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September - 2009 - issue > India Road Ahead
Telecom the Great Leveler of Social & Economic Strata
Anil Nair
Tuesday, September 1, 2009
The phenomenal growth of Indian telecom sector in the last ten years has been the most defining development in India's history, which is second only to the economic reforms of 1991. The Indian telecom sector has played a pivotal role on two counts: growth and inclusion. The telecom sector got the wheels of socio-economic development rotating really fast while covering almost half of this country's population, bringing them all on one common platform.

Rurban' Growth is for Real

Going forward, what I see is a great opportunity - an opportunity for marketers to use telecom infrastructure as a reliable channel for business, especially when it comes to the hinterland. Recent surveys indicate that rural markets have contributed around half the sales of home and personal care products, beating the slowdown. Sectors like automobiles or durables have grown steadily on similar lines. There is a large market in the rural and semi-urban (rurban) India, and this fortune at the bottom of Indian market pyramid is for real. For some time now, marketers have debated whether lack of credit in rural India barricades growth. After six decades, merely 10 percent of the population of independent India can qualify as financially included (68 districts out of the total 611). The other debate has been that if rural markets need different (read 'lower quality') products or a 'sachet' approach to bridge the cost-affordability gap. While 'credit infusion', 'sachet marketing', or a 'no-frill product' does take you closer to the rural market, there is another approach that combines these strategies into a potent solution for rural marketing.

'ProVAS' – the Next Big Thing

ProVAS (product as a value added service) is the next big thing waiting to happen for the Indian telecom sector and for the Indian marketer in general. ProVAS solves many problems of rurban marketing. Let me explain. The rurban consumer is no different in aspirations or consumption needs and hence would typically want the same products and solutions that one would offer the urban markets. Secondly, the 'what this consumer needs is a service’ approach to his needs instead of simply infusing credit (loan). A rurban consumer is 'value' conscious. Sweating every buck he or she spends to the hilt is important. With 'product as a value added service' approach this consumer gets a quality product, gets credit (pay per use), and gets more value for money. And here is where the telecom sector has a pivotal role to play.

Building the 'Mobile' Supply Chain

The rurban markets become unviable mainly due to high distribution cost. The cost of activating, acquiring, and servicing this large geographically spread out market outweighs the returns, or rather the 'pace' or 'rate' or return. An alternate channel like the Web does reduce this distribution cost but is severely constrained by affordability of PCs and low broadband penetration. What solves this problem is the affordable mobile phone. With more than a million subscribers getting added every month and mobile phones getting cheaper by the day, it is poised to become the new 'supply chain' for the rurban markets. It can connect the consumer with an enterprise from anywhere, any time, and at almost one-tenth the cost. If products are distributed as a ‘value added service’ on this new supply chain, it can make selling to rurban markets not only viable, but also profitable. These ProVAS applications can be offered as a service by telecom companies or other managed service providers in conjunction with the supplier of relevant products.

Mobile Wallet

The determining factors for success of ProVAS in India will be 'simplicity' and 'regulations'. Anything complex will have to remain back-end (within the enterprise or with the service provider), keeping the mobile device as simple and ubiquitous as possible. On the regulatory front the RBI is likely to come out with guidelines around monetizing instruments like pre-paid mobile vouchers, enabling ‘using them to purchase goods and services at an identified network of establishments up to a certain amount'. This will give a great boost to development and adoption of ProVAS. With this a consumer, having once invested in a mobile phone, can now avail durables, financial products, and a host of other services, while paying it over a period using the 'talk-time'.

On a concluding note, the next decade is likely to see a paradigm shift in the way Indian enterprises think. Products offered as 'service' will expand the rurban market. New alliances and business models will emerge converting the billion plus population into a real competitive advantage for this country. The telecom sector will undoubtedly play a crucial role in this transformation.

Anil Nair, Managing Director, Avaya GlobalConnect (AGC). He can be reached at Anil.Nair@avayaglobalconnect.com
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