2010

Enhancement of Rural Telecom

Harishkumar.S Jss Centre for Management Studies

A PROJECT REPORT ON
... ... at ...

Submitted by:
USN:

Under the guidance of: Prof Designation.. SJCE, Mysore Mr Designation.. Place..

Submitted to VISVESVARAYA TECHNOLOGICAL UNIVERSITY BELGAUM In partial fulfillment of the requirements For the award of MASTER OF BUSINESS ADMINISTRATION

SRI JAYACHAMARAJENDRA COLLEGE OF ENGINEERING,MYSORE JSS Technical Institutions Campus Mysore Autonomous institution affiliated to Visvesvaraya Technological University

CERTIFICATE
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This is to certify that Ms/Mr.. (USN:.) has undergone a project work entitled Submitted to the Visvesvaraya

Technological University, Belgaum, for the partial fulfillment of MASTER OF BUSINESS ADMINISTRATION. Dr.C.S.Thammaiah Prof.& HOD Department of Management studies SJCE, Mysore Dr.B.G.Sangameshwar Principal SJCE, Mysore

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CERTIFICATE FROM GUIDE

This is to certify that the project report entitled Submitted to the Visvesvaraya Technological University, Belgaum, for the partial fulfillment of MASTER OF BUSINESS ADMINISTRATION, is a record of independent work carried out by Ms(USN) a student of Department of Management Studies, SJCE, Mysore under my supervision and guidance.

Place: Date:

Name of the faculty and Signature

CERTIFICATE
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This is to certify that Ms/Mr.. student of MBA, Department of Management Studies, SJCE have successfully completed the project

on.at as a part of MBA curriculum under the guidance of Mr.. for.....weeks

for Company name Name and Designation

DECLARATION
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hereby

declare

that

this a record

project of an original

report and

titled...

independent work carried out by me under the guidance of Prof. Department of Management Studies and Mr.. and submitted to the Visvesvaraya Technological University in partial fulfillment of the requirements of Masters of Business Administration 4th semester. I further declare that this project has not formed the basis for the award of any other degree/diploma of any university/institution.

Place: Date:

( Name and Sign)

Index

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Contents
Executive Summary Chapter 1 Industry Profile History of Telecommunication Industry Indian Telecommunication Industry

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Chapter 2 Chapter 3

Major Players Process of Marketing Research Problem Identification Research Design Data Collection Data Analysis & Interpretation Research Report & Presentation

Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8

Data Analysis and Interpretation Marketing Telecom Issues in Rural

Rural Market A ray of hope Successful Experiences in Rural Telecom Findings and conclusions

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Executive Summary

This project deals with the collection of data from the rural customers. The main purpose of this survey work is to find out the status of telecom in rural sector and to find out what does the rural customers expect from the service providers. This survey showcases the facts and figures of rural telephony, the drawbacks of service providers act as a major tool for the companies to know their weaknesses in the market and the strategies, methods and pricing rates etc of their competitors. The need of this survey is to understand what exactly is going on in the market and how to deal with its competitors. As this is an era of cut-throat competition, the rural telecom is being dealt in the same way. And the Telecom companies compete for more number of customers. By this survey the companies can evaluate the drawbacks of their product and the service delivered by them as compared to their competitors.

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Objectives of the project:

To study the telecom Industrys growth. To find-out the status mobile usage in rural areas. The marketing issues in entering the rural market.

Need of study:
There are many benefits related to take this study. Some of the benefits of taking this study are as follows: The report will brief about the status rural telecom. By analyzing this information, the companies would be able to better design schemes.

3. Scope of the study:

The scope of the study on title Enhancement of Rural Telecom was restricted to few villages of Mysore cluster. The scope of the study was limited to the extent of knowing the status of telecom and areas of improvement.

4. Limitations of the study:

The study of each and every village was not possible. Time taken by each respondent was high, as the respondents being villagers. Reluctance on the part of the respondents to provide exact details. Duration of the project is yet another limitation of the study

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What is telecom?
-An introduction

1.HISTORY OF TELECOMMUNICATION INDUSTRY

The history of telecommunication industry started with the first public demonstration of Morses electric telegraph, Baltimore to Washington in 1844. In 1876 Alexander Graham Bell filed his patent application and the first telephone patent was issued to him on 7th of March. In 1913, telegraph was popular way of communication. AT&T commits to dispose its telegraph stocks and agreed to provide long distance connection to independence telephone system. In 1956, the final judgment limited the Bell System to Common Carrier Communications and Government projects but preserving the long-standing relationships between the manufacturing, researches and operating arms of the Bell System. In this judgment AT&T retained bell laboratories and Western Electric Company. This final judgment brought to a close the justice departments seven -year-old antitrust suit against AT&T and Western Electric which sought separation of the Bell Systems Manufacturing from its operating and research functions. AT&T was still controlling the telecommunication industry. In 1982 , AT&T was requested to divestiture its stock ownership in Western Electric; termination of exclusive relationship between AT&T and Western Electric; divestiture by Western Electric of its fifty percent interest in Bell Telephone Laboratories, AT&T s telecommunication research and development facility, is a jointly owned subsidiary in which AT&T and Western Electric each own 50% of the stock; separation of telephone manufacturing from provision of telephone service and the compulsory licensing of patents owned by AT&T on a non-discriminatory basis. It was telecommunication act of 1996 that true competition was allowed. The act of 1996 opened the market to all competitors. AT&T being the first telecommunication company paved the road for the telecommunication industry as well as set the policy and standards for others to follow.

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Indian Telecommunication Industry

The Indian telecommunications has been zooming up the growth curve at a feverish pace, emerging as one of the key sectors responsible for India's resurgent economic growth. India has surpassed US to become the second largest wireless network in the world with a subscriber base of over 500 million in April-09, according to the Telecom Regulatory Authority of India (TRAI). India's telecom sector has shown massive upsurge in the recent years in all respects of industrial growth. From the status of state monopoly with very limited growth, it has grown in to the level of an industry. Telephone, whether fixed landline or mobile, is an essential necessity for the people of India. This changing phase was possible with the economic development that followed the process of structuring the economy in the capitalistic pattern. Removal of restrictions on foreign capital investment and industrial delicensing resulted in fast growth of this sector. At present the country's telecom industry has achieved a growth rate of 14 per cent. Till 2000, though cellular phone companies were present, fixed landlines were popular in most parts of the country, with government of India setting up the Telecom Regulatory Authority of India, and measures to allow new players country, the featured products in the segment came in to prominence. Today the industry offers services such as fixed landlines, WLL (Wire-Less Landline), GSM (Global System for Mobile) mobiles, CDMA (Code Division Multiple Access) and IP (Internet Portal) services to customers. Increasing competition among players allowed the prices drastically down by making the mobile facility accessible to the urban middle class population, and to a great extent in the rural areas. Even for small shopkeepers and factory workers a phone connection is not an unreachable luxury. Major players in the sector are BSNL, MTNL, Bharti Teleservices, Vodafone, Reliance, Tata, Idea, etc. With the growth of telecom services, telecom equipment and accessories manufacturing has also grown in a big way. Indian Telecom sector, like any other industrial sector in the country, has gone through many phases of growth and diversification. Starting from telegraphic and telephonic systems in the 19th century, the field of telephonic communication has now expanded to make use of advanced technologies like GSM, CDMA, and WLL to the great 3G Technology in mobile phones. Day by day, both the Public Players and the Private Players are putting in their resources and efforts to improve the telecommunication technology so as to give the maximum to their customers.

1.3 Evolution of the Industry - Important Milestones

Year 1851 1881 1883 1923 Description First operational land lines were laid by the govt. near Calcutta(seat of British Power) Telephone Service introduced in India Merger with the postal system Formation of Indian Radio Telegraph Company (IRT)

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1932 1947

Merger of ETC and IRT into the Indian Radio and Communication Company(IRCC) Nationalization of all foreign telecommunication companies to form the Posts, Telephone and Telegraph(PTT), a monopoly run by the governments Ministry of Communication Department of Telecommunications (DOT) established, an exclusive provider of domestic and long-distance service that would be its own regulator (separate from the postal system) Conversion of DOT into two wholly government-owned companies: the Videsh Sanchar Nigam Limited (VSNL) for international telecommunications and Mahanagar Telephone Nigam Limited (MTNL) for service in metropolitan areas. Telecom Regulatory Authority of India created Cellular Services are launched in India. New National Telecom Policy is adopted. DoT becomes a corporation, BSNL

1985

1986

1997 1999 2000

1.4 Introduction to rural market:

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India lives in villages, 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 countrys GDP (ETIG 2002-03) 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 todays 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 exists 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 tells us about the villages in India.

Population Less than 200 200-499 500-999 1000-1999 2000-4999 5000-9999 10000 & above Total Source: Census 2001

Number of villages 114267 155123 159400 125758 69135 11618 3064 636365

Percentage of total village 17.9 24.3 25 19.7 10.8 1.8 0.5 100

1.5 Why rural market?

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 in these areas. But the telecom revolution has been able to extent its wing only in the urban and semi-urban small towns of the country. Out of the total population of about 1.136 billion in India, only about 28% live in urban areas and the rest 72% live in rural areas. But however, only about 2% (16m) of the rural population has access to mobile phones. It is a high time for the companies to invest in these rural areas, too. Driven by a significant addition in rural telephony, overall population coverage in the country is expected to increase from 65% to 80%. Therefore still there are large segments which have not been addressed yet by the wireless companies, either due to price structure of the calls (profitability for the company) or due to inaccessible terrain (demographic reasons). 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 Jss Centre For Management Studies Page 14

improved only through the introduction of modern and suitable technology along with participation from the private operators. The fundamental question comes why it is necessary to have this growth. The chapter briefly analyzes the reasons for having higher penetration of telecom services in rural areas which enumerated below:There is no doubt about the linking of economic prosperity (in terms of GDP per capita and teledensity of a country) and to achieve a higher teledensity in a country like India where around 70% population lives in rural areas, it is necessary for telecom services to penetrate into rural areas if we have to increase the teledensity in the country and we as a nation also join the club of developed countries where very high level of telecom penetration has already been achieved. Based on international experience in various countries it has been estimated that the penetration of telecom services enhances the productivity and wealth generating capabilities of the local population which in turn increases the GDP of the country This is not a new hypothesis and it has already been demonstrated at thousands of locations within and outside the country that a largely self-sustainable business model can be created for these telecom services even in most backward areas. It is to be kept in mind that connectivity is not an end in itself. We have to see that what the rural people do with the computers and connectivity. Various applications useful to the local population are to be developed and we have to go beyond teleeducation and tele-health and revitalize the rural economy by creating rural micro enterprises. These micro enterprises could be in the areas of agriculture, food processing industry, animal husbandry, fisheries, sericulture, handicrafts etc. Urban Indian can outsource their IT based services to rural India. Government would outsource works like digitization of land records, birth-death certificates and variety of data entry works to the agencies or small entrepreneurs in rural areas. This would enable these enterprises to create wealth in rural areas.

1.6 Types of Telecom service provider:

There are three types of players in telecom services: State owned companies (BSNL and MTNL)

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Private Indian owned companies (Reliance Infocomm, Tata Teleservices) Foreign invested companies (Vodafone-Essar, Bharti Tele-Ventures, Escotel, BPL Mobile, Spice Communications and docomo )

India's mobile telecom sector is one of the fastest growing sectors. Unlike in the 1990s when the mobile phone was an elitist product, mobile operators now tap a mass market with mass marketing techniques. "Unified licensing" rules allow basic and mobile operators into each others territory, and have ushered in perhaps the final phase of industry consolidation. It seems that only companies with deep pockets can effectively compete as primary operators mobile markets. Economies of scale, scope, and end-to-end presence in long-distance as well as local telecom, are desirable. There are, besides, new challenges. Operators have to find new growth drivers for the wire line business. There are problems of getting broadband to take off, of technology choice, of when to introduce new technologies, and of developing a viable business model in an era of convergence.

1.7 Growth rate of Subscribers:The total subscriber base (both wireless and wireline) of telecom sector in India during the financial year 2008-09 crossed 400 million mark with 429.72 million subscribers as on 31st March 2009. The growth of subscriber base during 1999-2009 is indicated below Years 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Sample 22.81 28.53 36.29 44.97 54.62 75.54 98.41 140.32 206.83 300.49 429.72 size 200 Jss Centre For Management Studies Page 16

Figure1: Growth rate of mobile subscribers

Figure 2: Rural and urban tele-density:-

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Source: TRAI

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Major Players BharatiAirtel

Established in 1985, Bharti has been a pioneering force in the telecom sector with many firsts and innovations to its credit, ranging from being the first mobile service in Delhi, first private basic telephone service provider in the country, first Indian company to provide comprehensive telecom services outside India in Seychelles and first private sector service provider to launch National Long Distance Services in India. Bharti Tele-Ventures Limited was incorporated on July 7, 1995 for promoting investments in telecommunications services. Its subsidiaries operate telecom services across India. Bhartis operations are broadly handled by two companies: the 5.Mobility group, which handles the mobile services in 16 circles out of a total 23 circles across the country; and the Infotel group, which handles the NLD, ILD, fixed line, broadband, data, and satellite based services. Together they have so far deployed around 23,000 km of optical fiber cables across the country, coupled with approximately 1,500 nodes, and presence in around 200 locations. The group has a total customer base of 6.45 million, of which 5.86 million are mobile and 588,000 fixed line customers, as of January 31, 2004. In mobile, Bhartis footprint extends across 15 circles. Bharti Tele-Ventures strategic objective is to capitalize on the growth opportunities the company believes are available in the Indian telecommunications market and consolidate its position to be the leading integrated telecommunications services provider in key markets in India, with a focus on providing mobile services. Airtel is providing cellular services in Delhi, Mumbai, Kolkata, Chennai, Andhra Pradesh,Gujarat, Haryana, Himachal Pradesh, Jammu and Kashmir, Karnataka, Kerala, MadhyaPradesh Maharashtra, Goa, Orissa, Punjab, Rajasthan, Tamil Nadu, UP and West Bengal. Airtel is the No.1 cellular service provider in India using GSM technology. Airtel has 23% market share in India with a total subscriber base of 50 million.

Reliance Communications

Reliance is a $16 billion integrated oil exploration to refinery to power and textiles Conglomerate (Source: http://www.ril.com/newsitem2.html). It is also an integrated telecom service provider with licenses for mobile, fixed, domestic long distance and international services. Reliance Infocomm offers a complete range of telecom services, covering mobile and fixed line telephony including Jss Centre For Management Studies Page 20

broadband, national and international long distance services, data services and a wide range of value added services and applications. Reliance India Mobile, the first of Infocomms initiatives was launched on December 28, 2002. This marked the beginning of Reliances vision of ushering in a digital revolution in India by becoming a major catalyst in improving quality of life and changing the face of India. Reliance Infocomm plans to extend its efforts beyond the traditional value chain to develop and deploy telecom solutions for Indias farmers, businesses, hospitals, government and public sector organizations. Until recently, Reliance was permitted to provide only limited mobility services through its basic services license. However, it has now acquired a unified access license for 18 circles that permits it to provide the full range of mobile services. It has rolled out its CDMA mobile network and enrolled more than 6 million subscribers in one year to become the countrys largest mobile operator. It now wants to increase its market share and has recently launched pre-paid services. Having captured the voice market, it intends to attack the broadband market. Reliance has both CDMA and GSM networks and total subscriber base of 29 million or 17% market share. It has GSM network in Assam, Bihar, Himachal Pradesh, Kolkata, North East, Madhya Pradesh, Orissa and West Bengal. Reliance has CDMA networks in other states and cities.

Bharat Sanchar Nigam Limited (BSNL)

On October 1, 2000 the Department of Telecom Operations, Government of India became a corporation and was renamed Bharat Sanchar Nigam Limited (BSNL). BSNL is now Indias leading Telecommunications Company and the largest public sector undertaking. It has a network of over 45 million lines covering 5000 towns with over 35 million telephone connections. The state-controlled BSNL operates basic, cellular (GSM and CDMA) mobile, Internet and long distance services throughout India (except Delhi and Mumbai). BSNL will be expanding the network in line with the Tenth Five-Year Plan (1992-97). The aim is to provide a telephone density of 9.9 per hundred by March 2007. BSNL, which became the third operator of GSM mobile services in most circles, is now planning to overtake Bharti to become the largest GSM operator in the country. BSNL is also the largest operator in the Internet market, with a share of 21 per cent of the entire subscriber base BSNL is a state owned telecom company which has GSM presence in almost every cities and towns. BSNL has 27 million subscribers with a market share of 16%.

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VodafoneEssar.pvt.ltd

Vodafone Essar is the Indian subsidiary of the Vodafone Group and has operations in 16 circles with 37.2 million customers. Vodafone has partnered with the Essar Group as its principal joint venture partner for the Indian market. Vodafones presence in India dates back to late 1992, when they worked with local partners to establish a company licensed to provide mobile telecommunications services in Mumbai. Commercial operations began in November 1995. Between 2000 and March 2004, Hutch acquired further operator equity interests or operating licenses. With the completion of the acquisition of BPL Mobile Cellular Limited in January 2006, it now provides mobile services in 16 of the 23 defined license areas across the country. VodafoneEssar has benefited from rapid and profitable growth in recent years. Vodafone is another emerging GSM provider in India with coverage in Kerala, Mumbai, Delhi, Kolkata, Chennai, Gujarat, Andhra Pradesh, Karnataka and Punjab with a total subscriber base of 37.2 million.

TATA Teleservices

Tata Teleservices is a part of the $12 billion Tata Group, which has 93 companies, over 200,000 employees and more than 2.3 million shareholders. Tata Teleservices provides basic (fixed line services), using CDMA technology in six circles: Maharashtra (including Mumbai), New Delhi, Andhra Pradesh, Tamil Nadu, Gujarat, and Karnataka. It has over 800,000 subscribers. It has now migrated to unified access licenses, by paying a Rs. 5.45 billion ($120 million) fee, which enables it to provide fully mobile services as well. The company is also expanding its footprint, and has paid Rs. 4.17 billion ($90 million) to Dot for 11 new licenses under the IUC (interconnect usage charges) regime. The new licenses, coupled with the six circles in which it already operates, virtually gives the CDMA mobile operator a national footprint that is almost Jss Centre For Management Studies Page 22

on par with BSNL and Reliance Infocomm. The company hopes to start off services in these 11 new circles by August 2004. These circles include Bihar, Haryana, Himachal Pradesh, Kerala, Kolkata, Orissa, Punjab, Rajasthan, Uttar Pradesh (East) & West and West Bengal. Tata Indicom is a main CDMA provider in India with 16 million subscribers all over India. Tata Indicom has presence in almost every state and cities in India.

IDEA Cellular Ltd.

Indian regional operator IDEA Cellular Ltd. Has a new ownership structure and grand designs to become a national player, but in doing so is likely to become a thorn in the side of Reliance Communications Ltd. IDEA operates in eight telecom circles, or regions, in Western India, and has received additional GSM licenses to expand its network into three circles in Eastern India the first phase of a major expansion plan that it intends to fund through an IPO, according to parent company Aditya Birla Group . Idea has a customer base of over 20 million and covers approximately 60% of India's telecom population in 11 circles. Idea also has licenses for Mumbai and Bihar.

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2. Process of Marketing Research:

The marketing research is done in systematic process. The Researcher has pursued the below process of marketing for my study at Vodafone:

Problem Identification

Research Design

Data Collection

Data Analysis & Interpretation

Research Report & Presentation

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3.1 Problem Identification:

The first and the most important step of marketing research are properly defining the problem. Even though the Telecom companies have attractive pricing, offers, schemes etc: The rural subscribers are way behind when compared with urban subscribers. What do they expect from service providers?

3.2 Research Design:

Research design indicates the methods and procedure of conducting research study. Descriptive Research:Descriptive research is undertaken when the researcher want to know the characteristics of certain groups. Descriptive research includes surveys and fact-finding enquiries of different kinds. The major purpose of descriptive research is description of the state of affairs as it exists at present.

3.3 Data Collection and Sampling:

Sources of Data Collection:Basically there are two types of data i.e. primary and secondary: Primary Data Collection: - Primary data collection contains the following four types of methods: Survey Method: - It contains Personal Interview, Telephone Interview and Mail Interview. To conduct a survey, the Researcher has selected a structured Interview as an instruction for gathering valuable information from the customers.

Collection of data through Questionnaire: - It contains a set of questions, the respondents have to fill & return the Questionnaire. Page 26

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To conduct a survey, the Researcher has selected a structured questionnaire as an instruction for gathering valuable information from the customers. Questionnaire, which is used for the survey, is consisting of questions and checklist questions to check the customer feedback.

Secondary Data Collection: It can be collected from internal as well as external sources: Internal Source: - Various internal sources like employee, books, sales activity, stock availability, product cost, etc. External Sources: - Libraries, trade publications, literatures, etc are some important sources of external data. The Researcher has used primary data for the core purpose of the project and this primary data has been gathered by survey method. The researcher has also used secondary data.

3.4 Sampling Design:

Sampling unit: The Researcher has selected people between the age group of 18-60, who are considered to be active users to study the Penetration level in rural market by telecom companies. Sampling types: There are two types of sampling i.e. Probability Sampling and Non probability Sampling. Probability Sampling: Probability sampling means each unit of the universe has equal chance of getting selected. Simple random sampling: - This type of sampling is also known as chance sampling or probability sampling where each and every item in the population has an equal chance of inclusion in sample.

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Sample Size:
Sample size means limited numbers of respondents covered under the research study from a population and the researcher has taken a survey of 205 respondents to know the prevalence of telecom in rural areas. n= Z2 (p*q) /E2 Z @ 95% confidence E= 5% Therefore n=22 * (0.15*0.85) / 0.052 N= 204

Sampling Area:
The researchers area for survey was: Naganahalli Shriranga pattanam Pandavapura Melkote H.D kote & nearby villages.

Sampling Unit:
Here the researcher has randomly selected Individual respondents.

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4. Interpretation of data
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Data Analysis and Interpretation

After all the above steps are completed now the important step is data analyzing and interpretation. For this there are various analytical and statistical tools. Some of these tools are Percentage, Average, Dispersion, Co-relation, Co-efficient, etc.

Arbitrary scales
Arbitrary scales are developed on ad hoc basis and are designed largely through the researchers own subjective selection of items. The researcher first collects few statements or items which he believes are unambiguous and appropriate to a given topic

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4.1 Interpretation and analysis Do you have a mobile phone?

Purpose:
The main purpose of this question is to know how many respondents use mobile phone. Parameters Yes No Respondents 140 65

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Is mobile a necessity? Purpose: - The main purpose of this question is to find out the percentage of people who are
willing to buy connections in future. Parameters Yes No Respondents 160 45

Interpretation: - Out of 200 samples, only 140 are present customers, hence the addition of (160-140)
20, is from the sample which dont possess mobile as of now, but have an intension to buy it.

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Main purpose for using a cell phone. (Multi choice question) Purpose: The main purpose of this question is to know the Priorities of the customer, from the
given options (Questionnaire is attached in the Annexure) Parameters Communication Business Influence Up gradation Others Responses 135 43 16 12 6

Interpretation: - Out of 140 respondents who use mobile, the purpose of using mobile is for
communication, business, influence, up-gradation & others each having a percentage of 63, 20, 8, 6 & 3 respectively.

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Connection Causing Factor:

Parameters Brand name Network Service Advertisement Tariff Customer care Value added service Responses 20 103 41 10 83 10 31

Interpretation: - Network and Tariff occupies almost 63% of respondents decision towards having a
connection.

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Are you satisfied with the Service?

Parameters Yes No Can't Say Respondents 116 11 13

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Are you able to access Value Added Service?

Parameters Yes No Respondents 17 123

Interpretation: - Value Added Service; the rural population can use it barely. Only 12% of total
users are able to avail the benefit of VAS.

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Why Customers dont use Value Added Service?

Parameters Lack of awareness Technology Cost Not Necessary Respondents 34 18 25 27

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Interpretation: - 33% of the respondents are not using VAS, because of lack
of awareness.

Parameters to be improved:

Parameters Network Tariff Full talk time Service Others

Responses 86 84 75 23 7

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Interpretation: - Network, tariff and full talk time are the top three parameters which needs to be
improved.

5. 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 like 4 As 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.

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Affordability

Availability

4 As

Acceptability

Awareness 4 As Model

Acceptability issues would include issues needed to be addressed to improve the willingness to consume, 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. Operators have demonstrated they can achieve profitability by reducing fixed costs, controlling variable costs and carefully tailoring services to the requirements of their customers. A similar model with minor customization could be emulated in the rural areas. The government will roll out new incentives for mobile networks in rural India. Its also planned that the ultra-low cost handset of approximately Rs.840 ($17) to the market with built-in subsidies, lifetime validity and minimal maintenance costs have promoted mobile usage in remote areas. Moreover, operators could learn from business models that have been experimented across the developing world for expanding rural connectivity. Jss Centre For Management Studies Page 40

Acceptability issue would include issues needed to be addressed to improve the willingness to consume, distribute or sell a product.

5.1 Issues to be tackled:

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 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. 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

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Rural Market A ray of hope

6.1 Status of Rural Telephony:
Indias Tele-density in 1948 was 0.02 per cent. The telecom industry was for the exclusive preserve of the public sector. All Five Year Plans and successive governments placed strong emphasis on telecom development. Yet in 1998, the tele-density was only 1.94 per cent, displaying an incremental growth of 1.92 per cent in the fifty year period post-Independence, indicating an average yearly growth of 0.04 per Jss Centre For Management Studies Page 42

cent. After the introduction of telecom regulation in 1997 and liberalization of the sector, growth accelerated 12.5 times over the non-liberalized monopoly years. Competition regulation was introduced in 2003 and it led to a growth of 2 per cent in 20034 and again in 20045. With stabilization of competition regime, tele-density increased by about 3 per cent in 20056 and at the present monthly rate of growth, it would increase by more than 5 per cent during 20067, as per latest data of March09 it has increased to a remarkable 19.83% from 17% in December08.(Source: TRAI)

6.1.1 Rural Telecom Market an emerging market

According to numbers compiled by the Telecom Regulatory Authority of India, nearly 29 per cent of the mobile user base now resides in the villages of India, where a few years ago none of the operators wanted to venture. As on April09, out of the 464.84 million mobile users in the entire country, 136.27 million were in rural areas. As the government targets to increase rural teledensity from the current 29 percent to 35 percent by 2012, rural telephony will require major investments. This segment will boost the demand for telecom services, equipment, Internet services and other value-added services; thereby, offering great market opportunities for telecom players. Rural India will wrest 40 percent of new telecom market Indias rural telecom connectivity is poised for explosive growth in the next five to 10 years, grabbing a 40 percent share of the new market, a study released Wednesday said. Of the estimated new 250 million Indian wireless users, in next 5-10 years approximately 100 million will be from rural areas, said the study by the Federation of Indian Chambers of Commerce and Industry (Ficci) and Ernst and Young. .

6.1.2 Reasons for rural inclination:

Far from being considered as a social obligation, offering telecom services in rural areas has now become the hot spot for private telecom operators. Nearly 75 per cent of the mobile users in the villages are now owned by private operators as cellular phones catch the imagination of rural consumers. Until now, stateowned Bharat Sanchar Nigam Ltd was known to be the only significant rural telecom operator in the country.

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Analysts said that the share of rural telecom consumers will continue to increase as operators have initiated an aggressive roll-out plan to cover remote areas of the country. This is primarily driven by a slump in the growth rate of mobile user base in the metro and urban areas. According to the data released by the Cellular Operators Association of India Circle C and Circle B States such as Bihar, Kerala, Madhya Pradesh and Punjab are showing better growth rates compared to the metros. Therefore, most of the mobile operators are investing heavily in setting up infrastructure in these circles. The telecom regulator has suggested a number of initiatives to make mobile connection attractive, including lower entry cost to make it more affordable. It is estimated that a one per cent increase in rural connectivity can generate 0.5 per cent economic growth. Thus a well-planned 10 per cent increase in rural connectivity can propel India into double-digit growth and unprecedented prosperity. Rural India possesses enormous potential in terms of economy and human resources. Recent experiments have confirmed that ICT (information and communication technology) helps improve the timeliness and efficiency of rural farm operations and enhance income through producer-oriented markets. Hence the communication ministry has requested the finance ministry for higher allocations from the USO Fund for executing rural telephony network. The finance ministry has made a budgetary allocation of 15 billion from the USO Fund. The rural telephony targets include, providing 50 million telephones by 2009(i.e. one phone per three rural households) and 80 million by 2010 (i.e. one phone per two rural households) India plans to establish 0.25 million, village knowledge centers. The ICT industry can establish rural call centers modeled on the Kisan Call Centre established by the Ministry of Agriculture to provide domain knowledge in the services, agriculture and manufacturing sectors. This spread will increase the volume of users and automatically bring down bandwidth cost, with a spiraling effect on efficiency and economy. Advanced telecom services are no longer considered a luxury but a necessity for all. Thus, providing telecom services to every individual in a country like India is a huge challenge, and at the same time holds immense opportunities for those in the telecom industry.

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Fixed line market share in rural India A study by TRAI reveals that the incumbent service providers (BSNL and MTNL) are the market
leaders of fixed line in the rural market. The private players hold only marginal shares in the rural market. Table shows the market capitalization of the fixed line rural players.

Table: Fixed line market share in rural India Company

BSNL MTNL RCOM/Tata telecom/Others

Market share (%)

80.05 9.33 10.62

Source: TRAI Figure 1: Wire line market share in rural India:

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Rural Telecom, Current Status in India:

Source: TRAI Jss Centre For Management Studies Page 47

Rural Market for GSM & CDMA:

The rural mobile market as per as December 2009, data shows that Airtel is the market leader. Figure below illustrates the market shares of the private and public players in the mobile subscriber market share.

Sales( %)

Airtel 26

BSN L 22

Vodafo ne 22

R.co m 14

Idea 8

Airc el 5

Tata tel 2

Spic e 1

HFC L 0

Shya msiste ma 0

Figure 2: Market share of GSM & CDMA providers

Rural Mark for G M & CD et S MA:

30 25 20 15 14 10 5 0 8 5 2 1 0 0
Sales

26 22 22

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6.1.3 The objectives and targets of NTP 1999 for rural telephone network
are as follows: Encourage development of telecom in rural areas by making it more affordable through tariff restructure and making rural communication obligatory for all fixed service providers Rural tele-density to be raised to 4 per hundred by the year 2010, Achieve 100% telecom coverage of villages by the year 2012 and provide reliable transmission media in all rural areas.

Village public Telephone:

Out of the 5, 93,485 villages in the country, 5, 60,539 villages have been provided with Village Public Telephone (VPT). 32,946 villages are yet to be connected with a VPT. In percentage terms 94.44% villages have been covered by VPTs and 5.56% villages are yet to be covered. There was an increase of 1,036 VPTs during the financial year. The private operators share in these VPTs is very negligible and almost the entire VPTs have been installed by BSNL. The total number of VPTs of BSNL was recorded at 5, 49,294 in March 2009 as compared to 11,245 VPTs of private operators during the same period. As on 31st March 2009, out of the total 429.72 million Subscribers, the rural subscribers contribute 120.29 million, comprising of 10.58 million wireline and 111.63 million wireless. The Rural tele-density as on 31st March 2009 was 15.02% as compared to 9.20% in the previous year.

Rural Telephone Network:

It has been observed that despite several attempts over the last ten years, telecom infrastructure in rural areas is lagging behind the expected levels. There has been a phenomenal spurt in the growth of teledensity in the country with the evolution of new wireless technologies, but the gap between the urban and rural teledensity has been increasing.

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Source: TRAI

Rural Subscribers:
As on 31st March 2009, the Wireless rural (Mobile and WLL (F)) market has reached the 111.63 million mark as against 62.28 million for the same period in the previous year. Service Providers reports indicate that more than 28.50% of total Wireless subscribers are now in rural areas. The total rural subscriber has been steadily increasing during 2008-09. The rural subscriber base during the each quarter ending during the financial year 2008-09 was

Source: TRAI

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7. Successful 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 Garmeen Phone experiences show the importance of relying on an existing institutional infrastructure of the Microfinance helped it in succeeding and the use of a share access model. Similar initiatives on tying up 275 Adopting E-governance

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Example
Bangladesh Garmeen Phone (Garmeen Foundation 2005, World Institute, 2001)

Salient Features Reasons success

- Captured 63% of the countrys Mobile market - Average of 60 customers use each phone and average monthly bills amount up-to $144.02 in 2000.

for

Philippines Smart Communications Inc (Anderson & Billou, 2007, Anderson et.al, 2005).

Rural Communications Chile (Wellenius, 2002)

African Experience in Mobile Telephony (Vodafone 2006, ITU 2006)

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Share access business model - A cadre of phone entrepreneurs - Effective use of the Microfinance network For promoting Garmeen Phone. - Use of GSM Technology - Model has been extended - Significant subsidy being to given to the service Uganda Mobile penetration at 30% Use of Innovative over the by 2004 air payment and expected to reach 70 % system to overcome the by availability 2008. problems Developed smaller denominations of recharge - Use of used handsets reduced barriers to ownership. - From 1995-2002 reduced Reliance in market forces the and minimum population living without regulations access to - Simple and relatively basic voice communication expeditious from 15 processing to 1 percent - Effective Government leadership 15 million mobile Use of Mobile technology subscribers to leap-frog the added to subscriber base in older technologies 2004, - Ability of Mobile equivalent to total number operators to provide of mobile coverage rapidly telephone subscribers in High degree of 1996 liberalization and - Mobile penetration three competition in the mobile times than the sector land line at 9.1 per 100 - Reduction in Tariff inhabitants combined with ultralow- 75 % of all African cost Handsets and telephone subscribers are availability of Mobile users. prepaid service Page 53

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Findings:
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68% of respondents use mobile & only 32% of respondents do not use mobile. 78% of respondents think there is a need for mobile in the present scenario. Out of 140 respondents who have mobile, the purpose behind having mobile is because of communication 63%, business 20%, Influence 8%, Up gradation 6%, others 3%. Respondents bought mobile because of Brandname20%, Network 103%, service 41%, Advertisement 10%, Tariff 83%, customer care 10%, Value-added-service 31%. Out of 140 respondents, 82% of them are satisfied with the service, 8% of them are not satisfied & 10% of them didnt give any opinion. 88% of respondents do not use Value-Added-Service at all but only 12% of them access VAS Respondents do not use VAS because of 10% say Lack of awareness, 26% say technology, 33%say because of cost, 17% say not necessary. Parameters of improvement stands at 10%, 8%, 3%, 31% & 31% for Network, Tariff, Full talk time, Service& Others respectively.

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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.

Over two third of Indias population live in rural surroundings and in these telecoms have not really made their presence felt to any real extent. Companies driving technology into this sector of the market the effect is likely to be a boom in telecoms demand It is probable that in these rural areas that cheap call rates will link with state-of-the-art technology to boost teledensity and offer more freedom.

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Annexure

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SIR / MADAM, I HARISHKUMAR.S MBA STUDENT OF SJCE, MYSORE, DOING PROJECT AT VODAFONEESSAR.PVT.LTD ON THE TOPIC PENETRATION OF TELECOM IN RURAL MARKET WE KNOW THAT YOUR TIME IS MORE PRECIOUS THAN OURS , WE REQUEST YOU TO PLEASE SPEND SOME
TIME BY HELPING US BY PROVIDING NECESSARY INFORMATION WHICH WE THINK IS MUTUALLY BENEFICIAL .

THE

INFORMATION IS ONLY FOR RESEARCH PURPOSE AND CONFIDENTIAL .

QUESTIONNAIRE:NAME: OCCUPATION : _____________ _____________ SEX: STATUS : MOBILE

NO :

M[

F[

_____________ _____________

QUALIFICATION : _____________

_________________________________________________________________________________________

DO

YOU HAVE A CELL PHONE?

YES

NO

Do you think it as a requirement in present scenario? YES

I F NO [
WHY

NO

_________________________________________________________________

WHAT

IS THE MAIN PURPOSE FOR BUYING A CELL-PHONE?

COMMUNICATION BUSINESS INFLUENCE TO

GET UPDATED

] [ [ [ ] ________________________ ] ]

OTHERS

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Is it fulfilling your Purpose?

YES

[ [ [ ]

] ]

NO CAN T SAY

WHAT

MADE YOU BUY

____________

CONNECTION?

BRAND

NAME/BRAND AMBASSADOR

] [ ] [ [ [ [ [ ] ] ] ] ]

NETWORK SERVICE

COVERAGE

ADVERTISEMENT ATTRACTIVE TARIFF FRIENDLY VALUE

CUSTOMER CARE

ADDED SERVICE

OTHERS

_____________________________

Are you satisfied with the service?

YES [
IF NO WHY

NO [

_______________________________________________

ARE

YOU ABLE TO USE THE VALUE ADDED SERVICES GIVEN BY THE

SERVICE

PROVIDER?

YES [ I F NO ,

NO [

IS IT BECAUSE OF :-

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 LACK

OF AWARENESS

[ [

] ] [ [ ] ]

TECHNOLOGY FEAR NO
NEED

OTHER

______________________________________

What are the parameters to be improved? NETWORK SERVICE ADVERTISEMENT ATTRACTIVE TARIFF FRIENDLY VALUE
CUSTOMER CARE COVERAGE

] [ [ [ ] ] ] ]

[ [

ADDED SERVICE

DATE :-_________

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Bibliography

www.vodafone.com www.relaiance.com www.tataindicom.com www.idea.com www.bsnl.com www.airtel.com www.scribd.com

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