A new report from Ovum concludes that while rural India presents significant growth opportunities for mobile, the market that is currently being addressed is less than 25% of the country’s 800 million potential customers. Tackling low ARPU and high service costs is the challenge...
A report from Ovum concludes that rural India presents significant growth opportunities for the mobile industry. However, due to low ARPU and the higher cost of providing services in rural India, operators face a challenge if they want to serve these areas profitably.
”Due to huge population base, low teledensity and strong socio-economic developments, rural India is becoming an important growth frontier for the mobile industry”, says report author Amit Gupta, Principal Analyst and based in India. However, half the rural population is too poor to afford even the cheapest handset, and among those who can afford one, a mobile phone is likely to be a family device as opposed to an individual one.
“Despite a huge rural population and low tele-density, the addressable market in the short to medium term is less than 200 million unique subscribers out of a total population of more than 800 million.” continues Amit Gupta.
Customers’ low spending power has an adverse impact on adoption and ARPU. In tandem, limited electrification, a lack of backhaul and the poor state of road connectivity make deploying and operating a wireless network in rural areas expensive. Therefore, mobile business case in much of rural India is very challenging.
To overcome these challenges, operators need to shift their primary focus from increasing ARPU and penetration to maximising total revenue and profit from serviceable rural subscribers. This can be achieved by adopting a comprehensive rural strategy comprising service and product innovation and operational excellence; partnering with government and non-government organisations as well as non-telecoms players; and employing local entrepreneurs. “These levers are mutually reinforcing and can help industry players to meet the dual objectives of increasing revenues and reducing costs”, adds Mr Gupta.
The industry’s success in rural India so far can be attributed to efforts in the areas of service and product innovation, operational excellence, partnering with non-government organisations, and employing local entrepreneurs. For Mr Gupta, however, “We believe that the industry needs to further explore partnership opportunities with the government and non-telecoms companies.”
Amit Gupta concludes, “Operators can circumvent the poverty constraints of rural India to a certain extent by forming partnerships with the government and non-telecoms companies to charge them, rather than the poor end customers, for providing mobile services...The government and non-telecoms companies get a reliable medium for connecting with rural India, and operators get new revenue streams. It’s a win-win solution.”
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