India's rural market beckons

Nicole McCormick
25 Mar 2010

Now more than ever, it is critical for mobile operators in India to have a clear and concise rural mobile strategy.

Urban mobile penetration has now reached 103% and even after adjusting for an estimated 20% dual SIM cardholders, penetration in urban India is still extremely high.

In contrast, rural mobile penetration is just 19%, with the rural segment accounting for 40%-45% of monthly net additions. India’s rural market makes up 70% of its 1.16 billion population.

Market leader Bharti Airtel has long realized the rural mobile opportunity. Some 57% of its net adds stem from the countryside.

According to financial-services firm CLSA, four operators – Bharti, Vodafone, Idea and BSNL – account for 77% of rural subs. Bharti has the biggest share at 27%, followed by Vodafone at 19%.

But what’s more interesting is who’s missing from list.

Reliance Communications (RCom), India’s second largest mobile operator, doesn’t make the cut with only 12% of its GSM and CDMA subs coming from the countryside.

Similarly, Tata Teleservices – whose GSM venture is Tata DoCoMo – has only 3% of its subscribers in rural areas.

CLSA believes that an operator’s share of 2G rural subscribers is indicative of a firm’s competitive strength. It also sees “a sizable network” as key to achieving faster than-industry revenue growth.

The point is that Bharti’s rural strategy is well-entrenched. Its grass roots approach in rural India is to appoint local businesses as selling agents.

Its rural lead is the envy of the industry and will be extremely difficult for its rivals to match.

Moreover, if the country’s new GSM players have any real chance of building sustainable businesses, they must be prepared to think outside the urban centers where ARPUs are higher.

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