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India is a country of villages, with over 70% of its population living in rural areas. For mobile operators, this means future mobile subscribers in the country are going to come from India’s villages.

Between 2002 and 2006, mobile penetration increased by a more than 40% in India (source ITU). Still, rural penetration is low, making up just over one fifth of the total mobile user base in India, as reported by the Telecom Regulatory Authority of India in 2007.  The future of the mobile industry is exanding in rural India, but what do mobile operators need to do to tap into this market?

In 2009, Accenture, a global management consulting company, surveyed 2,400 current and potential rural consumers and interviewed 15 senior-level executives representing the mobile telephony ecosystem. The goal was to understand the needs of rural customers for mobile services and identify the value propositions for rural services by mobile operators.

The research was divided in two phases. In the first phase, 15 executives representing mobile operators, handset manufacturers, telecom infrastructure providers, application and content developers were interviewed. The second phase involved an assessment of 2400 surveys completed by rural citizens (802 current mobile customers and 1634 non-users) to gain an understanding of what mobile services and devices customers value.

The research offers valuable insight to mobile operators to inform their strategies for profitable rural expansion in India. Urban markets have fuelled the majority of profits, but as penetration begins to pass the 80% mark and prices and profit margins are plummeting, operators need to look closely at their rural strategies.  

Key challenges faced by mobile operators for (profitable) rural expansion were presented in Accenture's full report that can be found here. A few key findings:

• Rural markets are more expensive to serve because there is a shortage of technical infrastructure across rural India.
• Diverse cultures, educational standards and technical knowledge in rural areas influence mobile phone adoption differently.
• Frequent power shortages and more rugged environmental conditions are obstacles for mobile phone use.
• Cost recovery is the main challenge for operators in their rural expansion.

The survey of rural consumers revealed some fascinating information as well. Several disconnects between rural consumers and the mobile industry were identified. Rural consumers and senior executives agreed that cost of handsets and lack of mobile infrastructure resulting in poor reception were among the top barriers for mobile adoption. However, operators were surprised to learn that the issue of accessing electricity to charge phones was noted as a significant barrier by rural users.

Rural customers identified their top three needs to be: cheap long distance communication for personal or business purposes; reliability of tool for communication, and privacy. Senior executives perceived rural consumers’ needs to be: cheap communication, style/status, and platform for entertainment. There clearly exists a discrepancy between mobile operator’s understanding of what is needed and valued and their rural customers.  While rural consumers value functionality, operators seem to think that entertainment, style and status are most important.

The most value-added service, according to rural users, was SMS (31%), but only moderate (50-74%) awareness around this function was reported. Other services included download ringtones/wall papers (19%), agricultural alerts (9%), and news in local languages (8%). Mobile banking in local language ranked low, perhaps as its favorability depends on a reliable infrastructure.

The Accenture study offers some key strategy points for mobile operators when examining their rural plan of action. Among these suggestions are:

• A provision of culturally specific and personal after-sale service is highly valued by rural customers.
• A distribution strategy that accommodates rural lifestyle.
• Reduction of costs through outsourcing services.

It is also clear that collaboration between players in the mobile ecosystem is essential if infrastructure shortages are to be tackled.

Creative Commons-licensed photo courtesy of flickr user Meena Kadri. Thank you!