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More mobiles ring in the rural areas than urban

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48 million new users in Bharat against 32 m in India in Jan-July 2009.

Thomas K. Thomas

New Delhi, Oct. 23 Mobile growth in the rural areas has outpaced that in cities for the first time.

According to data available with the Telecom Regulatory Authority of India, 48 million rural consumers took a new mobile connection in the first six months of calendar 2009 compared with just 32 million in the cities. In contrast, only 39 million new mobile 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 residing in villages. While this is not much compared to the 329 million mobile consumers in the urban areas, market watchers predict that the next 500 million mobile subscribers will come mostly from the hinterland.

“The cities and towns are saturated, with the tele-density as high as 95 per cent. However, the tele-density in the rural areas is just 17 per cent which means there is a huge unmet demand in these regions. The rural mobile user base is likely to overtake the urban subscriber base in the next 3-4 years,” said an official from the Department of Telecom.

Big gainers

The biggest gainers from the shift in mobile usage trend are Bharti Airtel, BSNL and Vodafone Essar. While Airtel’s rural subscriber base grew from 15.76 million subscribers in March 2008 to 33.78 million by June 2009, BSNL’s rural base improved from 13.74 million to 29.64 million in the same period. Vodafone almost doubled its rural user base from 13.14 million to 24.83 million.

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

According to the TRAI data, Reliance’s rural user base has increased from 8.95 million 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 operator’s revenue. Low tariffs combined with low minutes of usage have driven telecom operator’s revenue to a negative growth for the first time in Q2 2009. Compared to a combined revenue of Rs 32,211 crore in the first quarter of calendar 2009, the revenues for the second quarter were Rs 29,507 crore, which is 9 per cent decline.

“While it is good that the rural tele-density is improving, operators should also simultaneously address the issue of declining revenues by bringing in applications and services beyond voice and SMS. Innovation through third generation technologies should help the operators improve their finances even as they continue to add more subscribers,” said a market analyst.

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(This article was published in the Business Line print edition dated October 24, 2009)
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