The Hindu Business Line : Call of the village

Indian private mobile companies are embarking on a major plan to roll out services to the remotest and the poorest parts of India, where no telecom entrepreneur has dared to venture till now, over the next year, to ensure that every person living in this country has access to a mobile phone.

So people living in interior villages such as Henry Island in the Andamans and Chingraliang in Arunachal Pradesh, who may not enjoy regular supply of electricity or basic infrastructure such as roads, will soon have access to mobile brands such as Airtel, Reliance and Hutch. Some of these villages have just one household inhabited by just one person.

Bids and beyond

That private mobile operators are falling over each other for taking their respective services to rural India can be gauged by the recent bids received by the Government for a Universal Services Obligation (USO) fund project that envisages setting up cellular infrastructure across 2.5 lakh villages that have not had any telecommunications services yet.While the Government has said it is willing to cough up as much as Rs 1,000 crore over a five-year period to companies willing to set up shop in these villages, cellular firms such as Reliance Communications, Hutchison Essar, Bharat Sanchar Nigam Ltd and Idea Cellular have put in zero bids, which means operators are willing to offer cellular services in remote rural India without any subsidy from the Government.

Bharti Airtel has gone a step beyond and quoted negative bids, which means that the company is prepared to give money to the Government instead of taking support from the USO fund.

A quick flashback

Contrast this to a few years ago, when the same operators had baulked at the mention of rural telephony, terming these villages unviable, uneconomical and unreachable. Take, for instance, the Village Public Telephone project, which envisaged setting up a public telephone in nearly 6.5 lakh villages across the country. After two years into the project, most of the private operators who had been given part of the responsibility to set up these VPTs put their hands up and got the commitments diluted by the Government, leaving the State-owned BSNL to complete their share as well.

Or take the example of Rural Community Phones, the first project under the Universal Services Obligation fund started in September 2004. Reliance Communication was the only private operator to take up the project and after three years is yet to set up 7,500 rural phones out of the 21,449 envisaged under the project.

While the company has time till September 2007 to fulfil its commitment, this year Reliance has so far set up only 911 phones. The private operators have been so focused on urban and semi urban markets that the Department of Telecom is all set to impose a fine of Rs 400 crore on seven operators for not fulfilling the rollout obligations as per their licence conditions.

The operators in the line of fire include Bharti Airtel, Tata Teleservices, Aircel, Hutchison Essar and Reliance Communications, the same companies who are now vying with each other to go rural. To further drive home the point, consider the fact that the USO fund, which has been set up specifically to better the dismal rural telecom penetration, has more than $2 billion lying unused.

Present perfect

Cut to the present and operators are now talking of reaching clusters of villages with as little as 1,000 people. "A few years ago, operators would not consider rolling out telecom services to areas with less than 10,000 population. This has now come down to 5,000 and in a few years time we would get into clusters of villages that have just 1,000 people," says Pradip Srivastava, Chief Marketing Officer, Idea Cellular.

Agrees T.V. Ramachandran, Director-General, Cellular Operators' Association of India (COAI). "With over 5 million subscribers being added every month, operators are going after every subscriber they can find in this country."

Match-box approach

Bharti Airtel, for instance, has adopted the `match-box approach' which essentially will ensure Airtel's availability wherever a match-box is available, even in the smallest and remotest corners of the country. "The other key initiative is our `Chapa Chapa' approach which supports our objective of reaching out to all towns with a population of less than 5,000. We believe that the next level of growth will happen from these geographies," says a Bharti Airtel spokesperson.

At cheaper rates too

In the ongoing USO fund initiated project to roll out cellular infrastructure across 500 districts in the country, private companies are willing to roll out infrastructure in rural areas at nearly 80 per cent cheaper rates than the subsidy benchmarked by the Government.

For instance, while the Department of Telecom had set a benchmark of Rs 4.02 lakh a year for each tower to be set up in Andhra Pradesh's East Godavari district, it has got bids for as low as Rs 80,000. In Bihar, while DoT had set a subsidy benchmark of Rs 4.2 lakh per tower a year in places such as Begusarai and Darbhanga, operators are willing to set up units for as low as Rs 1 lakh.

Extending coverage

While currently cellular networks cover about 60 per cent of the over one billion population, the proposed USO project will give access to a mobile phone to another 270 million people with the help of 7,871 towers across 2.5 lakh villages that have not had any telecommunication facilities till now. The project will also expand the geographical coverage of telecom services by about 20 per cent.

Cellular operators currently cover 39 per cent of the country in terms of physical area. BSNL has bagged 80 per cent of the rural project, winning contract for setting up 6,125 mobile towers out of the total 7,871 passive cell sites (land, tower, electricity and civil needed to start mobile services) envisaged by the Government. Among the private companies, GTL Infrastructure has got the contract to set up 471 towers while Reliance Infrastructure has won the bid for 472 towers. Hutchison South, which is being acquired by Vodafone, has emerged the lowest bidder for 331 towers while NIT and Quippo have got 384 and 88 towers, respectively.

Rationale for rush

Market analysts point out that stiff competition in the cellular market, which has as many as seven operators, and a saturated urban market is forcing companies to look for subscribers in the rural areas.

"The Indian telecom market continues to grow unabated. We are already witnessing a growing demand for mobile services from the smaller towns and rural areas. India is looking at achieving 500 million customers by 2010, and going by the current market trend, we are expecting a large number of this to come in from these rural and semi-urban areas," says a Bharti Airtel spokesperson. While tele-density in urban areas is close to 30 per cent, it is only about 2 per cent in rural areas. Operators, including Airtel, Reliance Communications and Hutchison Essar, have earmarked a significant part of their investments this year for rollout in rural areas.

"Operators are now looking to roll out services in the nook and corner of the country. There is a huge untapped market there and operators now have a rural-focused rollout plan," says Ramachandran.

Affordability is key

According to a new study done by LIRNEasia and AC Nielson, close to 100 million new cellular subscribers are expected to come from the rural areas over the next two years and the prospective subscribers are reasonably heavy users, making an average of 40 calls a month.

However, analysts caution that while operators are rolling out networks to the remote and poor areas, they also need to bring down the cost of owning a phone if they want to penetrate a highly budget-conscious rural market.

Says Prof Rohan Samarjiva, LIRNEasia, "Our study revealed that 82 per cent of the respondents did not own a phone because they could not afford it. While the current entry cost of owning a phone is perceived to be higher than $25, the rural population is not willing to pay more than $10. Also more than 95 per cent of the rural population, who do not yet own a phone, are willing to pay less than $5 per month for phone usage."

The study was conducted with a sample of 4,000 Indians who are at the bottom of the pyramid or BOP (see graphs).

`We'll Give them what they want'

Operators say they are aware of the factors that could pull the plug off their rural plans. "We are adopting various routes to reach out to varied market segments. Our tie-ups with low-cost handset manufacturers, for instance, is an essential part of our strategy to reach out to the lower-end market segment. We also have introductory offers on prepaid packs with a lower entry cost from time to time. Our RC200 prepaid card, Lifetime prepaid and our Easy Lifetime prepaid are revolutionary products that unlocked the potential in the rural areas and smaller towns," says a Bharti spokesperson.

Idea Cellular is making its services more suited to the rural population. "Apart from tariffs, which is anyway rock bottom, we are making value added services more relevant for the agri-economy. The mobile should become a tool that offers the farmer an opportunity to increase his business," says Srivastava.

Cost-cutting initiatives

Aiding the private operators are initiatives such as the Ericsson-supported bio fuels programme, which offers a low-cost and environment-friendly solution to power the operator's cell sites. Since some of the villages are located very remotely, reaching diesel to run the mobile base stations is a tedious and expensive task. The bio fuels initiative enables operators to use locally available agri-products to generate power. Then there is also the low-cost handset initiative by Motorola, which offers mobile handsets at Rs 1,000.

An indigenously made low-cost wireless communication solution developed by Rajiv Mehrotra-promoted Vihaan Networks promises to lower network costs drastically. The GSM-based network designed specifically for rural areas supports as low as 150 subscribers and can go up to 15,000 subscribers.

The cost of deploying this system is so low that operators can offer mobile services for as low as Rs 100 a month.

Captain James Kirk had to face a number of challenges before he and Enterprise could complete the mission. Indian telecom operators too could just be fastening up their seat belts for rolling out mobile services in one of the world's toughest terrains, in their quest to conquer new terrain.

tkt@thehindu.co.in

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Call of the village