Distribution to villages vital to Indian success

Posted by Nicole McCormick Tuesday, February 24th, 2009

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It’s one thing for Indian operators to boast how many base stations they’ve rolled out, or how cheap their tariffs are, but how operators physically get services out to customers in the villages will be one of the key make-or-break differentiators for the country’s mobile operators.

The plain fact is that distribution right to the heart of the village will prove critical to any Indian operator.

With mobile penetration crossing 63% in urban India the major operators like Bharti, BSNL and Vodafone Essar, are turning their attention to rural India.

This is a smart move given that rural subscriptions are estimated to account for 40% of India’s mobile subscriptions by early 2012, compared to just 25% now.

India’s 500,000 villages are the backbone of rural India and quite amazingly some 80% of these villages have less than 1,000 residents.

Earlier this month, Sanjay Kapoor, president of India’s leading mobile operator Bharti Airtel, declared that the country’s villages are where the future for mobile operators lay.

Bharti is already making steady gains in rural India with 60% of its total subscriber net adds now coming from rural areas.

Moreover, Bharti’s rural growth is being fuelled by a simple but extremely effective distribution plan which it hopes to replicate in villages nationwide.

Bharti plans to establish so-called Rural Airtel Service Centers in every Indian village which are definitely not like the regular Public Calling Offices that are already a feature of most villages.

Instead, a local business person, such as the owner of the village general store, is appointed as a Bharti mobile agent.

These agents sell and exchange SIM cards and are empowered to activate, reactivate and recharge mobile connections as well as sell value-added services to subscribers.

Put quite simply, Bharti aims to bring mobile connections to the people by the people.

Following a pilot of the project in Rajasthan, Bharti has already set up 30,000 Rural Airtel Service Centers over the last couple of months, and it aims to expand this by a further 20,000 by the end of March.

Now, does any of this sound familiar to you?

Well, it turns out that Bharti’s plan is very similar to the one used by China Mobile as it too sought to extend its presence into the hinterland markets.

China Mobile recognised the importance of rural markets as a potential growth driver very early on and begun a much earlier rollout of rural networks than rival operators.

By getting an early start on building on rural networks China Mobile’s 2G network already covers about 98% of all towns and 94% of all villages and it has installed at least one base station per village and deployed equipment from local vendors to lower costs.

Aside from the reach of its network, the key theme behind China Mobile’s rural success has come from its “Connecting the Village” campaign, in which the head of the village or mobile phone store manager in each village signs on to sell China Mobile’s services, in order to lower marketing costs.

The success of the “Connecting the Village” campaign is borne out by the firms’ subscriber take-up in rural areas with rural subscriptions making up half of China Mobile’s net additions.

China Mobile’s biggest advantage over rival operators China Unicom and China Telecom is its deeper rural network coverage and its distribution strengths - in fact a lot of villagers have never heard of China Unicom and only know China Telecom as a fixed-line operator!

It is a very smart move on Bharti’s part to try and copy China Mobile’s “Connecting the Village” rural strategy because it will not only enable it to steal a march on existing rivals but it will also be an early nail in the coffin to the start-up GSM1800 operators that are planning launches this year.

Like China Mobile, Bharti already has the extensive, low cost rural network in place to dominate the rural market, with its networks already passing some 400,000 villages.

Now the operator is hoping that it can seal the deal in rural areas with a ground-level distribution strategy that has already proved so successful for China Mobile in the world’s biggest mobile market.