction of the user with themobile phone hear and speak. The services provided through a voice user interfacealso are not handset dependent, which is especially crucial in the rural contextwherein ultra low cost handsets are more prevalent.

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Voice interfaces do not present users with complex interactions. These are morenatural, dialogue-based conversation styled interactions. These interactions comeclosest to the basic use of mobile phone to talk to another person. They have aneasy learning curve and capability to offer regional language content. They are alsocapable of replicating virtually any information service offered on SMS or WAP, e.g.news, market rate information, etc. Voice based user interfaces make content

discovery faster and easier. In scenarios where there is a lot of information for a userto go through and make a choice, voice search and browsing could be an effectivesolution.

r). Mobile phone ownership in India is growing rapidly

Six million new mobile subscriptions are added each month and one in five Indianswill own a phone by the end of 2007. Many of these new mobile citizens live inpoorer and more rural areas with scarce infrastructure and facilities, high illiteracylevels, and low PC and Internet penetration. The study looks at how their newmobility could be used to bridge the growing economic and social digital dividebetween rural and urban areas.

The report identifies seven service areas that could be transformed for ruralcommunities by mobile communications:

Transport

Finding cost-effective, reliable, and safe ways to transport goods and services tomarket is a major problem for small businesses in rural communities. Publictransport is not available in 45% of villages in India, and only 1% of Indianhouseholds own a vehicle. Mobile communication could be used to create and co-ordinate car sharing schemes amongst villages, and provide real-time informationabout public transport services and the ability to make request stops.

Micro-commerce

Small businesses in rural areas often have to travel significant distances to marketsor other places they can distribute their goods, and cannot make arrangements inadvance with buyers or other sellers. Mobile phones could significantly change thelogistical issues faced by rural traders and home entrepreneurs, by affording mobile-based ordering systems, delivery requests, and the ability to make more reliable andadvance arrangements with business partners or clients.

Finance

Mobile phones are already being used in rural areas as a tool for financialtransactions by swapping airtime for goods and services. The study encourages

mobile networks and financial services institutions to work together to test anddevelop new financial services in this area and address how people can transfer thesecredits into cash.

Healthcare

New mobile services in this area could better connect rural communities, creatingnetworks to share and discuss health information and advice.Governance

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Accessing information about public services remains a major challenge for many ruralcommunities. Mobile phones provide a new platform through which ruralcommunities will be able to access government information and services, using text,data, and audio browsing techniques;

Education

The study looks at a range of educational services that could be provided via mobilesto children in remote villages and communities, particularly where PCs or connectionsto the Internet are not available. Mobile phones could serve as an essential meansfor children to become connected to one another for educational and peer-learningactivities. These phones are particularly important for communities that are eithernomadic or transitional on account of displacements due to a natural disaster or forother reasons; and

s). Mobile helps find right price for farmer produce

Two major problems plague the agriculture sector: the first, lowering input cost, and

the other, proper marketing. If these two are addressed then the farmers economicstatus will improve.

t) Mobile Value Added Services [VAS] in rural market

The next wave of Telecom growth will come from the bottom of the pyramid. Formajority of the population in the rural segment, the mobile phone is the firstcommunication device.

Rural should not always be interpreted as poor and therefore some categories ofMVAS might apply directly to them. But whether the statement can be extended toMVAS depends on some key factors.

One is to clearly identify the need of the rural segment, second is to communicatethe services to them i.e. generate awareness and thirdly, to provide an easy andcheap access mode to the rural consumers.

All these 3 are quite big challenges and therefore needs to be addressed adequatelyfor MVAS to take off in Rural India.

Apart from the identification of rural consumer needs and development of relevantcontent, communication of these services to the rural population would be a biggerchallenge.

One way to do this is to communicate through regional SMS for which a separate

SMS gateway needs to be installed.

Literacy level of the geographical area will be another limitation. Therefore the bettercommunication option is Voice in regional languages.

The challenge with regional voice is not only investment but also blockage of thealready scarce spectrum. Marketing the content in rural market is going to be all themore challenging.

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This would require right packaging and pricing of MVAS. Providing cheap accessmode to end consumer would be another key booster to rural MVAS. Current voiceMVAS charges are expensive from a rural consumer perspective therefore that alsowould need to be addressed for e.g. the sachet model could prove to be successfulhere. MVAS is going to address two main needs of rural consumers- connectivity andentertainment mode. Connectivity will provide Information VAS on Agriculture

necessary for the farmers livelihood e.g. mandi rates, weather, etc. Health, finance,job opportunities etc are potential areas. Mobile also has the potential to evolve as akey entertainment mode considering lack of other entertainment options in ruralareas. The industry has witnessed some type of content being downloaded more insmall towns of UP and Bihar rather than in metros like Delhi and Mumbai. Thereforeby leveraging on these two aspects MVAS can be a success in rural area.

5. What Next?

The mobile phone and its applications should be able to improve the quality of life ofthe rural mobile phone user, keeping in mind their context. With the knowledge of

the scenarios, the way forward is providing relevant value added services using voicerecognition technology. Of course the solution is not as simple. There are challengesof many kinds, which need to be addressed to be able to meet the larger goal ofdesign for all.

One of the challenges for a voice-based interface is to serve the wide range oflanguages with variations in dialects and pronunciations. India is home to severalhundred languages and over a thousand dialects. The 1991 census recognizes 24languages and 1642 dialects. Design for all implies that technology should be able toserve this varied range.

The second big challenge in creating voice-based interface for mobile phones is thevoice recognition technology. A robust recognition system with an extensivevocabulary, which recognizes utterances with utmost accuracy, is crucial. Indian ruralenvironments may not be the most conducive to using a voice recognition system. Arural environment is resplendent with background sounds, loud noises and multipleinteractions going on the mobile phone. A voice recognition system will have to bestable enough to not be thrown off by such inputs.

The other big challenge is the varied and diverse needs of the rural audience. Theirinformation needs are also linked to geographies. For instance, information on cropsis very region specific.

It would be a constant endeavor to meet the challenge. The task ahead is to workwith the profile of the rural mobile phone user to create true value add easy to use

and affordable service solutions.

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6. The Challenges

The challenges include difficulty in the acquisition of rural consumers due to the lowaffordability of telecom services, the low average revenue per user (ARPU), lack oflocally relevant content and the prevalent literacy levels, said the report.

Though the cost of owning and using telecom equipment and services has comedown considerably in the last few years, the rural consumer still finds it hard to putaside money for 'discretionary spend'.

'Tie-ups with state-owned banks could enable the rural consumers to purchasetelecom equipment and services at affordable rates,'

The rural ARPU is not expected to be driven solely through voice services. Theavailability of data services is expected to have a positive impact on the rural ARPUs,FICCI said.

The report also cited lack of locally relevant content for restricting rural telecom.

To increase adoption, the report stated that it was essential to develop services likenews in local language, weather alerts for fishermen, and comparative 'mandi' rates,among other services.

'To derive maximum benefits from these services, it is essential for the consumers tohave basic reading and writing skills in place.'

Half of new mobile subscribers are coming from rural areas.

A few months earlier, Airtel entered into a joint venture with the Indian FarmersFertilizer Cooperative Ltd (Iffco) to offer specifically designed products and services.

The target consumers are the 55 million farmers under Iffcos fold. Airtel has alreadyenrolled over 60,000 farmers under this scheme.

Mobile phone manufacturer Nokia, which had earlier launched a basic handset with atorch and an alarm clock, has now gone a step further with Nokia Life Tools arange of agriculture, education and entertainment services designed especially forconsumers in small towns and rural areas. The Life Tools provide basic informationon weather, mandi prices and crops.

The Indian telecom market woke up to the potential about three years ago and themoves are paying off now.

Apart from the tie-up with Iffco, the company has set up Airtel Service Centres inrural areas to provide services and handle customer queries and complaints,eliminating the need for call centres.

The company has also tied up with Nokia to launch an educational initiative in orderto give rural users a live experience on mobility services, that include hands-ontraining on making the first phone call and sending SMS with localized content.

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7. Rural Telecom Market an emerging market

According to numbers compiled by the Telecom Regulatory Authority of India,nearly 21 per cent of the mobile user base now resides in the villages of India, wherea few years ago none of the operators wanted to venture. As on September 2007,out of the 209 million mobile users in the entire country, 43 million were in rural

areas.

As the government targets to increase rural teledensity from the current 2 percent to25 percent by 2012, rural telephony will require major investments. This segmentwill boost the demand for telecom services, equipment, Internet services and othervalue-added services; thereby, offering great market opportunities for telecomplayers.

Bharti Airtel, Karnatakas No. 1 mobile network and the first telecom circle inIndia to go past the 1 crore-customer milestone, today announced a uniqueinitiative to penetrate deeper into the remotest villages of Karnataka.

Airtel to focus on rural expansion

Bharti Airtel, which had 65 million mobile users in September 2009, had 9.80million subscribers coming from rural areas.

People in the rural markets are ready to go mobile and the growth dependson the strength and the quality of the network.

To strengthen the distribution with the growing pace and make Airtel to getreached for all segments of customers in the State.

Airtel Service Centre (ASC) is an ideal combination of distribution and service toreach out to rural customers and an important step in Airtel's objective of expanding

its presence in the state.

Airtel Service Centers are Multi Brand Outlets (MBOs) located in a good, easyaccessible location, preferably in the main market in a village that attracts highfootfalls.

4As in mobile communication,

1.Availability 2 Affordability 3 Awareness 4 Acceptability.

A one-stop shop for customers immediate communication requirements, Service

Center will revolutionize the lives of our rural customers with localized mobilecommunication and service at closer locations.

Primary Objectives of setting up Service Centers in rural Karnataka:

Helps in removing barriers towards availing mobile communication

Handling customers queries and complaints

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Reducing rural calls per customer

This unique rural model of distribution and service has been developed on the basisof multiple Consumer Studies, which reflect that rural consumers are hesitant tospeak with machines and most rural people are not comfortable speaking with thecall center executives these customers prefer to be served in the local dialect, by a

local representative.

One-stop shop for information about the entire gamut of products and services

Services available to rural customers in an Service Center are:

Sale of connections

Exchange of damaged or lost SIM cards

Best value recharges and offers of the day

Educating and subscribing to relevant value added services

Handling customer queries and complaints

Enabled with a Multi-function printer and a photocopier machine, Service Center issuitably equipped to ease documentation required for new connections. ServiceCenter provides rural mobile customers the convenience of availing all Service Centerunder a single roof. Service Center are empowered to resolve consumer queries by adirect routing channel to trained agents on behalf of customers for solving queriesthat are specific to customers needs.

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Nokia The whole world is in Mobile

Nokia Company aims to tap the fast-growing rural market with various new services.It would also look at lowering the affordability barrier for mobile phones by providing

micro-financing facilities.

With estimation of 500 million people it will have a benefit of mobility by 2010 andthe telecom sector would be the biggest contributor to GDP.

It also believes that much of the growth is been take place in the non-urbanmarkets, where penetration is still low at 13 per cent,

India is the second biggest market in terms of revenues for Nokia.

The company also announced the national rollout of Nokia Life Tools services, whichwould eventually cover 17 States. Targeted at the rural customer, Nokia Life Tools

provides useful information on weather conditions, farm inputs and market prices.

Nokia also announced that it plans to offer a micro-financing facility for its phonesacross 12 States, for which it is currently in talks with few institutions.

This facility would be aimed largely at women in rural areas.

With an investment of $250 million, is now Nokias biggest factory worldwide.

Were exporting more than half of our production from of this plant to over 59countries,

In addition the company has around 1.9 lakh 0,000 retail outlets across the country.

Nokia Ovi Stores

Nokia Ovi Store, a one-stop shop for downloading games, videos, images,applications and ring tones, is increasingly offering localized content to be morerelevant to users across the globe.

The Ovi Store application, which was launched end of May, has users from around

180 countries. In around 17 markets (including Poland, the US, Switzerland, Finlandand the Netherlands), the store offers fully localized content translated, locallyrelevant and, in some cases, locally developed too.

While majority of the content on Ovi Store is free of charge, some are paid for usingcredit card. In the 17-odd markets where the store offers fully localized content,some of the services are also paid through operator billing, in the local currency.

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Nokia Ovi Store is working all over the world, including India, on getting contentthat is local and is talking to operators for billing support, said Mr Eric John, Directorand Head of Product Marketing, Media, Nokia. Globally, Ovi Store, after around sixmonths of operations, is nearing 1 million downloads a day.

The growth in user base month-on-month is 100 per cent and around 75 per cent of

visitors are regulars.

Explore a dazzling array of downloads from Ovi. Discover and download mobileapplications, games, videos, music, themes and more from brands you know andtrust.

Find out how Ovi lets you keep up with whats going on around you with quality newsand information from your favourite publications, download games from some of theworlds leading game publishers, organize and share your photos and videos withapplications that give you easy access to your favourite social-networking sites, anddiscover useful widgets and utilities that help you get through your day.

Connect with your friends by checking out what applications theyve rated orrecommended. Get involved yourself by sharing your own ratings, recommendations,streams and collections. And make the most of where you are with content thatsrelevant to your location as you discover new places, or as youre re-discoveringyour favourite hangouts.

Double humped camel

How to sell feature-rich devices with a lot of high-end applications in a price-sensitive, poor-country market such as India, is precisely the question that Nokia isnow faced with.

Forum Nokia, likens India (and China) to a double humped camel with big marketsfor both premium as well as low-end devices. Forum Nokia is the platform on whichNokia works with some 4 million applications developers.

Our applications are not restricted to the high end, at Nokias

The Way We Live Next, was communicated at the World meet by the worlds largestmobile device manufacturer.

Rural market, local needs

And so, while there is a big market in India for premium devices and servicescomparable to any developed country, there is also a big rural market, where moneycould be made by addressing local needs.

A good example is Nokia Life Tools, which gives information updates to farmers. Theinformation ranges from prices of commodities to tips on agriculture to teachingEnglish language.

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The new mobile device has given a new meaning to the word local, which no longerrefers to a piece of geography. Applications developed under Forum Nokia arechanging the way people live,

More than calling device

What with radio, recorder and camera having become almost a standard feature onmobile phone, people have long stopped thinking of the handset as an instrument tomake calls. Today, calling is just one feature of the device.

But practically with each passing day, the mobile phone is becoming a lot more thanwhat it began its life as.

Chinese developer who happened to attend a Forum Nokia meeting in 2003 wasinspired to develop an application, which has become very popular today an SMSspam filter. There has been 10 million downloads so far and the demand is stillstrong.

Giving an example for the expanded connotation of local, another developer hasmade it possible for the Malayalam daily, Malayala Manorama, to be available on anEnglish-language phone. This has become popular with Keralites living in West Asia.

More to come

A lot more applications are on the way. One is Nokia point to find. You point yourmobile to, say, a hotel or a movie advertisement and click. All details about the hotelor the movie pop up on your screen. The service was beta-tested last year and isavailable in the US and the UK, on Nokia N95 devices. Now, Nokia is rolling it outacross other markets. The service is available free to the customer and can bedownloaded from a mobile phone or a desktop computer atpointandfind.nokia.com.

Among the hundreds of other applications being developed or tested is one thatwould help elderly people live independently. A voice recognition feature in thedevices helps them give commands. Originally developed for use while driving cars,the application is being expanded into a utility tool for the elderly.

The future is going to be richer, say Nokia officials. Nokia Research Centre is workingon using biosensors to sense several measurable be it quality of air and water orbody health parameters. The center is also looking into the possible use of Nantechnology to miniaturize the biosensors.

Pricing strategy

Currently, the revenue split between the content developer and Nokia is70:30. Nokia is also experimenting with other pricing strategies.

SMS services in 22 Indian languages soon

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For, the 3rd Generation Partnership Project (3GPP), the global standards organizationthat defines standards for GSM-based mobile services, has approved a move toinclude 22 Indian languages in mobile telephony standards in October. This is thefirst time that a standardization proposal from India has been accepted by the globalbody.

With this, all the non-English-literate subscribers in India will be able to send andreceive text messages just as others do today in English, besides getting a multitudeof SMS-based services such as news alerts, travel updates, banking services andhealth information.

The move from 3GPP will prompt handset vendors to also develop uniform keypadlayout and other user interface that are friendly to Indian languages. Though atpresent some handsets support some Indian languages, it is not done in anorganised way. For example, the Hindi keypad on a Nokia handset could be differentfrom what Motorola provides.

A lot of the language capabilities, currently, are also achieved through proprietary

software by individual handset makers, which gives rise to inter-operability issues. Asa result, India lags behind other countries in SMS usage.

A standards-based method will enhance inter-operability across devices andoperators. The India initiative at 3GPP was led by the Centre of Excellence inWireless Technology.

Dial your doctor, pay by phone

Patient-doctor link portal Healthcare Magic has said its subscribers now can not onlyconsult a doctor on phone but also pay their fee by phone. The company has tied upwith mobile payment service provider Atom Telecom to provide IVR-based payment

option for the service.

Patients can now interact with doctors by dialling a landline number to get medicalassistance for their illness or common query, a release by the Bangalore-basedHealthcare Magic said. The charges range from Rs 160 to Rs 999 and can be paidthrough mobile or landline using credit card.

Healthcare Magic launched its Doctor on Call and Doctor on Click live chat serviceover a year back. The charges were collected online; now this extends to phone-based payment, a spokesperson said.

The option of paying over the phone will cover all 400 million telecom subscribers

and 40 million landline subscribers across the country. It has tied up with insuranceand telecom players including Reliance Telecom, BPL Mobile, Aircel, ICICI Lombardand Bajaj Allianz.

Providing m-payment facility for our customers will definitely increase oursubscriber base and smoothen the payment system. As the mobile penetration inIndia is more than the Internet, Atoms technology will definitely help get morevisibility to the service,

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Atom is the digital, retail initiative of the Financial Technologies Group and is said tohave handled over 100 crore similar transactions in India and West Asia.

8. The Pay Per Second Billing Model

The past month has seen some hectic activity in the Indian Telecom Sector. Itsamazing how a little competition always keeps everyone on his or her feet. Eachbusiness enterprise looking at the market as if through the eyes of a hawk for thenext big business opportunity .Each company trying to seduce the prospectivecustomer with its products. India, the future to be worlds largest mobile telephonymarket is now going through a massive upheaval. Market leaders no longer have iteasy and with the introduction of theper second billing model, the competitionhas only gotten more cut throat.

Up until now weve seen various hashes and rehashes of the tariffs under the prepaidand post pay systems. Plan after plan requiring you to remember how much youdhave to pay if you spoke for a minute. How much to a phone using a rivals network,how much for STD, how much for ISD, etc.

All that has changed with the entry ofTata Docomo in the Indian market. Docomogot the ball rolling by offering the per second model charging 1 paisa per second.

The competition and I mean everybody, absolutely everybody; Airtel, Vodafone,Reliance, BSNL, Idea Cellular, Aircel and the smaller operators too have nowbegun offering the pay/second model.

The activity in the TRAI (Telecom Regulatory Authority of India) offices with regardto this matter has taken place at lightning speed.

The recommendation has been passed approving the model and immediately thecompanies have launched the scheme to attract customers. Tata Docomo has barelyhad the time to blink at the success of their initial few weeks in the Indian markets!

In the short term this is a model, which is going to hurt telecom operators with theirrevenue. As much as a 15-20% loss in revenue is expected as a result of the pay persecond model. This isnt my personal opinion but a consensus reached among manyother analysts.

Brokerages are not happy with the telecom sector. The I

Documents

Indian Telcom Industry 2009Ver1