PROJECT TITLE

VALUE ADDED SERVICES PENETRATION AND FEASIBILITY STUDY

IN RURAL MARKET

For VODAFONE ESSAR DIGILINK LTD.

A PROJECT SUBMITTED AS A PART OF THE REQUIREMENTS

FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION

SUBMITTED BY
Gaurav Saxena
MARKETING/SYSTEMS
BATCH: 2009-11

UNDER THE GUIDANCE OF

Mr. Aniruddha Ghosh Prof. Kinshuk Bhadury
Sr. Manager VAS (Vodafone UP-East) Faculty, SIMS
 Symbiosis Institute of Management Studies

To whom it may concern

This is to certify that Mr/ Ms. Gaurav Saxena_ PRN No. 09020441245_ has
completed his/ her project report on the topic Value Added Services penetration
and feasibility study in rural market _ under my guidance.

Kinshug Bhadury
Sign :
Place :
 CPS Report – Vodafone Essar Digilink Ltd.

Project

The prime question associated is, “WHY VAS?” and “WHY Rural market?”

Why Rural Market?

The proportion of new mobile subscribers
from rural areas indicates the importance of
this market segment to sustained mobile
growth in India.
Telecom Regulatory Authority of India
(TRAI) predicted in its 2009-2010 report
that, of the next 250 million mobile
subscribers in the country, approximately
100 million will be from rural areas, and this
will drive the growth of rural VAS. By 2012,
60 per cent or close to 400 million of India’s
projected 650 million total mobile subscriber
base, will be rural subscribers.

Why VAS?
Present day operators are facing the biggest
hick of declining ARPU (Average Revenue
Per user) and increasing churn.
A sharp decline in average revenue per user
is being witnessed due to tumbling tariff
rates. Entry of new operators has aggravated
this and tariff rates have hit rock bottom
levels. Thus, telecom operators are seeking
ways to increase their per-user revenue and
VAS has become one of the key focal point.
To make this more attractive vendors and
operators have started focusing on innovative
solutions and local content to increase
consumer stickiness along with improving
the adoption rate of these services.

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Acknowledgement

It gives me immense pleasure to acknowledge all the people who have guided and helped
me to complete this assignment.

The Vodafone UPE rural market survey offered a great learning experience. During the
tenure of this project, I was fortunate to have interacted with people, who in their own
capacities have encouraged and guided me.

I would like to express my sincere gratitude to HR Department of Vodafone (UPE) for

providing me an opportunity to undergo training in VAS-Marketing Department of such a
reputed organization. Working with the market leaders was a great learning experience.

I am extremely fortunate that I got an opportunity to work with the VAS Marketing
Team of Vodafone (UPE). My sincere thanks to Mr Aniruddha Ghosh who have
shared his corporate experiences and shown me the direction during my project. I am
deeply indebted to him for his extensive illuminating guidance, creative suggestions,
persistent encouragement, constant supervision and constructive criticism which enabled
me to give this project its final shape.

I offer humble thanks and shall always be obliged to him for giving me such a valuable
project and for trusting my potential.

Thank you Vodafone (UPE) for this opportunity.

Gaurav Saxena
Marketing/Systems
EMAIL:[email protected]

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Executive Summary

Rural markets in India constitute a wide and untapped market for many products and
services which are being marketed for the urban masses. There is a demand for
telecommunication services to be provided to in these areas. Till now it was government
which was trying to reach the villages through various initiates, but the rural tele-density
is very poor and can be improved only through the introduction of modern and suitable
technology along with participation from the private operators. The report here would
like to make a strong insight for the use of VAS for rural areas. The various marketing
issues related to marketing of VAS services in rural areas area seen through the 4 A’s
framework.

The structure of report is as follows, the First section outlines how the telecom sector has
grown in last 5-10 years, what all aspects have grown and what all have fallen, what all
new services are being introduced and currently in which direction is this sector heading
to.

Second section talks about Vodafone global and Vodafone India, growth of hutch to
Vodafone, current wireless subscriber base and market share in UPE and then lastly about
Vodafone (UPE) and VAS in Vodafone (UPE).

Third section talks about the VAS in urban market. A survey and research result
(obtained from online resources) is presented giving the big picture of how and what
urban subscribers want to see in VAS. The section ends highlighting the dividing
elements between urban and rural market.

Last but not the least; Fourth section introduces the rural market and all aspects with the
promotion of VAS in this type of market giving the subscriber behavior and pattern,
followed by graphical analysis of survey and authors recommendations.

The project report highlights the understanding of rural market; the consumer behavior
and pattern; why VAS is not so much accepted or used in these areas as compared to
urban market and how a company should promote VAS.

The research suggests out that company need to better understand the customers
(subscribers) need w.r.t. cost of products and services, buyer values of rural customers, as
well as the post-sales support expectations that rural customers have in India.

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Table of Content

Section I
Telecom Overview………………………………………………………………………………….1
Prepaid connections popular among mobile users…………………………………………….2
Tele-density………………………………………………………………………………………….3
Tariff reductions…………………………………………………………………………………….4
Revenue growth in industry……………………………………………………………………….5
ARPU………………………………………………………………………………………………...7
Minutes of usage (MoU) …………………………………………………………………………..8
Growth of MVAS……………………………………………………………………………………9

Section II
About Vodafone and Vodafone India…………………………………………………………...11
Growth of hutch to Vodafone……………………………………………………………………12
About Vodafone India…………………………………………………………………………….13
About Uttar Pradesh……………………………………………………………………………...13
Wireless subscriber base in UPE……………………………………………………………….14
About Vodafone UPE……………………………………………………………………………..15
UPE Vodafone regional structure (hierarchy) ……………………………………………….16
VAS, VAS entities and VAS in Vodafone UPE………………………………………………...18
Promotion of VAS…………………………………………………………………………………20

Section III
Statistical snapshot of Indian mobile users……………………………………………………21
Top mobile sites…………………………………………………………………………………...21
Urban behavior study…………………………………………………………………………….22
The gap between urban and rural market……………………………………………………..25

Section IV
Indian rural market……………………………………………………………………………….27
Marketing issues in rural telecom………………………………………………………………28
Mobile awareness level…………………………………………………………………………..30
Rural survey………………………………………………………………………………………..31
Targeted information sources…………………………………………………………………...31
Questionnaire……………………………………………………………………………………...31
Survey analysis……………………………………………………………………………………36
Graphical analysis………………………………………………………………………………..39
Recommendations…………………………………………………………………………………47

Concluding Remarks……………………………………………………………………………...51

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References………………………………………………………………………………………….52

Appendix A
Major VAS products in Indian rural market…………………………………………………..53
Successful Global Experiences in Rural Telecom…………………………………………….53

Abbreviations
VAS: Value Added Service
ARPU: Average Revenue per User
IVR: Interactive Voice Response
SMS: Short Messaging Service
MCI: Missed Call Information
CT: Caller Tune
P2A: Person to Application
P2P: Person to Person

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1. Telecom Overview

The Indian telecommunication industry, with 621.28 million telephone (landline and
mobile) subscribers and 584 million mobile phone connections as of March 2010, is the
second largest telecommunication network in the world and the second largest in terms
of number of wireless connections in the world. Telecommunication activities saw rapid
growth in India starting at the dawn of the 21st century and since then; efforts have been
made from both governmental and non-governmental organizations to further improve
the telecommunication infrastructure. The eventual goal is to foster the development
and widespread use of modern telecommunication technologies that will serve all
segments of India‘s culturally diverse society, and to transform it into a country of
technologically aware people. The Indian Mobile subscriber base has increased in size
by a factor of more than one-hundred since 2001 when the number of subscribers in the
country was approximately 5 million to 584 million in March 2010. In the first quarter
of 2010 there have been a record breaking 59.18 million mobile subscriber additions -
More than twice as many added in China during the same period (29.5 million), which
is currently leading with 780 million mobile subscribers as of March 2010.

As the fastest growing telecommunications industry in the world, it is projected that

India will have a more than 1-billion mobile subscribers by 2015. Furthermore,
projections by several leading global consultancies indicate that India‘s the total number
of subscribers will exceed China by 2019. The industry is expected to reach a size of
Rs 344,921 Crore (US$ 76.92 billion) by 2012 at a growth rate of over 26 per cent, and
generate employment opportunities for about 10 million people during the same period.
According to analysts, the sector would create direct employment for 2.8 million people
and for 7 million indirectly.

Figure 1: Service Providers‘ share in net additions during the month of March-2010

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Figure 2: Service Provider wise Market Share as on 31-3-2010

1.1 Prepaid Connections Popular Amongst Mobile Users

Prepaid customers account for a significantly higher share in the total subscriber base in
both the GSM as well as CDMA segments. Prepaid subscribers form around 93.10%
and 94.30% of the total subscriber base of the CDMA and GSM segments, respectively.

Figure 3: Area wise composition of wireless subscribers (FY-09)

Ease of changing the tariff plans anytime coupled with the notion that prepaid
connections help in limiting expenses within a fixed budget are likely to have made
prepaid connections an attractive proposition for the customers, especially in the middle

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and lower income segments. Interestingly, in the metros, the proportion of postpaid
subscribers is relatively higher as compared with other service areas. The B&C circle
has comparatively higher proportion of the prepaid customers.

1.2 Teledensity
With sustained increase in subscriber base since the beginning of the current decade, the
teledensity has witnessed a significant increase from just above 2% in FY99 to 36.98%
by end of FY09. Even though the teledensity has improved substantially during the last
decade, it is still low as compared with other developing countries. Thus, there is a huge
untapped potential existing for the telecom operators in India. While the teledensity in
India has improved substantially, there is a stark difference between the teledensity of
the urban and rural areas. While the urban teledensity at 89% indicates a rapidly
saturating urban market, teledensity of just around 15% in rural areas points to a huge
potential market for the growth in the telecom industry.

Figure 4: Trend in Urban and Rural Teledensity

The urban teledensity has improved from under 7% in FY99 to as much as 89% in
FY09. In fact, in Delhi, the teledensity is as high as 125%. While the teledensity in the
metros is rapidly reaching saturation point, the future growth in urban areas is expected
to come from non-metros. The teledensity of the rural areas has also improved
substantially during the last decade. The number of rural telephones increased from
around 12.30 mn in March 2004 to 120.29 mn in March 2009. In fact the significant
improvement in the rural teledensity has been primarily backed by the surge in wireless
services in the rural areas. The wireless subscriber market in the rural areas has surged
to 109.71 mn by end of FY09, taking the share of rural wireless subscriber to 28% of
the total wireless subscriber in the country.

Although the teledensity in the rural India has grown from as low as 0.5% in FY99 to
around 15% in FY09, the rural areas still remain under-penetrated to a large extent.
Large agricultural workforce, low per capita income, low literacy rates and around 60%

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of rural households not having access to electricity is likely to have limited the growth
of the mobile services in rural areas. Further, underdeveloped telecom infrastructure in
the rural areas has also been an inhibiting factor to necessitate rapid penetration of
telecom services in rural areas. High network maintenance cost in rural areas compared
with the urban areas on account of poor transportation, lack of skilled labour have also
restrained the rapid growth of telecom services in these areas.

Overall Teledensity in India reaches 47.89 with 562.21 million subscriber base (Jan-
2010).

1.3 Tariff Reductions

Across the board, reduction in telecom tariff has been one of the primary factors behind
the exponential growth experienced by the Indian telecom industry. The competition
within the various segments of the telecom sector has intensified in the past few years
and has led to a price war between the operators. The race between the telecom service
providers to capture the market, which led to substantial tariff reduction, has proved
beneficial for the consumer. The array of tariff schemes is being made available by
various service providers to suit the usage profile of a wide range of customers in India
to stay ahead of competitors. Also, most operators offer schemes with assured lifetime
connectivity without having to pay any recurring fixed charges. Moreover, intense
competition and the resultant reduction in tariff levels induced the TRAI to gradually
move towards a regime of tariff deregulation. While tariffs for some crucial segments
like rural telephony, roaming services and leased lines are still regulated, all the other
tariffs are under forbearance. The tariff regulation of TRAI has even granted the unique
option for customers to avail a particular tariff for the entire licensing period of their
service providers without having to fear any tariff hike.

Currently, the charges for outgoing local telephone calls have dropped to below Re
1/min and there is no charge for incoming calls. The charges for national long distance
calls and international long distance calls have also experienced significant reduction
since 1999. A 1 minute call between Delhi and Mumbai that cost more than Rs 37/- in
pre-TTO 1999 period can be currently made for almost at the price of a local call.
Similarly, the tariff for a call to American continent from India has come down from Rs
75 to less than Rs 7 per minute within the same span of time.

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Figure 5: % decline in Tariff of NLD and ILD service during period May-99 to Mar-08

The average outgo per outgoing minute (Rental revenue + Airtime revenue per outgoing
minute), which is considered as a realistic indicator of tariff levels, has also witnessed
significant decline in the last few years. The average outgo per outgoing minute for
GSM subscribers has declined by almost 34% from Rs 1.15 in March 2007 to Rs 0.76 in
March 2009 and that for CDMA subscribers has declined from 0.81 in March 2007 to
Rs 0.57 in March 2009.

GSM Segment CDMA Segment

Figure 6: Average Subscriber Outgo per minute

1.4 Revenue Growth in the Industry

Despite the Indian economy witnessing a significant slowdown in growth on account of
severe global economic crisis, the Indian telecom industry has shown resilient
performance with a revenue growth of almost 18% (y-o-y) during FY09. A confluence
of factors, such as under-penetrated rural areas, growing demand for telecom services

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(especially by the young population) have supported the industry growth. The revenue
growth in the telecom industry during FY09 was primarily driven by the robust
performance of the private sector. The revenue of the private sector grew by as much as
29% during FY09. On the other hand, the revenue of public sector witnessed a decline
of around 4.80% during FY09; as a result, the share of private sector in total revenue
increased to 73% during FY09 as compared with 66.50% in FY08 and that of public
sector declined to 27% from 33.50% in the same period.

Figure 7: Growth in gross revenue

Within the GSM as well as the CDMA segment, revenue from call charges account for
around 60% of the revenue. While the share of rental revenue for the GSM players is
around 18%, for CDMA players it is comparatively higher at around 24%. However, for
both these segments, the share of rental revenue in total revenue has witnessed
significant decline in the last few years. The decline can be partly attributed to the
intensified competition within the players that has led to intensive price-war between
service providers.

Figure 8: Trend in outgoing SMS

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Further, the share of revenue from SMS has also witnessed substantial decline in the
recent past. Decline in SMS charges, lucrative offers designed by service providers
(such as SMS package) coupled with falling call price leading to substitution effect is
likely to have reduced the revenue share from SMS services. In fact the number of
outgoing SMS per subscriber per month has witnessed a gradual reduction the last few
years. The revenue forms the value-added services and installation charges have
witnessed a gradual increase in the past few years.

1.5 ARPU is Continuously Declining

The average revenue per unit (ARPU) of both GSM and CDMA subscribers has been
on a downtrend in the last few years. The industry-wide ARPU of GSM service
providers have witnessed a decline of around Rs 189 between FY05-FY04, from Rs 394
during the quarter-ended March 2005 to Rs 205 during the quarter-ended March 2009.
The ARPU of CDMA service providers have also declined from Rs 256 in the quarter-
ended March 2006 to Rs 99 during the quarter-ended March 2009. The decline in the
ARPU over the years could be largely attributed to the reduction in tariffs of local, NLD
and ILD calls. The customer-oriented policy taking by the regulatory body and intense
competition among the players have to a greater extent resulted in declining ARPU in
the telecom industry. The ARPUs have also been affected by the increasing proportion
of prepaid subscribers and increasing subscription from lower income population.
Postpaid ARPU has been five times that of prepaid ARPU, which could be attributed to
the declining importance of processing fee on recharge coupon/ voucher purchased by
prepaid subscribers; the gap is lowest in Circle C (3.68 times) and highest in Circle A
(5.59 times).

Source: TRAI, various issues of performance report

Figure 9: Segment wise trend in ARPU

The ARPU in the B & C circles is relatively lower as compared with the other areas.
This could largely be attributed to concentration of low income and low usage

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population in these regions. Going forward, the fall in ARPU is likely to continue given
that the additional subscriber base for the telecom industry will emanate from the B & C
circles. Thus, the deeper penetration in rural areas is likely to put downward pressure
on the industry’s ARPU.

1.6 Minutes of Usage (MOU)

With gradually declining call charges, the minutes of usage for the GSM players
witnessed gradual increase during the last few years. The minutes of usage (MOU) for
GSM subscribers increased from 395 per subscriber per month during end-March 2009
to around 505 during the quarter-ended June 2008, before declining to 484 during
March 2009. The marginal decline in MOU in the GSM segment could in part be
attributed to increasing addition of low-income, low usage population to the subscriber
base and slowdown in economic activity during the period.

The MOU of CDMA players, however, have witnessed a gradual decline in the last few
years. The MOU for CDMA segment has declined form 550 per subscriber per month
during end-March 2006 to 357 per subscriber per month during end- March 2009. The
withdrawal of free minutes offers from the existing CDMA subscribe is likely to have
dragged down the MOU in the CDMA segment to a certain extent.

Figure 11: Segment wise trend in MOU

With both the GSM as well as CDMA segment the postpaid customers have a higher
minute of usage per subscriber per month as compared to the prepaid subscribers.
Further, the MOU per subscriber per month is relatively lower in the metros as
compared with the other circles for both the CDMA and GSM segments.

Local calls (inter circle) account for about 81.40% and 86.64% of the total all India
minutes of use within the CDMA and GSM segments, respectively. NLD calls account
for around 18% and 12.89% of the all-India minutes of usage for the CDMA and GSM
sectors, respectively.

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1.7 Growth of Mobile Value Added Services Market (MVAS)

The value-added services market is growing rapidly in India. According to a
consultation paper published by the TRAI, the VAS contributes around 10%-14% of the
total revenue of mobile telecom service providers. A confluence of factors such as the
falling costs of value added services, enhanced handsets qualities, lowering age profile
of mobile users have helped in stimulating the growth in this segment. Also, a host of
innovative contents and packaging provided by the service providers is also luring the
customers. Moreover, the consumers are increasingly looking for entertainment,
different means for performing transactions and accessing information at their finger
tips. VAS helps the consumers in receiving the same and hence is expected to become a
major revenue segment for the telephone operators.

The rapidly-growing valued-added services segment has been one of the instrumental
factors in India‘s runaway success in mobile telephony. Value-added services are
increasingly being viewed as an instrument for customer retention and service
differentiation by the telecom operators given the rapidly increasing competition. The
usage or demand for the VAS is higher among younger population. The CDMA
services have handset constraints thereby its level of acceptance among the youth is
low. Among the CDMA players, the share of VAS revenue in total revenue is lower as
compared with that of GSM service providers. For many service providers mobile
value-added services act as a guard against falling ARPU.

In India, the VAS delivery has largely been based on the SMS, IVR, GPRS and WAP
portal platforms. These VAS platforms are the backbone of the telecom operators for
managing various entertainment services such as games, streaming audio/ video and
ringtone downloads.

The MVAS market is currently dominated by SMS in terms of revenue. SMS can be
P2P or P2A. A host of services such as the information services (news alerts, cricket
scores) are provided through the SMS platform by the service providers.

Voice-based value-added services, such as customer support lines, are delivered via the
Interactive Voice Response system (IVR). IVR is an interactive technology that allows
a computer to detect voice and keypad inputs, thereby enabling the end user to select the
options available on a particular service through pressing numbers on the key pad or
using the speech recognition system. Given that the voice-based services can be
delivered in different languages, these become a significant medium of providing value-
added services to the rural and semi-urban areas. These are voice-based value added
services such as news, live talk to astrologer, movie information, jokes, cricket
commentary, which can be accessed by subscribers.

The General Packet Radio Service (GPRS) system is used by GSM mobile phones for
transmitting IP packets, thereby enabling a user to access the internet on their mobile.
Various services including MMS, downloading content such as wall paper, ringtones,

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games, are provided using the GPRS platform. The GPRS adoption in India is still at a
very nascent stage given the significantly higher prices of data access. Despite being an
effective mode of delivering MVAS, the progress of GPRS has been limited due to
comparatively lower customer base.

Unstructured Supplementary Service Data (USSD) is a GSM standard that facilitates

high-speed two-way communication between the mobile phone and the applications.
USSD is a very useful mechanism that allows users to access applications through their
mobile phone whether they are at home or overseas. USSD offers session-based
communication and supports a range of applications. It permits users to search for
information within that session-based service. The services are delivered through a
continuous interactive session, unlike SMS where the interaction needs to be broken to
separate messages. It is charged on a per minute basis and works out to be more
economical than SMS. The industry holds a positive perspective towards its adoption as
a means of accessing MVAS. Services such as content download, cricket updates, jokes,
news alerts etc. can be acquired by consumers through process of using USSD.
Call Management Services (CMS) – Services such as missed call alerts, call forwarding,
voice mail, and incoming call block come under this category.

Mobile VAS may be broadly classified into the following three categories:

 Entertainment VAS – These provide entertainment for leisure time usage: jokes,
ringtones, Caller Ring Back Tone (CRBT) and games.
 Info VAS – These services are characterized by the useful information it provides
to the end-user: information on real estate, education, stock updates.
 M-Commerce VAS (Transactional Services) – These services involve some
transaction using the mobile phone: mobile banking and mobile payments.

The consumption of VAS by the consumers requires feature handsets that facilitate easy
access of content. Given the comparatively higher cost of feature-rich mobile handsets,
their penetration remains low. The lack of feature-rich mobile handsets acts as a barrier to
the surge in VAS. However, with the increase in competition between the handset
manufacturers the price of feature rich handsets is likely to witness some moderation,
which in turn would assist the increase VAS usage. Further, the introduction of 3G
services, Next Generation Network (NGN)/ converged network, the usage of VAS is
likely to gain momentum. 3G services and NGN would enable the high bandwidth
multimedia content services, mobile TV and online gaming and thereby will push the
demand for VAS as well as innovations in VAS products offering. According to a TRAI
consultation paper, the mobile revenue through value added services is expected to cross
30% of the mobile telecom service provider‘s revenue in the next 5-7 years.

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2. Organization and region Information

2.1 About Vodafone

The name Vodafone comes from voice data fone, chosen by the company to "reflect the
provision of voice and data services over mobile phones"

Vodafone Group Plc is the world's leading mobile telecommunications company, with a
significant presence in Europe, the Middle East, Africa, Asia Pacific and the United
States through the Company's subsidiary undertakings, joint ventures, associated
undertakings and investments.

It currently has operations in 31 countries and partner networks in a further 40 countries.

Based on subscribers, it is the world's second largest mobile phone operator behind China
Mobile, with over 427 million subscribers in 31 markets across 5 continents as of 2009.

The Company's ordinary shares are listed on the London Stock Exchange and the
Company's American Depositary Shares ('ADSs') are listed on the NASDAQ Stock
Market. The Company had a total market capitalization of approximately £71.2 billion at
12 November 2009.

Vodafone Group Plc is a public limited company incorporated in England under

registered number 1833679. Its registered office is Vodafone House, The Connection,
Newbury, Berkshire, RG14 2FN, England.

2.1.1 Presence

Vodafone Operating Countries

Vodafone's partners and affiliates
Figure 1: Worldwide presence of Vodafone

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Growth of Hutchison Essar

1992: Hutchison Whampoa and Max Group established Hutchison Max

2000: Acquisition of Delhi operations Entered Calcutta and Gujarat markets through
ESSAR acquisition

2001: Won auction for licenses to operate GSM services in Karnataka, Andhra Pradesh
and Chennai.

2003: Acquired AirCel Digilink (ADIL — ESSAR Subsidiary) which operated in

Rajastan, Uttar Pradesh East and Haryana telecom circles and renamed it under Hutch
brand

2004: Launched in three additional telecom circles of India namely 'Punjab', 'Uttar
Pradesh West' and 'West Bengal'

2005: Acquired BPL (Except Mumbai) - 3 Circles, another mobile service provider in
India

2008: Vodafone acquired the License in remaining 7 circles and has started its pending
operations in Madhya Pradesh/Chhattisgarh with its headquarters at Malviya Nagar,
Bhopal as well as in Orissa, Assam, North East and Bihar

2008: Vodafone launched the Apple iPhone 3G to be used on its 17 circle 2.75G
network.

Hutch was often praised for its award winning advertisements which all follow a clean,
minimalist look. A recurrent theme is that its message Hello stands out visibly though it
uses only white letters on red background. Another recent successful ad campaign in
2003 featured a pug named Cheeka following a boy around in unlikely places, with the
tagline, ‗wherever you go, our network follows‘. The simple yet powerful advertisement
campaigns won it many admirers.

2009: Vodafone launched Recharge Online

2009: Vodafone Essar - 1st Indian Telecom operator to receive the Payment Card
Industry Security Standard (PCI DSS) certification for its Mumbai operations and
launches unlimited SMS offer in Mumbai.

2010: Vodafone emerged as the most admired marketer in India.

2010: Vodafone crossed 100 million subscribers in India

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2.2 About Vodafone India

Vodafone Essar, formally known as Hutchison Essar is a cellular operator in India that
covers 23 telecom circles in India based in Mumbai. Vodafone Essar is owned by
Vodafone 67% and Essar Group 33%. It is the second largest mobile phone operator in
terms of revenue behind Bharti Airtel, and third largest in terms of customers.

Vodafone Essar provides 2.75G services based on 900 MHz and 1800 MHz digital GSM
technology, offering voice and data services in 23 of the country's 23 licence areas. It is
among the top three GSM mobile operators of India.

3. About Uttar Pradesh

“I had been to other countries - in Europe, Asia and the Middle East - but none of them
had provided even half as much variety, or so much to see and experience and remember,
as this one State in northern India. You can travel from one end of Australia to the other,
but everywhere on that vast continent you will find that people dress in the same way, eat
the same kind of food, and listen to the same music. This colorless uniformity is apparent
in many other countries of the world, both East and West. But Uttar Pradesh is a world in
”
itself.
- Ruskin Bond.

Uttar Pradesh, accounting for 16.4 per cent of the country‘s population, with a population
of over 190 million people, it is India's most populous state, as well as the world's most
populous sub-national entity. Were it a nation in its own right, Uttar Pradesh would be
the world's fifth most populous country.

It is also the fourth largest state in geographical area covering 9.0 per cent of the
country‘s geographical area, encompassing 2, 94,411 square kilometers and comprising
of 83 districts, 901 development blocks and 112,804 inhabited villages. The density of
population in the state is 473 people per square kilometers as against 274 for the country.

Religion Mix:

Hindus constitute 80% of the population in the state. Islam is practiced by about 18% of
the population while the remaining 2% include Atheists, Sikhs, Jains, Buddhists and
Christians, and also the tribal population.

Economy:

Uttar Pradesh is the second largest state-economy in India after Maharashtra, contributing
8.17% to India's total GDP. Between 2004-2009, Uttar Pradesh grew at 6.29% and is now
quite close to the miracle growth norm (which is 7% by international norm).

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The major economic activity in the state is agriculture; in 1991, 73% of the population in
the state was engaged in agriculture and 46% of the state income was accounted for by
agriculture.

Language:

Uttar Pradesh is often referred to as the 'Hindi heartland of India'. While the languages of
state administration are Hindi, established by the Uttar Pradesh Official Language Act,
1951, and Urdu, established by the Amendment to the same in 1989, the native languages
of the state are considered as dialects of Hindi, both by the common populace as well as
the State and Central Governmental authorities. Linguistically, the state spreads across
the Central, East-Central and Eastern zones of the Indo-Aryan languages, the major
native languages of the state being Bhojpuri, Awadhi, Bundeli, Braj Bhasha, Kannauji
and the vernacular form of Khari boli, which also forms the basis for the standardized
Hindi and Urdu registers. Bagheli is spoken on the southwestern fringes of the state.

Festivals:

Among the most important Hindu festivals are Diwali, Holi and Dashehra, which are
also observed with equal fervor by Jains and Sikhs. Bāra Wafāṭ, Eid and Bakreed are
Muslim religious festivals. Mahavir Jayanti is celebrated by Jains, Buddha Jayanti by
Buddhists, Guru Nanak Jayanti by Sikhs and Christmas by the Christians.

3.1 Wireless Subscriber Base in Uttar Pradesh East

The table below gives a picture of as by how much the subscriber base of various telecom
companies has increased in UPE region.

Circle : Uttar Pradesh (E)

Feb-10 Mar-10
Vodafone 9,561,217 10,002,619
Idea 3,613,016 3,688,675
Bharati 8,643,635 9,048,192
Reliance 8,138,842 8,601,534
Tata 2,716,819 2,824,923
Aircel 814,571 901,538
Unitech 608,050 765,256
BSNL 7,852,629 8,199,211

Total 41,948,779 44,031,988

Net Addition 2,083,209

Table 1: Monthly subscriber addition in UPE region.

Source: TRAI Report

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The pie chart below illustrates the market share of different Telco‘s operating in UPE
region.

Market Share of UPE Circle as on

March-10

Vodafone
19% 22%
Idea
2% Bharati
2%
Reliance
6% 8% Tata
Aircel
20% Unitech
21%
BSNL

Figure 2: Market Share of UPE circle as on March-10

4. Vodafone UPE
Vodafone Uttar Pradesh East (UPE), head quartered at Lucknow, covers a population of
12 Crore. Of this, 9.5 Crore people reside in small towns (sub-rural) and villages (rural)
areas.

ARPU coming from UPE circle stands at Rs.178 for prepaid and Rs.730 in case of
postpaid.

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4.1 Vodafone-UPE Region Map

Figure 3: Regional map covered by Vodafone-UPE circle

4.2 Vodafone UPE Structure

Vodafone UPE circle consists of six main towns, which are, Lucknow, Allahabad, Jhansi,
Varanasi, Gorakhpur and Kanpur. The way towns and villages are divided for these main
cities is shown in diagram below.

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There are 6 main towns:

Main Lucknow, Allahabad,
Town Jhansi, Varanasi,
Gorakhpur and Kanpur

DHQ
District Head Quarter
(Town)

THQ
Tehsil Head Quarter (Town)

Towns and Villages

(79% of covered population)

Figure 4: The hierarchy of division of regions

Example of the above mentioned Hierarchy, taking Lucknow District is illustrated in

diagram below.

Lucknow District
35 Lakhs Subscribers

Lucknow
(Main Town)
22 Lakhs Subscribers

Bakshi Ka Talab Mohan Lal Ganj Malihabad Lucknow Sadar

(THQ) (THQ) (THQ) (THQ)

Figure 5: Hierarchy for Lucknow City

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5. VAS – Value Added Services

A value-added service (VAS) is popular as a telecommunications industry term for non-

core services or, in short, all services beyond standard voice calls and fax transmissions
but, it can be used in any service industry for the services providers provide for no cost to
promote their main service business. In telecommunication industry on a conceptual
level, value-added services add value to the standard service offering, spurring the
subscriber to use their phone more and allowing the operator to drive up their ARPU.

5.1 Entities in VAS Value chain

Entity Description Players

Content/Application Companies who develop Saregama, Mauj, Rajshri
Owner copyrighted content.
Aggregator Aggregates content like Mauj, Hungama mobile,
games/wallpapers/ringtones Indiatimes mobile etc.
and distribute it to suit
customer needs.
Software developer Develops applications (like Mchek, July systems,
payment/games/middleware Webaroo, Affle etc.
etc.) for mobile VAS.
Technology Enabler Provides the platform that OnMobile, Cellnext, Mauj
plugs into telco networks etc.
and acts like a bridge
between aggregator and
telcos.

Table: Entities in VAS

Figure 6: Flow between different VAS entities

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Operators still dominate the revenue sharing arrangement in VAS. Of the amount paid by
end users, 60-70% is kept by operator, aggregator gets 20-25% and content app/owner
gets 10-15% of the revenue.

Figure 7: Revenue sharing arrangement in VAS

5.2 VAS in Vodafone (UPE)

Vodafone UPE VAS is Rs.1730 million business i.e. 9% contribution towards gross
revenue.
VAS

VOX SMS Subscription Alerts GPRS

Packs

LIVE IVR P2A P2P -Cricket -Cricket Surfing Downloading

-Jokes -Learn
-Astrology English
-Match-Day -Astrology
Packs -Stocks
Vodafone Guinness
Music Book
Figure 8: VAS structure of Vodafone (UPE) Junction TV serial
alert
The ARPU of VAS (prepaid) is Rs.16 and for VAS (postpaid) itNews
stands at
Beauty
Rs.135

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5.2.1 Promotion of VAS

Promotion of VAS is done by the company through following channels:

OBD: Outbound Dialer (I)

An automated voice dialer application that automates the functionality of outbound call
operations. In situations where outbound calls need to be made with relatively lower
levels of interaction except passing the campaign message, the OBD can provide
extremely effective and efficient mode of campaigning.

IBD: Inbound Dialer (V)

The Telephony server handles inbound calls and routes them to agents. When the server
first receives a call, it gathers information about the call. Based upon the incoming phone
number dialed, the server determines which campaign the call belongs to, plays a
customized message, and then attempts to route the call to an available agent. If an agent
is available, it immediately transfers the call. If an agent is not available, then the server
will play a customized on-hold message and continue to wait for an agent to become
available.

SMS: Short Message Service (I)

It is a communication service component of the GSM mobile communication system,
using standardized communications protocols that allow the exchange of short text
messages between mobile phone devices. SMS text messaging is the most widely used
data application in the world, with 2.4 billion active users, or 74% of all mobile phone
subscribers. The term SMS is used as a synonym for all types of short text messaging, as
well as the user activity itself, in many parts of the world.

The first SMS message was sent over the Vodafone GSM network in the United
Kingdom on 3 December 1992, from Neil Papworth of Sema Group (now Airwide
Solutions) using a personal computer to Richard Jarvis of Vodafone using an Orbitel 901
handset. The text of the message was "Happy Christmas".

Voice Search: (V)

Tool that allows someone to use their phone to make a query. After the user calls the
number of Voice's search system, they would wait for the words Say your Search
Keywords and then say the keywords. Next, they would either wait to have the page
updated, or click on a link to bring up the search page the user requested.

PCN: Post Call Notification (I)

After every call or SMS telecom service providers can notify subscribers about the
information on last call or SMS.

Retail: (V)
Promotion through retail chain of telecom operators.

*(I) – By invitation *(V) - Voluntary participation

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India is currently the 2nd largest Mobile Market in the world after China, adding nearly
10-12 million subscribers on average monthly.

6. Statistical Snapshot for Indian Mobile Users (Jan 2010)

 Page-view growth since December 2008: 263.3%
 Unique-user growth since December 2008: 244.8%
 Page views per user: 339
 Data transferred per user (MB): 7
 Data transferred per page view (KB): 20
 Gmail fell off the top 10 list, allowing Facebook, Wikipedia, Yahoo!, and
YouTube to move up the list. Reason being, Google introduced push email feature
few months back and that allowed users to check mail without the browser.
 Cricinfo is a new addition to the top 10 list.
 Mobile Internet Users grown by 245% in India.

7. Top 10 Mobile sites in India (unique users)

1. google.com
2. orkut.com
3. facebook.com
4. wikipedia.org
5. yahoo.com
6. youtube.com
7. songs.pk
8. zedge.net
9. cricinfo.com (new)
10. wap.in

Most of the Metro‘s and big cities have nearly come to a saturation point, however, the
current phase of growth in Indian Mobile Market is in Rural areas that is now accounting
for majority of growth in mobile space.

Following, in this section, is a survey report that highlights the behavior of

urban market and their mobile service usage pattern.
Note: The data is collected from online survey and online analysis from data collected by
a colleague.

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8. Mobile VAS services report

*** Results are from different online reports/studies which are mentioned in reference.

Here are some numbers on how Urban India uses the Mobile Value Added Services
offered by Telecom providers.

Note: With respect to this project, this survey will help in understanding the psychology
of urban subscribers and then when compared with the rural survey done (by the author),
we will be able to see that using same strategies in both urban and rural market fails.

8.1 SMS Based Value Added Services

Figure1: SMS based value added service (proportion of different Teco‘s)

Nearly 56 Million urban Indians used a VAS related SMS subscription service in
March/April 2009 out of which Reliance Mobile CDMA accounted for a quarter of all
subscribers to VAS SMS subscription service, followed by Bharti Airtel (18%) and
Vodafone (14%).

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8.2 Which is the most popular SMS service used by Urban India?

Figure 2: Most popular SMS service

Numbers are actually surprising, It was thought that News and probably Jobs would
garner most votes, but NO, it is Jokes that used by 52% of Urban Indian Mobile users
followed by Astrology.

One conclusion can definitely be made from these numbers is that majority of mobile
users in India fall into Age group of 16-25 years.

8.3 Which are the popular VAS options that Urban India likes?

No surprises here, Unlimited Internet Access & better offers on SMS bundles are the two
VAS options that Indian urban mobile phone users look at while deciding on a service.

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8.4 Which is the most popular M-Commerce Activity for Urban Indian Mobile
phone users

Figure 3: Most popular M-Commerce activity

Nearly 98 million of all mobile users have used mobile phones to recharge their card or
pay their phone bill. The second most popular M-Commerce activity is buying movie
tickets (39.67 million).

8.5 Which is the most popular VAS service used by Urban Indian Mobile Phone
User?

Figure 4: Popular VAS services among urban subscribers

Finding out who called and informing people when busy are the two other most
popular Value added services used by Urban India. Missed call alerts is used by almost
110 million urban Indians while Talk/Voice SMS is used by almost 80 million.

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The gap between urban and rural market

The market is a place where buyers and Sellers Exchange Things. In lay man terms ―It is
a place where buyers and sellers exchange goods/Service for some value in return such as
Money‖. So the Market is same everywhere. But, the difference is in the consumer
behavior. There will be different buyers in each market. This is because of different
factors which Influence them. So the same way there is a difference between Rural and
Urban Market. The factors are so many to define. There is a difference in all the
marketing Variables. That is where most of the companies approach with different
Marketing Mix and Strategies to Rural Market. The strategies differ from the urban to
rural market.

The Differences can be Infrastructure, Economy, Lifestyle, Socio- Cultural Background,

Availability or reach, Habits, Competition, and Consumer Behavior.

Infrastructure: The facilities like Electricity, Internet, Roads and Buildings, Educational
Institutions, Financial Institutions, Communication and Organized Market, Other
Facilities differs in urban and rural market. In urban everything gets implemented soon
and Availability is also there. Where as in rural market everything takes a good amount
of time.

Economy: Here the Economy means, the earning Capacity in a rural Market. The cost of
Living always depends upon their way of earning. So, the Income levels are unreliable, as
Most of them are depended upon the seasons and Agriculture. So the Income levels
cannot be a fixed one.

Lifestyle: The Lifestyle, that is living pattern of both the markets differ a lot. This can be
important factor which influences the companies to think of when they approach rural
market.

Socio- Cultural Background: Due to the illiteracy level and Culture adaptability from
long time the rural market always gets differ than the urban market. The superstition and
other belief as well as the way of thinking towards products and goods differ in these two
markets.

Availability or Reach: Due to the areas which are diverted geographically and
Heterogeneous market the reach is very difficult. The logistics for rural market is a tough
task than to reach the Urban Market.

Habits: The daily routine of the people makes them to cultivate different habits. Apart
from due to the awareness is low in Media terms there will be a difference in the habits.

Competition: The competition in the market for brands and Companies always differ. As
in rural markets it is always the channel Partner and Retailer plays a vital role. But where
as in Urban Market Brand plays a great role.

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Consumer Behavior: Last but not least, the consumer behavior is the task for the task
for the companies. The mindset of the rural consumer is completely different from Urban
Consumer. The Mindset of the consumer is different. For Ex: In urban market, to buy
Electronic Item the customer thinks of Brand and its updated feature, whereas in rural
market he thinks of in so many ways , such as money, Durability, Buying Capacity and
so on. So this mindset makes a difference in both markets.

So these are the differences in the rural market and urban market. Any company need to
understand these differences well and should frame different strategies when entering
into rural market.

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9. Indian Rural Market

In India close to 72 percent of Indian population lives in rural areas. In the country we
have 6.36 lakh villages out of which only 13 percent have population above 2000. The
rural economy contributes nearly half of the country‘s GDP which is mainly agriculture
driven and monsoon dependant. More than 50 percent of the sales FMCG and Durable
companies come from the rural areas. The McKinsey report (2007) on the rise on
consumer market in India predicts that in twenty years the rural Indian market will be
larger than the total consumer markets in countries such as South Korea or Canada today,
and almost four times the size of today‘s urban Indian market and estimated the size of
the rural market at $577 Billion.
Census of India defines rural as any habitation with a population density less than 400 per
sq. km., where at least 75 percent of the male working population is engaged in
agriculture and where there exits no municipality or board, and the same definition being
accepted for the paper here. A marketer trying to market his product or service in the
rural areas is faced by many challenges; the first is posed by the geographic spread and
low population density in the villages in the country. The table below gives us the
population and village size details in the country.

Percentage of total
Number of Villages
Population villages
Less than 200 114267 17.9
200-499 155123 24.3
500-999 159400 25
1000-1999 125758 19.7
2000-4999 69135 10.8
5000-9999 11618 1.8
10000 & above 3064 0.5
Total 636365 100

Table 1: Rural Population Statistics (Source: Census 2001)

The second challenge is from the low purchasing power and limited disposable incomes
in these parts of the country. But this has been changing in the last few decades with
agricultural growth rate faster in the 1990‘s and 80‘s than the 1970‘s (CMIE 1996).
These all lead to a quantum jump in the incomes of farmers in the country. Though the
income levels overall are still very low there are many pockets of prosperity which have
come up in the rural areas in the country.

According to NCAER 2002, the number of rural middle class house holds at 27.4 million
is very close to their urban counterpart at 29.5 million. The improvement in the support
prices being offered to farmers also has an impact on the disposable income with the
farmers. And between, 1981-2001 there has been tremendous improvement in the literacy
levels, poverty and rural housing in the villages of the country. Rural literacy levels have
improved from 36 percent to 59 percent, the number of below poverty houses have
declined from close to half to 46 percent and the number of pucca houses have doubled

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from 22 percent to 41 percent. These figures provide us with a clear picture that rural
India with the increase in agricultural income and improving standards is on the verge of
becoming a large untapped market which marketers have been aspiring for a very long
period of time. Thus the current status of rural markets makes it an attractive market for
marketers. The next section specifically looks at the current status of rural telecom and
the technology perspective.

Mobiles in recent days are not just a symbol of urbanization. It‘s also a necessity today in
rural India. According to the Telecom Regulatory Authority of India (TRAI), there has
been a rise of 18% in use of the mobiles by rural subscribers. Rising from 93.2 million
users at the end of last year, India today has a total of a massive 109.7 million rural
mobile subscribers. The urban users on the other hand are 282 million in total.

With the rural market being identified so well by the Indian Mobile Services as well as
the handset vendors, they do not miss a single chance to get themselves on the
forefront. With rural mobile market increasing, there is a huge market for Mobile VAS.
The growth in mobile VAS is mainly attributed to the rural market. A few of the service
providers have already taken the initiative for rural VAS.

9.1 Marketing Issues in Rural Telecom

To address the issue of the urban and rural gap and reaching to the rural masses can be
addressed by falling back on the Bottom of the Pyramid (BOP) marketing strategies as
advocated by Prahalad(2007) and the 4 A‘s Availability, Affordability, Acceptability and
Awareness. The BOP marketing strategies basically talk about aggregating the demand of
consumers who have low individual purchasing power and are spread out. The basic
commercial infrastructure suggested by Prahalad and Hart (2002) for the bottom of the
pyramid markets constitutes of four things, creating buying power, improving access,
tailoring local solutions and shaping aspirations.

The 4 A‘s model described in Figure below, is explained in the context of rural telecom.
Each of the A‘s is detailed out below.

Figure 1: 4 A‘s Model

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Availability the first A is about making the product reach the consumers and in the case
of telecom services studies have shown this to be the biggest barrier to be overcome. It
has been acknowledged by many that distribution systems are the most critical
component and a barrier which needs to be overcome for success in marketing in rural
areas. The task of distribution in these areas is considered to be more difficult than in
urban areas, low density of population and inaccessibility makes the problem of servicing
villages individually difficult and often uneconomical. Direct delivery of goods even to
the top one percent of villages cost twice as much as servicing urban markets. To
overcome the difficulties posed in distribution a phased spread of the services is
recommended, wherein bigger villages can be targeted first, then the ones which are near
a small town and connected and last would be the remote villages. In the distribution the
importance of small town markets cannot be ignored and need to be given importance as
besides being a point of distribution they can also be used for promoting products as
villagers tend to come to the town frequently for either purchase of agricultural inputs or
sale of their produce.

Acceptability issues would include issues needed to be addressed to improve the

willingness to consume, distribute or sell a product. It would also include how the
product or service could be made more acceptable to the rural consumers by
incorporating features which would make it attractive to them. With a telecom service
there are two basic components of the service one being the handset and second being the
recharge coupons. Innovation is needed at both the ends to be able to tackle both the
issues.

Affordability issues in telecom would include two sets of issues, the first being a fixed
cost and an initial barrier for a villager to start with the service needs to be brought down
and many companies including the market leader Nokia are working on low cost handsets
which could be of use in rural areas. Within the product there is a need for customization
in terms of language and user friendliness. The rural population where illiteracy is very
high needs to be taken into consideration before coming out with the product and the
feature which would be included in the product need to be rethought; the needs of rural
consumer need to be taken into consideration. In a rural area a radio combined with a
mobile might make more sense to the rural consumer than perhaps a camera. And while
designing the phone one needs to keep the problems related to the power shortages in the
villages.
The second component of recharge also needs to be tailored according to the needs of
rural masses. The availability of disposable income in rural areas is cyclical relate to
agricultural cycles and thus the recharge coupons provided in the urban areas might not
be suited to the needs to farmers and the promotions and schemes to be used in these
markets also need to be in accordance with the agricultural cycles. And it has been shown
through the success of single use small packs that the cost per-use is more important than
the cost of the overall product or service.

The last A, Awareness is linked to the issues of promotion of telecom services in rural
areas. The promotion of the services also needs to be adapted to the village environment;
the language and means of communication used should be in the local language. The best

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places to promote the services could be the local haats and melas which is frequented by
the villagers, the local festivals should also be included in the promotional plan, so should
be the agricultural cycles.

Lastly, issue of proper segmenting and targeting of village consumers should also be
addressed. Rural India is not a homogenous mass, but there are pockets of prosperous
villages and areas in the country and within villages the purchasing capacity of the
villagers vary and the products to be offered need to be tailored to their needs. The next
section looks at experiences of other countries which have been successful in rural
telecom.

9.2 Mobile Awareness Level of Rural

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10. Survey
A survey was done in order to understand the rural base in a better and closer way. The
survey included small towns and villages of UP East which come under Lucknow main
town. The detail of areas and distributors/retailers covered is mentioned in Table 2 of
this section (on next page). Following in this section is the questionnaire which was used
and the key findings and recommendations.

10.1 Targeted Information Sources

To come up to some analysis, every node of chain from distributor to subscriber was to
be taken into consideration as a very useful source of information.

The type of people that were met and queried includes:

Distributor: MD/AD forms the first node of distribution chain. There is a certain region
under each distributor. Usually a district under Main Distributor (MD) and a Zila by an
Additional Distributor (AD).

Retailers: the most important and influential link in the chain is retailer. Retailers take
the product (SIM/Vouchers) from distributor and sell it to locals. These are the people
who are contacted by locals in case they face any problem.

Subscribers: These are the people who are at present using service of any of the
available telecom operators. These are the people whose demand is to be captured and
supplied with respective beneficial service.

Locals: People who don‘t have mobile as of now, but are potential customers.

Figure 2: Flow of service

10.2 Questionnaire
The ideology behind designing the questionnaire was that people in rural areas if asked
closed ended questions won‘t provide any useful information, hence most of the
questions are framed as open ended to get a detailed view of rural understanding of
telecom and how exactly can we help them through our services.

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10.2.1 Retailer’s Questionnaire

इऱाके का नाम : क्रमाॊक :

दक
ु ान का नाम :
१. यहाॉ के मुख्य व्यवसाय ?

२. यहाॉ कौन कौन सी VAS सेवाएॉ ऱोग उऩयोग करते हैं ?

कृऩया अॊक दीजजये- जो सबसे ज्यादा उऩयोग होती है उसे (१) दें |
[ ] SMS [ ] CT [ ] Songs [ ] GPRS [ ] MCT [ ] Alerts

३. यहाॉ ककस ककस धमम का अनुसरण ककया जाता है ?

धमम प्रततशत
-
-
-

४. हर तनम्न लऱखित VAS सेवा के लऱए ऱोग ककस कॊऩनी को ऩसॊद करते हैं ?
सेवा कंपनी
SMS
CT
Songs
GPRS
MCT
Alerts

५. यहाॉ ककस तरह के गाने ऩसॊद ककये जाते हैं ?

६. ककस मूल्य का ररचाजम कूऩन सबसे ज़ायदा बबकता है ?

७. ऱोग यहाॉ ककस कॊऩनी का है ण्ड सेट उऩयोग करते हैं ?

[ ] Nokia [ ] LG [ ] Samsung [ ] Chinese Mobile [ ] अन्य ( )

८. आऩके अनुसार ऱोगों को VAS सेवा के बारे में जागरूक करने का कोई उऩाय ?

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10.2.2 Locals’ Questionnaire

इऱाके का नाम : क्रमाॊक :

१. यहाॉ कौन कौन सी बोलऱयाॉ बोऱी जाती है ?

२. यहाॉ ककस तरह/भाषा के गाने ऩसॊद ककये जाते हैं ?

३. ऐसी कोई जगह जहाॉ ऱोग अक्सर इकठा होते हैं ?

अगर हाॉ तो ककस समय ?

४. मालसक ककतने का रर-चाजम करते हैं ?

५. महीने में एक ही बार रर-चाजम करते हैं ?

[ ] हाॉ
[ ] नहीॊ
अगर बार बार, तो ककतनी कीमत वाऱा ?

६. आऩ अऩने मोबाइऱ में कौन कौन सी VAS सेवा का प्रयोग करते हैं ?
अगर नहीॊ , तो क्यों नहीॊ ?

७. क्या आऩ इन VAS सेवाओॊ के बारे में जानने के इछुक हैं ?

८. कोई ऐसी सेवा जो आऩ मोबाइऱ/टे लऱकॉम कॊऩतनयों से प्राप्त करना चाहें गे ?

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Moreover much of the information was taken as notes with questionnaire, where some
really useful data was found.

Following is the list of Retailers met.

Area Name Area Name

Bhagoli Maurya PCO Gosaiganj Slok Stuti
Promod PCO Anurag Communication
Ankur PCO Shukla
Rastogi Electronics Anand Mobile
Maurya Recharge Center UP General Stores
Bilhara Atul Medical Lucky Mobiles
Subhash Medical Dixit PCO
Salman PCO Verma PCO
Sama PCO OM Electronics
Ajeen Hello Point Ashish
Deep Mobile Amethi Neeraj PCO
Fatehpur Hello Communication Yash Mobile
Famous Communication Raj Priya
Surendra Mobile Shahdaab
Apna General Store Gaurav Communication
Lucky Battery Khurdai Bazar Ma Padma Mobile
Anju Book Depot Prachi PCO
Muna Mobile PS Gupta Electronics
Rai Communication Balaj Electronics
Yes Mobile Business Point
Verma Communication Bahraich Mukut Telecom
Farukh Watches Noor Mobile Shop
Dev Trader Magic Mobile Shop
Malihabad Ajay PCO Shubham PCO
Yadav Electronics Tulsi PCO
Bombay PCO Faisal Mobile
Varis Mobile Shop and
Janta General Store Café
Nadeem Mobile Ramnagar Guftagu Mobiles
Mall Nisa Haujri Raj Mobiles
Prijanshi General Store Maurya Mobiles
Raju General Store Astha Mobiles
Ekta Electronics Avasthi Mobiles
Smriti Communications MobileCare
Nabi Panah Rohit PCO Gaurav Mobile
Singh PCO Pankaj Mobile
Divedi Electronics Pathak Mobile
Jindaur Chaman PCO Haidargarh Nav Jyoti pratishthan
Famous Mobiles Grahsthi pratishthan
Star mobiles New Hind Mobile
Phalak Mobiles Pal Vaj Mobile

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Hardoi Bharat Traders Sachin Mobile

RS Enterprise Sahu Aata
Faizan Telecom Khalsa Mobile
Bindaas Mobiles Ayush Business
Markamau Maurya PCO Raja Communications
OM Mobile Sahu Computers
Kasmandi
Hari Om Hardware Khurd Divekar PCO

Summary Report of survey (Sample)

Area Malihabad Study

MD – Harsh Enterprise (98xxxxxxxxxx)

Area Study Nisarg Chowraha is the main chowraha where people gather. Most crowded on
Sunday (10 AM to 6 PM).
Season is in June-July, when maximum people gather at Malihabad.
A good number of people are working in gulf.

Consumer There is a Govt. Institute to teach farmers about fertilizers, crops, machines etc.
Study
No fixed income for people and occupation varies from Mango Bagh-Owners,
Nursery, Bagh-Caretaker, workers (mazdoor) and other shopkeepers.

People use cheap mobile handsets (China Mobile and Karbonn). Most of them
multimedia sets.

People don‘t download songs, they rather prefer going to shop and get transferred into
their memory card.

People in age group of 18-25 like hearing new Hindi romantic songs.
People in age group of around 30-50 like hearing Hindi songs of 80‘s.
Few people (areas around Moti Neem and Sanjog Bagh villages) like Bhojpuri songs
eg: Saiyan ji dilwa mange angoche bichaike.

People don‘t understand messages and alerts they get from company, the messages
should be in Hindi text. Even Hinglish don‘t works.

Retailer Study Many retailers are unaware of services offered by company eg: GPRS package
Retailers face problem in handling customer care. They often get confused.
Very low (almost no) brand-visibility in retail shop.
Max recharge denomination is 15-25.

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10.3 Survey Analysis

10.3.1 Snapshot

Mostly retail shops are not dedicated mobile retails; they take it as side business.

Locals’ Questionnaire outcomes:

Language:

Hindi is used as main language in towns.

As we move away from main town to village area, the use of Bhojpuri increases.
In few areas of Hindu-Muslim mix region, Urdu is used but in very small proportion.

Songs:

People in age group of 18-25 like hearing new Hindi romantic songs.
People in age group of around 30-50 like hearing Hindi songs of 80‘s.
Few people (areas around villages) like Bhojpuri songs.

Majority of the people like a song because of its tune (disco type), rather then the
wordings.

Songs are mostly downloaded from cybercafé and then transferred to mobile memory
card. This download facility is also available at most of the retailers shop as well.

Azan-Quran-Idaytein (verse) is not a craze even in Muslim region and will be liked only
by very little proportion of people (aged). Young people want new/romantic/disco songs,
irrespective of religion.

Occupation:

Farming
Bagh Owner / Bagh Keeper
Nursery
Gulf-Return
Shopkeeping/Self owned business

Very little proportion is in service profession.

Income:

3000-5000 INR per month.

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Psychology of people:

People want to spend least possible amount on mobile services.

They use mobile mainly for calling.
People mainly use China Mobile (multimedia handsets), due to its cost effectiveness and
facility that songs can be transferred to memory card.

Age:

50-55% of people fall in age group of 0-35

15% of people fall in age group of 35-50.
30-35% of people fall in age group above 50.

Awareness Interest:

Young people are interested in knowledge gaining/sharing stunts by company.

Old people, typically in 50‘s are not as interested, as they feel that they are over-aged to
learn these things and won‘t require it anymore as they are going to pass on business to
their young ones.

Recharge Pattern:

People recharge from Rs.100/month to Rs.1000/month.

Most preferred way to recharge is to recharge as and when required.

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Retailers’ Questionnaire outcomes:

VAS Services:

SMS, CT and Songs are most used VAS services.

GPRS is catching up.
Alerts and MCI services need is not yet realized by people and proper promotion is
required.

Songs:

People find it cheaper to go to retail shops and get songs transferred to their mobile‘s
memory card rather than downloading the songs.

Preferred N/W’s:

Airtel is preferred in most regions and Vodafone is the second best preferred network in
rural market mainly because of;
 Better network coverage
 Higher margins given by Airtel to retailers.

In GPRS services Aircel was dominating but is slowly loosing the market to Vodafone.

Preferred Recharge:

People usually recharge of values ranging from Rs.10 to Rs.25.

Very few people do full talk-time recharge.

Handset Preferred:

Maximum people use China made handsets. Next to China mobiles are Nokia and LG.

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10.3.2 Graphical Analysis

Note:
18 Tehsils, 90 villages (5 villages based on max population in each Tehsil) were covered.
- On an average 2500 people per village
- Sample size of 1060 respondents is taken for locals and 95 for retailers.

Occupation

Major chunk of the population is agriculture based.

Agro based people include farmers, nursery owners, Bagh owners/caretakers.

Graph 1: Occupation variation

People having self owned business are generally shop-owners and traders.
Then there are people in service sector, basically in and near main town.

Surprisingly there are many people who are working in gulf areas, which are not taken
into account in the graph shown above. The people working in gulf would constitute
around 10-12%.

Occupation Response Percentage

self-owned business 148 14
Agro based 827 78
service 53 5
gulf based 32 3

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Age Group

The education level in rural base is increasing at a rapid pace. People are becoming aware
about the trend and status symbols followed in urban India and are eager to accept that
trend, but at a slower pace.

Following graph shows that maximum population lies in age group of 15-35 i.e. around
35%, and this is the population which is most tech savvy.

Age distribution in Rural Base

40
% of Sample

30
20 %
10
0
0-15 15-35 35-50 50+
Age Group

Graph 2: Age group distribution

People up to age of 35 are most interested in learning about mobile services. So they
should be targeted.
People above 50 are least interested in learning about mobiles, and use mobile mainly for
calling.
People between age of 40-50 have a mixed opinion, and more inclined towards learning.

Age-Group Response Percentage

0-15 212 20
15-35 371 35
35-50 159 15
50+ 318 30

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Type of VAS service used

Following graph gives a vague picture of approximately how many people who owns a
mobile handset use which service in what proportion.

VAS Service Used

50
% of Sample

40
30
%
20
10
0
SMS GPRS Caller Songs Alerts MCI
Tune
Service Type

Graph 3: Type of VAS service used

The main problem for not using

 SMS

Illiteracy – Low knowledge of handset characters.

Ease of calling – people finds it more convenient to call rather than type
messages.
Confusion of schemes – people ought to get confused between inter/intra service
operator schemes.

 GPRS

It is mainly used for surfing and not downloading.

Alternative download points – people find it cheaper to go to cyber café and ask
the person to download songs to their memory card.
Low interest – the main purpose of using internet is either songs or wallpapers.
Unawareness – many people don‘t know about the schemes. Its not well promoted
by retailers. At many places retailers themselves are selling songs downloaded to
memory card.

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 Alerts

Pushed Service - Alerts is taken as something that is pushed on to the subscribers,

and hence mostly they go for deactivation of alerts.
Consumes lot of Battery – Alerts are something like text messages which keep on
popping on your mobile screen and hence consume a constant power charge of
mobile handsets. This leads to subscribers disinterest in Alerts.
Unneeded – Most of the alerts that most of the people get are not related to them.

 MCI

Unawareness – this is a service which can be in much-much demand but most of

the people don‘t know about this service.

Total Respondents SMS* GPRS* CT* Songs* Alerts* MCI*

95 42 5 29 3 2 3

* in percentage.

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Types of Songs preferred

Following graph gives a picture of type of songs preferred by people in rural and sub
rural base of UPE.

Graph 4: Song choice

The songs that are liked in the main town are like:

People in age group of 18-30 like hearing new Hindi; romantic; jazzy/disco songs.
People in age group of around 30-50 like hearing Hindi songs of 80‘s.

People in age group of 35+ do like to hear devotional songs, but the percentage is quite
low basically on account of:
- Changing fashion with more youth, and
- Lack of knowledge of songs available.

Song Type Response Percentage

New Bollywood 148 14
Romantic 201 19
Disco 212 20
80's 180 17
Devotional 127 12
Bhojpuri 191 18

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Types of SMS Alerts preferred

As the economy of rural areas is agro driven, the main interest of people is in
market/mandi rates. As of now people follow rates as are told by the transporter. If they
are able to know the right rates w/o transporter margin then it will be very much
beneficial for them.

Graph 5: SMS preference

The second most preferred interest is local news. News on what is happening in their
local areas and district, the jobs round and the weather of the local area.

The interest in Jokes and sher-o-shayari is increasing, and these SMS‘s are liked in
almost all the regions.

Service Response Percentage

Jokes 562 53
Local News 721 68
Sher-o-Shayari 562 53
Astrology 509 48
Market Rates 742 70
weather 689 65
Job 456 43
Cricket 445 42

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Problems faced in VAS usage

There are many challenges in usage of VAS service in these areas. The graph for the
same is illustrated below.

Problem Faced in VAS

70
60
% of Sample

50
40
30 %
20
10
0

C
ve

d
d

es

ee
C
an

si

en

N
ith
en
st
er

ar

’t
w
p

on
Ex
nd

w
em

na

D
tU

bl

U
no

o
Pr
an
C

Problem

Graph 6: Problems faced in VAS usage

The main reason found was unawareness about the services. People simply don‘t know
what VAS is, what services they can use on GPRS, and they don‘t know about MCI etc.

People feel that they don‘t need VAS service, is basically because they are unaware of
what they can achieve from these services; they need to be realized about it.

Many people find these services expensive, probably because they are put to the same
tariffs as of urban areas.

Literacy is main barrier in understanding the keypad of handsets. Most of the people use
mobile only for calling, although this problem will be overcome in few years as the
literacy rate is increasing at a rapid pace in rural areas.

Problem Faced in
VAS Response Percentage
Cannot Understand 371 35
Expensive 583 55
Problem with CC 191 18
Unawareness 636 60
Don’t Need 392 37

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Recharge Pattern

Following graph gives the recharge pattern of rural base and it is easy to predict from it
that mostly they go for chota recharge.

Recharge Denominations
% of Sample

40
30
20 %
10
0
10 15 25 50 100 Full
Talktime
Recharge Value

Graph 7: Recharge preference

People are very conscious with every penny they spend and hence recharge only when
needed that to of small denominations.

People find Full recharge very expensive. Currently the full recharge is somewhere about
Rs.333 or 500. They need something between Rs.200-Rs.250.

Total Full
Respondents 10* 15* 25* 50* 100* Talktime
95 24 24 31 11 9 19

* in percentage.

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10.4 Recommendations
10.4.1 Specific Recommendations

Recommendation - 1

Recommendation Text messages and alerts in Hindi script

Reason The literacy rate is improving in rural areas, but its still at a slow
pace and will take time to transform the rural education scenario.
The people in these areas don‘t understand the messages and alerts
sent to them even if the messages are in Hinglish. The only script
understood by the mass is Hindi/Devnagri.

Recommendation - 2

Recommendation Banners, Stripes and Signage‘s at shop

Reason Visibility is a one big issue wherever there is competition in market.
If the region is like Fatehpur, which is Vodafone dominating then
there is no issue, but in other regions like Haidergarh and Gosaiganj,
the posters/banners were to be seen only on roads but not in retail
shops. The impact of brand visibility in the retail shop will be much
more then anywhere else.

Picture 1: Low brand visibility

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Recommendation – 3

Recommendation Retailer Awareness

Reason It was found that some retailers don‘t even know some of the
services offered by the company (w.r.t. GPRS packages). Hence
timely update Retailer about the ongoing offers thru messages (text)
and moreover retailers should have poster of Info regarding offers
and codes to activate/deactivate services.

Recommendation – 4

Recommendation Govt/Institutional tie-ups

Reason Central and state Govt. is implementing many programs for the
development of rural areas as compared to urban development, for
this VAS is required. Company should try and tie up with the
institute and collaboratively provide related information to rural
base, as there are lots of people attending programs in this institute.
Eg: Govt. Farmer Institute at Malihabad
Moreover there are many technology and management institutes
cropping up in sub rural regions which should be targeted.

Recommendation – 5

Recommendation Local awareness

Reason Canopies or Care points at prominent places during busy hours.
Eg: Canopy at Nisarg Chowk (Malihabad) on Sunday between 10
AM to 6PM.

Recommendation – 6

Recommendation Come up with package (bundle) with mobile handset makers. Hindi
displayed keypad and Vodafone connection
Reason If text messages could be sent and received in Hindi script then the
% of people using SMS will increase dramatically.

Recommendation – 7

Recommendation Improve relation with retailers.

Retailers are the single point of contact for any rural subscriber. Any
problem and the person will directly come to retailer. The retailer
can guide/misguide a local easily as the local don‘t have any other
option to go. Other companies are incentivising more to push their
services. Eg: Airtel is paying retailers 4% extra for pushing GPRS
service in Haidergarh.

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Recommendation – 8

Recommendation Alerts of Most useful information

Reason Market price/ weather information/ Mandi price as alerts. Eg: In
Malihabad, Transporter rates are followed. If people can get to know
the real mandi prices it will be very much beneficial for them.

Recommendation – 9

Recommendation New Games

Reason Although launching a full fledged application in rural area will be
risky. But seeing the craze in games and epics, Telco‘s can think of
launching games on Ramayana and Mahabharata.

Recommendation – 10

Recommendation Sufficient vouchers to retailers

Reason Rural people are most interested in chota recharge. And many a
times these chota recharges get over. The company needs to
facilitate the timely flow of these recharge coupons to retailers.

Recommendation – 11

Recommendation Songs Taste

Reason More than any new bollywood song, people will prefer song with
rocking/disco tune and songs of 80’s.

Recommendation – 12

Recommendation Jokes & Sher-o-Shayari

Reason In the muslim mix areas, the intrest in Ayan/Quran verse was not as
much as it was expected. People will prefer SMS‘s of Jokes and
Sher-o-Shayari.

Recommendation – 13

Recommendation Pricing structure be broken from monthly to weekly or fortnightly

Reason The rural subscriber carries only those much balance that he will
require for a short span, and won‘t recharge until he is finished with
it. The time he will recharge, he will go for chota recharge. The time
any service is activated, his balance goes in negative and considers
this as loot. This pampers him to switch telecom operator.
To overcome this, to some extend, the VAS services could be priced
on 15 day basis or something on same line idea being shortening the
pricing duration.

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10.4.2 General Comments

Operators need to build revenue in the short-run on voice and on low-end VAS products
rather than spending money on creating high-end VAS content requiring them to shell out
high fees to content developers.

Mobile operators should focus on exploring ways of reducing the costs being borne by
the customer after being connected – Rural consumers are cost- and value-conscious, and
do look for a tariff plan that reduces their call charges. Business models will therefore
have to focus on providing various packages of voice/VAS-services that are appealing to
rural consumers.

Post-sales support and services are very important to rural customers – While fixed cost
of acquiring a mobile device is important to rural customers, they are equally concerned
about after-sales support and service availability. Operators will need to find innovative
ways to provide post-sales support for rural customers.

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Concluding Remarks
The paper was inspired by the fact that even though the market attractiveness of rural
markets has been accepted but very few of the private operators have actually made a
success entry into the market. An attempt has been made to understand the marketing
issues underlying marketing of telecom services in rural areas and why private operators
have been not entering rural areas in a big scale. Various issues which need to be
addressed in terms of pricing, product features both the mobile as well as the recharge
which needs to be addressed to make rural telecom services a success in rural areas in the
country have been brought out and so is the importance of use of existing institutional
infrastructure. Thus for success in rural telecom operators have to be innovative in both
product which they offer and the ways in which they tackle the challenges posed by rural
markets.

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References
1. TRAI Report (Press Release No. 20 /2010) New Delhi, 26th April 2010

2. Bda Report (2007) by Mohit S. Gundecha, Prof. Tom Kosnik.

3. Article on Value added services in rural India by Manoranjan Mohapatra,

CEO, Bharti Telesoft

4. Opera today released the state of mobile web report, 26 Jan 2010.

5. How & What Mobile Phone Services does India use – Report, Jan 23, 2010
http://trak.in/tags/business/2009/06/23/report-onhow-what-indian-mobile-
phone-services-vas/

6. The Fortune at the Bottom of the Pyramid. Strategy and Business, Issue 26 by
C.K. Prahalad and Stuart L. Hart.(2002).
7.
Rural Telecom in India: Marketing Issues and Experiences from other
countries by Rajesh K Aithal and Arunabha Mukhopadhyay

8. Tapping the rural telecom market by D. Murali (January 20, 2010)

http://beta.thehindu.com/business/article83259.ece

9. Statistical Data, Govt. of Uttar Pradesh at http://www.upgov.nic.in/

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Appendix A

Major VAS products in Indian rural market

Some of the major VAS products already in the Indian rural market are:

Reuters Market Light (RML) - Reuters has dispenseds comprehensive agriculture-related

information on a pilot basis in Maharashtra since April 2007;

IFFCO Kisan Sanchar Limited - a joint venture between Bharti Airtel and IFFCO to
provide rural-specific telecom services to rural households; is set to expand rural
coverage from 3.2 lakh to 5 lakh villages by 2010;

Soochna Se Samadhan - by One World Network in collaboration with Reliance Mobile

since 2006;

Mandi on Mobile service - by the state run BSNL in Uttar Pradesh;

Fisher Friend project - a pilot project launched in Tamil Nadu and Pondicherry aimed at
the fishing community; and

LifeTools - by Nokia, a package providing agricultural information and educational

services, slated to be commercially launched in 2009.

Successful Global Experiences in Rural Telecom

The table below summaries the four experiences of success rural telecom services
provided in rural areas. The first one if the Grameen Phone experience in Bangladesh
which is based on a share access model and has been successfully extended to other
countries also. Second is the experience of Smart Communication Inc and how it adapted
its services in rural areas if Philippines and improved the penetration of mobile services
in the country. Third is the experience of rural communication in Chile and the
constructive role that the government played in the scripting the success story there and
last is the experience in Africa, the success story which has been documented by many
researchers.

The Grameen Phone experiences show the importance of relying on a existing

institutional infrastructure of the Microfinance helped it in succeeding and the use of a
share access model. Similar initiatives on tying up the rural telecom initiative in the
country to some exiting Institutional Infrastructure like cooperatives or Microfinance
institutions and NGOs would ensure more sustainable success of the launch of the
services. And the Experience of Smart Communications Inc in Philippines reemphasizes
the importance of making the services affordable by innovations in both service delivery

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as well as pricing of services. Learning form the Chile experience shows us that
government too needs to play a constructive role, and the African experience highlights
the importance of low cost handsets in the expansion of services.

Example Salient Features Reasons for success

Bangladesh – Grameen Phone ( - Captured 63% of the country‘s - Share access business model
Grameen Foundation 2005, World Mobile market - A cadre of phone entrepreneurs
Resource Institute, 2001) - Average of 60 customers use each - Effective use of the Microfinance
phone and average monthly bills network for promoting Grameen
amount upto $144.02 in 2000. Phone.
- Model has been extended to Uganda - Use of GSM Technology
- Significant subsidy being given to
the service
Philippines – Smart Communications - Mobile penetration at 30% by 2004 - Use of Innovative over the air
Inc (Anderson & Billou, 2007, and expected to reach 70 % by 2008. payment system to overcome the
Anderson et.al, 2005). availability problems
-Developed smaller denominations of
recharge
-Use of used handsets reduced
barriers to ownership.
Rural Communications – Chile -From 1995-2002 reduced the - Reliance in market forces and
(Wellenius, 2002) population living without access to minimum regulations
basic voice communication from 15 - Simple and relatively expeditious
to 1 percent processing
- Effective Government leadership
African Experience in Mobile - 15 million mobile subscribers added - Use of Mobile technology to leap-
Telephony (Vodafone 2006, ITU to subscriber base in 2004, equivalent frog the older technologies
2006) to total number of telephone -Ability of Mobile operators to
subscribers in 1996 provide mobile coverage rapidly
- Mobile penetration three times the - High degree of liberalization and
land line at 9.1 per 100 inhabitants competition in the mobile sector
- 75 % of all African telephone - Reduction in Tariff combined with
subscribers are Mobile ―ultra-low-cost‖ Handsets and
availability of prepaid service

Table: Rural Telecom Success Stories

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