Executive Summary

The rapid growth in Indian telecom industry has been contributing to Indias GDP at large. Telecom industry in India started to set up in a phased approach. Privatisation was gradually introduced, first invalue-added services, followed by cellular and basic services. Telecom Regulatory Authority of India(TRAI), was established to regulate and deal with competition (the service providers). This gradual andthoughtful reform process in India has favoured industry growth. Upcoming services such as 3G andWiMax will help to further augment the growth rate.The Indian telecommunications industry is one of the fastest growing in the world and India is projected to become the second largest telecom marketglobally by 2010.This is evident from the facts of Telecom Industry for example, India added 113.26 million new customers in 2008, the largest globally. The countrys cellular base witnessed close to 50 per cent growth in 2008, with an average 9.5 million customers added every month. This would translate into612 million mobile subscribers, accounting for a tele-density of around 51 per cent by 2012. In this report we will capture the penetration of telecom industry in rural market. Major highlights of the report are the the major players in Indian market and the penetration of mobile market in rural areas of india.

Introduction

From the strict marketing point of view, the market structure in India is dichotomous having rural as well as urban markets. But many do not comply with this view as they contend that consumer everywhere is a consumer and hence their needs, aspirations, beliefs and attitudes will also be the same always. The fact, however, remains that there are certain unique characteristic features which call for separate marketing strategies to be distinctively developed to suit the rural and urban market behaviour. Conditions existing in urban markets at present can also be analyzed in this context. First, the urban markets have almost reached a saturation level that further tapping them with a high profit margin has become difficult. Secondly, competition is becoming tough in urban markets compelling many firms to incur heavy costs in promotional expenditure. Thirdly, the awareness level of urban consumers is high and hence product features have to be changed often. Needless to say this process needs a huge investment which will have a negative impact on profitability. Thus, except perhaps for easy reach the urban markets have become as oasis. The rural markets are estimated to be growing fastly compared to the urban markets. The potentiality of rural markets is said to be like a 'woken up sleeping giant'. 72% of the population is rural and contributes nearly half of the countrys GDP. Rural is bigger than urban comprising of 53% in FMCG sector and

59% in the durables sector. According to Indian Market Demographics 2004, approximate size of rural market ranges from 300-500 million. Since 2002 consumer expenditure in rural india has risen by 9%.

Mobile Service Operators in India

Bharti-Airtel leads the wirless market with 24% market share. The company recently achieved the magic figure of 100 million subscribers. However, Bharti-Airtel expects a bloodbath in the Indian telecom market in the near future, and is looking to spread its risks by entering new geographies With 12-13 players present in the market there would be asevere pressure on margins. Be it an Aircel or Etisalat, the new operators would not remain fringe players in the Indian market, but would try and rock the applecart of existing operators. The growth inIndian market could start tapering off very soon. According to an industry expert the subscriber base will not expand beyond 800 million in coming years from current number 400 million. The following are the servie providers in India: Aircel Airtel BSNL MTNL Idea Cellular Tata Indicom Tata DoCoMo Reliance Communications Loop Mobile India (Formerly BPL Mobile) Emirates Telecommunications Corporation (formerly SWAN Telecom)

Virgin Mobile Vodafone Essar (Formerly Hutchison Essar/Hutch Orange/Hutch Pink) Videocon Mobile Service (Formerly Datacom Solutions) Uninor MTS India S Tel Virgin Mobile Spice Telecom

Sl. No. 1 2 3

Name Company Bharti Airtel

of Total Figures

Sub Additions % Market in Aug Share 1,150,298 28.09% 1,133,024 23.56% 2,330,239 16.09%

171,846,824

Vodafone Essar 144,144,031 IDEA 98,441,714

4 5 6 7 8 9 10 11 12

BSNL Aircel Uninor Videocon MTNL Loop Mobile Stel Etisalat All India

90,622,219 59,191,661 27,738,154 6,382,493 5,298,081 3,181,967 3,433,988 1,477,495 611,758,627

388,057 602,312 349,488

14.81% 9.68% 4.53%

-652,383 1.04% 32,932 19,035 -67,259 52,941 0.87% 0.52% 0.56% 0.24%

5,338,684 100.00%

Source : http://investorzclub.blogspot.in/2011/04/telecom-companies-marketshare.html

Rural Telephony
As the government targets to increase rural teledensity from the current 2 percent to 25 percent by 2012, rural telephony will require major investments. This segment will boost the demand for telecom services, equipment, Internet services and other value-added services; thereby,offering great market opportunities for telecom players

Exploring the Rural Telecom Opportunity

It is believed that of the next 250 million people expected to go mobile; at least 100 million will come from rural areas. Though the rural mobile penetration is highest in Punjab (20.69 per cent), followed by Himachal Pradesh (17.09 per cent), Kerala (10.63 per cent) and Haryana (10.20 per cent), most companies are now sweating it out by hard selling their products and services in the rural areas of the region. As a result, the geographical coverage of mobile telephony in India has gone up from 13 percent, a couple of years ago, to 39 percent now.

Rural Telecom - Prospects & Challenges

Even though the technology existed, private players felt the rural. Rural India is characterized by low and widely market unattractive. It was the governments' scattered population, multifarious topography and attempt which made the segment looks viable for difficult climatic conditions, which makes it a the private players to make investments on telecom complex and expensive task to have a wired infrastructure latter. The GOI (Government of telecom network. India has around 300 cities and India) initiated the 'Bharat Nirman' project- 2005-4600 towns and four metro cities. Many languages 09, with the aim to develop rural infrastructure in are spoken; people are from diverse culture, sectors like water supply, housing, telereligion and castes. India is the second most communication and IT, roads, electrification and populous country in the world with multiple irrigation (Bharat Nirman, GOI). The government geographic terrains. The terrain varies from hot introduced village panchayat phone (VPTs) under deserts, mountains, forests and marsh lands to this project. But it was not a success as there was plains. The average population density is 319 low maintenance of the VPTs and a large number people per sq.kms which again varies from as thin had to be disconnected because of non payment of as 10 people per sq km in Jammu & Kashmir to as bills as VPT's were perceived as a free service high as 2000 per sq.kms in Delhi and Mumbai. provided by the government (Bhatnagar2000). Mobile network has been proposed to be a viable solution for rural and such other low population.

Literature Review
Emerging Rural Mobile Market in India The global mobile phone market is showing the signs of sluggishness but there is one telecom market growing at an outstanding pace India. While the worldwide subscriber base posted a growth rate of around 25.7% from 2004 to 2006, subscriber base in India leaped by a strong 63.5% from March 2004 to March 2006 and further 83% from March 2006 to March 2007, according to the leading market research firm RNCOS.The report has noticed that almost every region in India has been covered under the mobile umbrella and identified huge growth potential in the rural market as it has low mobile penetration.The report said that as the Indian government and leading players are seeing this market as the biggest opportunity ready to be explored, it can be anticipated that the maximum number of mobile subscribers in the combined subscriber base of India will belong to rural geography. So the wireless service providers, identifying the need of the hour, are rushing to so far overlook rural regions. Though there is still untapped potential in the urban market, a majority of the cellular operators have diverted their attention towards the rural areas to expand their base and reach. So the real growth in near future is projected to stem from these parts. The augmenting rural mobile market, as the report says, will give rise to the need of developing wireless infrastructure and this, in turn, will open up opportunities for Internet in rural India. The study has outlined various projects being run by various State Governments/NGOs or Corporate Houses to proliferate the use of Internet in rural regions and what incentives have been provided to these projects by the government for their seamless and effective functioning.

Emerging Rural Mobile Market in India is a prudent futuristic view on the rural mobile market of India. It discusses its various parameters, including subscriber base, mobile penetrations, and handset sales and evaluates the opportunities provided by the emerging rural mobile market and the possible hurdles it could face in future

Technical Developments in Rural Telecommunications

The oldest telecommunications technology, copper wire, has evolved over the past few decades and has presented new options for rural telephony. When rural systems were first developed, service over long distances was provided with open wire connections, suspended on poles or trees. In some areas to save on copper, single line open wires were used, where the earth served as the return conductor. When the number of users increased, copper pairs were shared (party line). As the infrastructure developed, carrier systems were introduced. Through frequency multiplexing and the use of coaxial cables the calls of many users were transported on the same line. With the introduction of digital technology this system was augmented by the use of time division multiplexing (digital loop carrier). With properly conditioned feeder cables, multiplexing allowed economic extension of the network.

Radio systems: Although multiplexing enabled network extension it did not resolve the issue of low cost service at large geographical distances. In order to serve distant rural areas, particularly those with very sparse populations,

radio systems present the advantages of scalability and easy deployment. However, while radio systems solve the problems of poles and copper wire theft, they require an external source of power, which is not an issue for fixed line service. Solar power may be a solution, although it is not deployable in all locations and may also be subject to theft. Radio systems have also undergone an evolution from analog to digital technology. In rural areas a widely deployed system is the so-called Point-to-multipoint system. Unfortunately standardisation of these systems has been limited and many manufacturers have ceased production.

Cellular mobile networks (Fixed access): With the arrival of cellular mobile telephone systems new options for rural areas came into view. Already in an early stage it became clear that investments made in mobile networks to serve a different group of users could benefit rural subscribers. At first these systems were deployed using a variety of analogue standards, whereas today digital systems are in use in many 8 developing countries. Apart from the placement of single telephone booths, another implementation uses mobile network to provide local access through a managed telephone service . This system has proved to be a good solution in areas where cellular coverage is available.

Wireless local loop (WLL): A third category of radio-based services is wireless local loop. Although standard implementations have not evolved, vendor specific solutions, both analogue and digital, have been used for some time. They continue to suffer however from a relatively high cost per line. An answer to this has emerged in the Indian design and deployment of corDECT, a system based on the original digital cordless system, DECT. The corDECT system provides an extended coverage area of about 10 km for about half the price of a classical WLL system. Furthermore, the corDECT system provides low cost service with some mobility, which the WLL systems did not allow.

This feature gives rise to disputes between corDECT operators who can operate without a special mobile license and those mobile operators who have paid a high license fee for this privilege. Another advantage of the corDECT system over other WLL systems is that it can provide data connections for Internet access with speeds up to 70 kbps.

Satellite: When Global Mobile Personal Communications by Satellite (GMPCS) systems were announced there were high expectations for the use of these systems in rural areas. Consortia offered developing countries free use of access channels. Naturally in return for this use the countries were expected to grant licenses to use frequencies and operate in their countries. Currently, both Iridium and Globalstar, the only two GMPCS firms in operation at the global level, struggle to attain profitability. Consequently, the deployment of these systems for general access in developing country rural areas has been severely limited. One other alternative is Very Small Aperture Terminal (VSAT) systems, which have now been installed in various countries. These systems provide a good solution for isolated areas, particularly where a connection over land would be too costly. In any particular rural application the choice of technology depends very much on the local conditions. Subscriber density, clustering possibilities, distances to nearest national connection point and the characteristics of the terrain have to be considered. Also local technical expertise and adoption capacity have to be taken into account.

Recommendations
There is large differential between rural (1.94%) and urban tele-density (31.1%) in India. Also the Indian rural market is very different. The cable TV in India has more penetration than telephones. The villagers can have substantial purchasing power if the price of their produce is right. In order to provide momentum to the rural telephony, TRAI recommended :

No prior SACFA clearance for deployment of towers upto 40 m. in rural areas.

No spectrum fees for usage of CorDECT and similar technologies in rural areas as well as for usage of 450 MHz.

No right of way charges for networks in rural areas.

In order to offer financial incentives to service providers in the form of coverage of partial cost of shared infrastructure and license fee and spectrum charge reduction based on the number of rural base station locations, TRAI proposed change from a universal obligation (USO) model to one where incentives are given for rural networks which are as follows:-

 Sharing of infrastructure to receive support from USO. Discount in Annual License Fee and Spectrum Charges linked with Rural Coverage. Supporting backbone infrastructure through USO fund

Policy Initiatives The government has taken many proactive initiatives to facilitate the rapid growth of the Indian telecom industry. 100% foreign direct investment (FDI) is permitted through the automatic route in telecom equipment manufacturing FDI ceiling in telecom services has been raised to 74% Introduction of a unified access licensing regime for telecom services on a pan-India basis Plan to introduce mobile number portability in a phased manner The government is implementing a program of connecting 66,822 uncovered villages under the Bharat Nirman programme. The government will invest US$ 2 billion to set up 112,000community service centres in rural India to provide broadband connectivity in 2008-09. The Department of Telecommunications (DoT) has stated that foreign telecom companies can bid for 3G spectrum without partnering with Indian companies. Only after winning a bid, would they need to apply for unified access service licence (UASL) and partner with an Indian company in accordance with the FDI regulation

Satellite-based rural telephony: Despite advances in digital technology that increases the availability and decrease the cost of communications, almost three billion people living in rural areas are still without basic telephone service. Satellite-based VSAT networks provide simple and economical solutions for quickly implementing communication infrastructure to link these areas to the rest of the world. VSAT-based solutions are flexible enough to grow as requirements increase and a combination of VSAT and terrestrial technologies, such as wireless local loop, accommodates a wide range of population densities. Various solutions include: VSATs connected to subscriber lines to serve scattered populations (< 20 lines) VSATs connected to wired or wireless/cordless local loop to serve clustered populations (20-300 lines) VSATs connected to macro cellular networks to serve medium density populations (> 300 lines)

VSAT stations connected to a small number of phone lines are an ideal solution for serving the initial demand of remote telephony, usually fewer than 20 lines per VSAT site. VSAT networks can be connected to pay phones or a small number of lines to serve scattered populations with a dispersed subscriber base. VSAT stations can be located at an individual home or colocated with a public phone. The public phone network can be composed of individual pay phones connected to a VSAT station (typically a 1.8m C-Band or a 1.2m Ku-Band antenna), or phone shops (telecenters) where multiple community lines/phones/fax are connected to a single VSAT station. In summary, this solution offers the following advantages: A cost-effective solution for implementing high quality and reliable communications in locations that terrestrial facilities cannot economically accommodate Rapid installation, as quickly as 2 days per site and low cost of operation and maintenance VSAT hub facilities which may be shared among multiple users and applications. Provision of high quality narrow and

wideband communications (voice, fax, tele-medecine, teleeducation, Internet access) Available alternative power supply such as solar energy (35 to 60 watts per channel) No requirement for separate power supply for subscriber terminals wired to the VSAT station.

Other Recommendations The problem of providing telephones in uneconomic areas exists in our countries. The following are few recommendations for deeper penetration in Indian rural market Quality and rates: Quality services should be available at just, reasonable and affordable rates. Access to advanced services: Access to advanced telecommunications and information services should be provided in all regions. Access in rural and high cost areas: Consumers in all regions including low-income consumers and those in rural, and high cost areas, should have access to telecommunications and information services, including inter-exchange services and advanced telecommunications and information services, that are reasonably comparable to those service provided in urban areas both in quality and rates. Equitable and non-discriminatory contributions: All providers of telecommunications services should make an equitable and nondiscriminatory contribution to the preservation and advancement of universal service. Specific and predictable support mechanisms: There should be specific,

predictable and sufficient Federal and State mechanisms to preserve and advance universal service.

Conclusion
The Indian Telecom Service provider industry is gearing for a revolution. The customer is driving this revolution and will see more unique and sophisticated offerings coming his way. The 3G which will pave the way for 3.5G, 3.75G and the next big thing-4G and the VAS services will keep the customer asking for more. The rural areas which have remained untapped will see an insurgence of services. Also the easing of the regulations by TRAI ,the ease of spectrum licensing, the FDI influx will make the telecom space in India a must watch in the coming years

References
http://www.rncos.com/Market-Analysis-Reports/Emerging-Rural-Mobile-Market-inIndia-IM567_toc.htm http://www.itu.int/ITU-D/pdf/fg7/ruraltel_itu.pdf http://www.scribd.com/doc/18590980/Telecom-Sector-in-India http://www.tmu.ac.in/pdf/final_inner_09.pdf http://milagrow.in/k-solutions/knowledge-bank/products/emerging-rural-mobile-marketindia http://www.rncos.com/Market-Analysis-Reports/Emerging-Rural-Mobile-Market-inIndia-IM567_toc.htm www.rncos.com