India mobilises for a rural revolution

Financial Times

6 August 2007

The small town of Fatehpur in eastern India’s Bihar state is about seven hours’ drive from the nearest big city. Reaching it requires a journey over rickety bridges through areas plagued by Maoist rebels. Narrow, painfully potholed roads cross bleak farmland and congested towns. To travel the 70km across the area’s roughest terrain takes a glacial six hours.

Unremarkable as Fatehpur may seem, it is here and in thousands of other towns and villages across India that the next stage of the country’s momentous telecommunications revolution will unfold.


India is the fastest-growing mobile phone market in the world. In May 6.5m new subscribers brought the country’s total to 218m. But if companies are to sustain this blistering pace of growth, they must bring mobile phones to rural areas.

There are daunting hurdles: lack of electricity; remote and rough terrain, which makes it hard to set up phone masts; and the challenge of marketing to low-income rural customers who are not familiar with mobile phones.

Telecoms operators – and innovative consumers – are devising ways to work around these problems. Like 90 per cent of Bihar, India’s poorest state, Fatehpur has no electricity. Yet this has not stopped people in the town (population 18,000) using mobile phones to connect to the world.

Arvind Tandon, 28, charges phones in his cramped shop where he sells and repairs clocks and radios. The use of a car battery, which also powers an electric fan on the counter, is available for Rs5 (about ) a time. He proudly holds up a mobile phone connected to his contraption, which serves at least 150 customers each day. Mr Tandon started this supplementary business a year ago and it now makes up nearly half his revenues.

Such “workarounds” in rural areas are crucial if India is to meet ambitious government targets of 500m phone subscribers by 2010.

The current surge in growth of telecommunications use in India is in stark contrast to the stagnation of previous decades. Telephone penetration nationwide inched up to only 2 per cent of the population in the 50 years following independence in 1947. But industry reforms launched in 1998 have propelled penetration to 19 per cent in May.

In this atmosphere of heady growth, Vodafone, the world’s largest mobile phone operator, this year paid $11bn for control of Hutchison Essar, India’s fourth largest mobile operator.

But Vodafone has a long road ahead, as have India’s other fast-growing mobile phone operators, Airtel, Reliance, BSNL, Tata Indicomm, Idea and Aircel. To sustain their expansion, phone operators must move from cities to villages, where nearly 70 per cent of India’s 1.1bn population live.

Telephone penetration in big cities can be 50 per cent but it remains as low as 2 per cent in tens of thousands of villages.

“There’s no way you can get more business if you don’t go rural,” says Shishir Kumar, chief operating officer for Airtel in Bihar. Airtel, India’s largest mobile phone operator, is aggressively expanding into rural areas. “This is not out of charity.”

Low-income rural residents spend only a few dollars a month on communication, so profits must come from signing up ever more subscribers.

The demand is there. Airtel signed up 100,000 mobile customers in Bihar in the first 14 days of its launch in the state in January 2005. It had nearly 2.4m total subscribers by March of this year.

To lure customers, Airtel stages Bollywood-style song and dance performances on the back of lorries. At one such show on a street corner in Belaganj, another town in Bihar, three young men gyrate their hips to a Hindi pop tune and leap across a small stage. A crowd ogles the show, although one man remains engrossed in fixing a tractor nearby.

After the performance Airtel representatives hand out red shirts and caps to the crowd. An MC with a microphone peppers the crowd with trivia about the company’s services.

Operators must focus on making services accessible and affordable for rural customers. The literacy rate in Bihar is 47 per cent. Those who cannot write mark their registration forms with a thumbprint.

Phone plans rely on prepaid credits and retailers can electronically refill credit on a customers’ phone, bypassing forms. Airtel’s rural start-up bundle offers a Motorola handset for as little as Rs1,599. Recharge coupons come in denominations as small as Rs10 so “even the daily wage worker can afford to talk”, Mr Kumar says.

Airtel is blitzing Bihar with roadside advertisements that feature its red logo. It is aggressively expanding its network of commission-based retailers, who hawk handsets and top-up cards from stores that sell anything from camera film to cloth.

The company aims to offer services in Bihar through 5,000 cigarette and pan sellers, whose betel nut stands are ubiquitous across India. That is in addition to 55,000 retailers in Bihar and the neighbouring state of Jharkand.

Although voice calls will continue to be its core business, Airtel also offers features whose aim is to create “emotional attachment” to its brand. Ring tones of catchy pop tunes, religious chants and hymns are popular. And Airtel recently launched a hotline that dispenses jokes, songs and information in Bhojpuri, Bihar‘s local language.

Mobile banking and money transfer are other areas with great potential: 80 per cent of India’s population lacks access to financial services.

But efforts to expand the rural market are hobbled by nightmarish logistics. Acquiring titles to land on which to erect phone masts is a bureaucratic maze. Annual floods wash away roads and bridges and make the set-up and maintenance of expensive masts all the more difficult.

Many are built on sites that are as far as 25km from the nearest electricity supply. Hundreds of litres of diesel must be trucked in weekly to feed the generators that run masts and other equipment.

Rolling out services in rural areas is especially precarious where “the writ of government does not run”, says Mr Kumar. Maoist rebels infest pockets of poor, rural India and are known to besiege towns and extort bribes.

In spite of these hurdles, rural markets even in beleaguered Bihar are hungry for communication. From just 2.87 per cent in 2000, phone penetration in Bihar has increased to 7 per cent. It is expected to double next year.

The remoteness of most of Bihar and the fact that many residents migrate to other states for work make communication all the more important. “Fundamentally, there is a need to talk,” Mr Kumar says.

* Phone calls that offer a lifeline to divided families

The desire to talk among those who have left India’s remote villages is keen. Take Devinder Chowdhary, a 33-year-old chauffeur based in New Delhi, far from the village in Bihar where his parents, wife and two young children live.

Like millions of other migrants who have left the poor Indian state in search of work, Mr Chowdhary travels home rarely. The journey to his village of 4,000 people takes 30 hours by train and bus.

But he and his family bought mobile phones last year, and they now talk regularly. Connecting is far easier than when he had to get through to the village phone stand and leave messages. He speaks to them at least twice a week.

In his last conversation, Mr Chowdhary asked his parents whether they had sown the crops now the monsoon had begun. He is also called on to resolve disputes between his wife and his mother, he says.

Before getting a mobile phone, he spent Rs200 a month at public phones. Today, Mr Chowdhary’s monthly mobile phone bill is about Rs500, out of an income of Rs6,000, but he is able to talk for longer.

Mr Chowdhary cannot write, so text messages are useless to him. But he spends 10 minutes a day on local calls.

The best thing about his mobile phone, he says, is: “I can talk whenever I feel like it.”


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