opportunities for mobile telephone operators in rural areas ...

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SuCCESS IN RuRal MaRKETS: NEW CuSTOMERS FOR TElECOMMuNICaTION BuSINESSES Large population in rural areas * : India ≈ 800 m China ≈ 865 m - Net subscriber additions in rural areas 2007-2010 * : India ≈ 107 m China ≈ 128 m x Desire for mobile phones: 90% = Potential customers: ≈ 1.29 bn * examples
content Rural Markets Sometime in the mid-1980s, the first mobile phones appeared in Hollywood films, as a status symbol for the rich and powerful. Gone are those days. Today mobile communication is so commonplace that the markets of the industrialized world are thought to have reached saturation point. Mobility players find it hard to achieve even meager growth rates in these markets. Things look totally different in emerging and developing countries, where mobile phones are less widespread. But this is changing fast. The demand for mobile communication in these countries is high, as the growth rates in several key emerging markets show (Egypt, Brazil, China, India, Indonesia, Nigeria, Pakistan and Thailand). Here, 570 million new mobile phone subscribers were added between 2007 and 2010. However, these new customers are not all city dwellers, as you might think. There is considerable demand for mobile communication among the rural population too. Most of the 570 million new customers, 303 million to be exact, live in rural areas. And the growth continues: Well over 90% of those currently without a mobile phone want one. "Metropolitan" business models do not work in the countryside Unfortunately, this demand does not automatically translate into big profits. Product design, sales and marketing models established in the cities cannot simply be transferred to the countryside. Equipping sparsely populated areas with the technical infrastructure needed for comprehensive mobile coverage does not come cheap: in fact, the costs increase as one penetrates more remote markets. At the same time, since the rural population has a low average income, the Average Revenue Per User (ARPU) tends to reduce with remoteness. On a hayride PROFIT Rural PROFIT City Mobile telephone operators should also take the path to the countryside if they look out for new customers. In the long run, ignoring the rural population's need for mobile communication for the above reasons is not a good idea. It would leave the field wide open to competitors. And since customer growth in rural areas is at least as fast as that in urban areas, significant market share would be lost. Relatively low ARPU among new customers can be compensated for by high volumes. Not to mention the additional image boost. Among companies who have entered the rural market, the successful ones are those who see their rural customers as a separate customer group that has to be addressed with specially tailored concepts. Companies who simply transfer the concepts they have established in big cities to the countryside, are destined to fail. Taking the network to the countryside Expanding a network in rural regions using urban quality yardsticks for network coverage and speech quality is expensive and complicated. A strategy of expanding cheaply and quickly with moderate quality of network coverage is more promising. This may reduce quality, but quality can be improved once there are enough customers spending enough money. The opposite strategy of a high-quality but slow and expensive network expansion not only reduces financial
Page 1: Roland Berger Strategy Consultants
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