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Handset makers tap rural India

Posted: 01 Oct 2008     Print Version  Bookmark and Share

Keywords:rural markets  mobile density  telecom provider  mobile handset 

The bleak, endless landscapes of 600,000 villages in India—where 70 per cent of the population lives off the land and conducts meetings under ancient village trees—is becoming the next frontier for mobile handset makers to conquer.

Although 11,000 subscribers are being added every hour in India, this is happening only in the metros and tier-one and tier-two cities. The vast rural market, where teledensity is 4 per cent and mobile density is not even mapped because it is so negligible, lies untouched. It is here that the faint rumblings of the mobile tsunami are being heard.

Phone manufacturers have begun to take these markets very seriously and have started introducing new products targeted at rural markets. Global firms such as Nokia, Samsung and Motorola have launched entry-level handsets retailing at Rs.1,290.32 ($30) to Rs.1,720.42 ($40).

The rise of low-end
Local companies such as Reliance Communications Ltd have announced low-end China-made phones retailing at Rs.817.20 ($19); Spice Telecom's People Phone is selling at Rs.860.21 ($20); BPL Telecom Pvt. Ltd is manufacturing phones in the southern state of Kerala with imports from Korea; and Tata Group sources its handsets from XL Telecom and Energy Ltd and CDMA phones from Kyocera Wireless Corp. India's largest telecom provider, Bharat Sanchar Nigam Ltd, is teaming up with leading handset brand Beetel to launch low-priced handsets in the northern state of Uttar Pradesh.

And everyone's target is the customer living in an innocuous village, who doesn't know a single word of English, and whose income is about Rs.2,150.53 ($50) a month.

"The cities are becoming saturated with mobile subscribers, and it is natural for handset makers to penetrate the rural markets," Jagdish Rebello, director and principal analyst at iSuppli Corp., said.

So, it is not surprising to see brightly coloured vans, splashed with Nokia or Samsung glossy prints, making regular forays and peddling their wares in this hitherto-untrodden territory peppered with bullock carts, tractors and cycle rickshaws and possibly a TV in the community area. Some villages have electricity for only 2-4hrs a day, while water and fuel are carried manually from rivers and wells miles away from their mud-painted homes. But every single inhabitant has the need to talk to someone else in the neighbouring village.

Although market research firm Gartner Inc. cut its global forecast for mobile handset growth from 16 per cent to 10 per cent for the year citing the global economic slowdown, the situation in India—a land of 26 crore mobile subscribers—seems to belie this prediction.

Driving rural markets
With 80 lakh (8 million) subscribers coming into the mobile fold taking the current total to 26 crore today, India has become the fastest-growing telecom market in the world. But for this growth to be sustained, new markets have to be explored.

There is a huge, untapped potential in the India market, and a big opportunity lies ahead for all stakeholders. "But success will entirely depend on customer response to the handset vendors' service offerings, and the ability of vendors and operators to serve those communities both adequately and cost-effectively," said Rahul Gupta, an analyst with Strategy Analytics.

But this is more easily said than done. "Three key factors that determine the rural markets are accessibility, affordability and aspiration," said Devinder Kishore, marketing director for Nokia India. "Accessibility is about working together with operators that are also keen on increasing the rural subscriber base and working out 'bundle offers' when they start putting up towers in the villages. Making handsets that are sub-Rs.2,000 ($50), and sometimes as low as Rs.1,290.32 ($30), addresses the affordability issue, but you have to get the entire manufacturing cycle right when you are looking at price points such as these."

The third factor—aspirational—is a slightly trickier one. "Every handset maker has realised that a built-in flashlight and FM radio are a big hit in the rural handset market. You would think that a monochrome display would satisfy an illiterate villager. But it is not so. We have studied the market and realised that they all want a colour display and a camera. I think our TV campaigns have paved the way for them to aspire to feature-rich handsets they would never have dreamt of two years ago," said Kishore.

Although entry-level phones are not exactly custom-made for rural markets, all have these basic essentials—ease of-use, utility value and sturdy construction. These are crucial in villages where the customer cannot drive up to a service centre and get the handset repaired. Multilingual and dust-free keypads without spaces between the keys are other must-have features for handsets marketed in rural areas.

Delivering value
But more than these features, the key strategy is to educate the villagers and give them real value. Merely selling a handset in the rural area is not enough. There has to be close interaction between the handset maker, service provider and content provider.

"You have to give them what they need—weather reports, because the majority are in farming and rely on rain; commodity prices; and information about pests and fertilisers. Lifetime validity and prepaid options are also being worked out with operators," said Sunil Dutt, country head of mobile business for Samsung India.

Samsung, for instance, has partnered with Indian Farmers Fertiliser Cooperative Ltd to sell its handsets. "We use their distribution channel that reaches over 90 per cent of the villages in India," said Dutt.

Meanwhile, Motorola and Nokia have partnered with ITC e-choupal—an e-commerce hub for villagers—which gives them wider reach into the rural markets.

"The challenges are numerous. After-sales service is key to the success of handset makers, and companies are coming out with innovative ways to handle this," said Amit Aggarwal, an analyst at Zinnov Management Consulting.

Innovative ways to tap the rural market are emerging. "Some of the handset makers have come up with a multiple SIM card that would enable a large family spread out in the village to use one handset. This is quite common in China and the Philippines, and it could prove to be so in India too," said Rebello.

Considering this, it's not surprising that some of Nokia's new models enable multiple users for each handset. For the first time, the phones have a call-tracking application and a multi-phonebook to make phone sharing simpler for customers in rural markets.

- Sufia Tippu
EE Times

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