Telecom Lead India: Rural India accounts for 70 percent of the country’s population but only 29 percent of India’s telephone subscriber base. This statistic evocates the digital divide plaguing the country and the huge opportunity the untapped market offers. Wipro Infotech shares opportunities and challenges through this whitepaper.
The journey of the Indian telecom industry to the first 500 million subscribers has been driven by cut throat competition and mass acquisition. The road to 1 billion would warrant a collaborative stakeholder ecosystem and drastic innovations in service delivery and strategy to make last mile access of telecom services a reality.
This highlights the range of opportunities, challenges and the strategies to bridge this astounding digital divide and drive inclusive growth across India.
The Indian Digital Divide
India is now the second largest telecom market in the world after China, having crossed the 951 million subscriber mark in March 2012. However, the first phase of Indian telecom growth to 500 million was led by urban penetration. Now, with urban India approaching saturation, the highly untapped rural market is all set to drive the next phase growth to 1 billion.
Growth in Subscriber& Teledensity
Opportunities and challenges for rural telecom
- Inclusive Growth:Telecom would be a critical enabler in driving basic amenities to the rural population of the country such as:
- Education: With the median age of 25.1 years and over 40% of population below 19 years of age, India’s population is young. There arises the need to drive education to every nook and corner of the country and wireless connectivity could be the answer to that.
- Banking: 65 percent of Indian population is still unbanked. Rural India has 3 million active no-frills bank accounts as opposed to 140 million wireless connections. This clearly highlights a strong case for branchless banking through mobile to make basic credit facilities available.
- High disposable income in rural areas:
Rural India contributes almost 45 percent to India’s GDP. Hence, if appropriate telecom services are offered at the prevailing prices, rural India can very well afford them.
- Data Usage and MoU from rural India:
For Leading Telco’s, UP is the highest contributor to VAS revenues across circles and Bihar is highest contributor in terms of pre-paid recharges asserting the strong case of high MoU (Minutes of Usage) and data usage from rural India. Moreover, rural India has a PC (Personal Computer) to Mobile ratio of 3:26, which means that broadband might be accessible to rural India on the mobile before a PC.
- Energy and infrastructure woes:
Availability of DG (Direct Grid) power, required for running the telecom towers, is the biggest roadblock. DG availability ranges from 2 to 6 hours daily in rural areas, with telco’s spending 30 percent of network OPEX on diesel and DG. Poor Road infrastructure adds to these woes.
- Huge CAPEX and low ARPU:
The cost of setting up a tower is around INR 30 – 35 lakhs. This translates into a CAPEX of INR 75,000 crore for rural tower coverage. Apart from this, setting up the infrastructure for roads, power, tower site and others wouldrequire a huge amount of capital expenditure from the TSPs and the government.
Additionally, it is estimated that ARPU from rural operations would be around INR 10 per month, 3 times lower compared to urban ARPU.
- Spectrum Crunch:
India has the second largest number of subscribers globally but one of the lowest spectrum allocation. An Indian TSP has 7-8 MHz of spectrum on an average against an international average of 17.5 MHz per TSP.
Strategic and technological solutions
Rural VAS and collaborations
The VAS offerings for rural India need to be designed keeping in mind the typicality of their needs. Offerings relevant to rural India can range from providing farming best practices, fertilizer availability and mandi rates for the farmers, daily weather updates for the fisherman,and veterinary services for villager and be in vernacular of the resident. Such content creation and presentment would call for innovative cross-industry collaborations.
Hub and Spoke Distribution Model
The imperative factor for selling any product/service in rural areas is to ensure affordability. This warrants making the demand reaches a critical mass for economies of scale and leveraging on VLEs (Village Level Entrepreneurs) through a hub and spoke distribution system. E.g. CSCs (Common Service Centres) can be run by VLEs familiarized with call centre processes and the latest VAS offerings.
Government and regulatory initiatives
The investment of over INR 75,000 crore required to drive inclusive growth across 70 percent of the country’s population calls for a major involvement from the Indian government, similar to the initiatives taken by countries such as China, US & Australia. Government has INR 18,000 crore of funds at its disposal for enhancement of broadband penetration and rural telephony which can be utilized to setup DG supply infrastructure, run pilot projects for renewable energy sites and provide subsidies.
Tower & Technology related solutions
Tower sharing: Tower sharing would be critical to expand in the rural areas owing to the higher cost of operations there and lower returns.
Sustainable technology: Energy OPEX as a percentage of overall OPEX is 2-4 times higher for Indian TSPs compared to US and EU operators on an average. This makes it imperative for Indian TSPs to innovate more on tracking and reducing the CO2 emissions and thereby reducing the energy OPEX.
WiMAX/LTE: Owing to spectrum crunch, it makes a viable case for new wireless infrastructure of a cost effective technology with wider coverage, such as WiMAX or LTE, for ubiquitous rural wireless broadband access.
What represents 70 percent of India’s population cannot be ignored by any industry, and most of all, an industry which runs on volume like telecom. However, creating a lucrative business case out of connecting 6.3 lakh villages warrant a collaborative stakeholder ecosystem as highlighted below:
By Ankit Verma, consultant at GRCC (Global Research Center for Consulting), Wipro Consulting Services