Mobile phones to ring louder in rural India

Monday, 21 June 2004, 07:00 Hrs
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NEW DELHI: Faced with the prospect of growth in the mobile phone user base hitting a saturation point in big cities, Indian cellular service providers are gearing up to delve deeper into under-penetrated rural areas.

With income levels rising due to robust agricultural output and the rural economy getting increasingly mainstreamed, mobile phone operators are eyeing the countryside with a view to maintaining the scorching pace of growth.

"Nearly 70 percent of India's population lives in rural areas and yet most mobile phone service providers are not there," said T.V. Ramachandran, director general of the Cellular Operators' Association of India (COAI).

"The telecom revolution will have to make a wider impact not only to bridge the digital divide but also to sustain the high growth rates that we have witnessed in the last couple of years," Ramachandran told IANS.

"Service providers are now increasingly realising this and are looking at the rural market as the next step in mobile phone growth."

India's mobile phone market has grown rapidly in the last couple of years on the back of spiralling income levels and falling phone tariffs and handset prices, making it one of the fastest growing markets globally.

The country of over one billion people has 36 million mobile phone users, up from just 10 million a couple of years ago. India, Asia's third largest economy, is adding at least one million new mobile phone users every month.

The share of the rural market in the country's mobile population is, however, less than 15 percent. Further, recent figures show that the new monthly additions are slowing down a bit with operators seeing signs of stagnation in their prime urban markets.

The mobile sector saw 1.25 million new additions in April, down from 1.9 million the previous month and 1.63 million in February, according to COAI, the umbrella body for cellular operators in India.

This has sent alarm bells ringing in the industry with companies exploring ways to invade virgin territories.

"The companies will have to go to rural areas. There is just no other way out," says Dilip Modi, chief executive officer of Spice Telecom, one of the leading private sector mobile phone services provider.

"I believe that in order to step up growth levels we will have to venture into untapped markets as also reach more and more subscribers in existing markets," he added.

"If our rural markets open up to mobile phones at a faster pace, India could catch up with China in penetration over the next few years."

China's mobile population touched 279 million at the end of 2003 while India, in comparison, had only 28 million subscribers. China is adding four to five million new mobile users every month.

Experts say India's mobile subscriber base can hit the 100 million mark in the next couple of years if the "formidable" costs of extending network to the uncovered areas are sharply lowered.

"Low-income countries like India can ill-afford to replicate expensive telecom infrastructure to enable new entrants reach addressable subscribers in rural areas," said Ramachandran.

The mobile industry lobby group chief said state-run Bharat Sanchar Nigam Ltd. (BSNL), the largest telecom firm in India with a countrywide network, should be allowed to share its infrastructure with private operators.

Modi said more people in rural areas could take up mobile service if entry barriers for private companies and costs of service provision are reviewed and lowered.

"One-third of our expenses are regulatory costs. If entry barrier aspects and cost of service aspects are addressed by regulation, then accelerated mobile subscriber growth in rural areas is certain to follow," he said.

Source: IANS
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