Ghaziabad / New Delhi: Giridhar Mawandia, a resident of Bhagalpur, Bihar, has no regrets that he gave up his MBA ambitions some three years ago to become a distributor of connections with Bharti Airtel Ltd, India’s biggest mobile phone company by customers.
For good reason: he clocks some Rs10 crore in annual sales hawking more than 1,600 new phone connections a month and thousands of renewals he channels through more than 480 retailers.
“I do not repent giving up the MBA (short for Master of Business Administration) pursuit at all. After our ancestral flour mill closed down (a) few years ago, this is the best thing that has happened to our family,” he told Mint on phone from Bhagalpur, known for its centuries-old silk business and infamous, more recently, for blindings of undertrial prisoners in 1980.
Distributors, such as the 26-year-old Mawandia, are pivotal to Bharti Airtel’s future success as the phone firm expands rapidly in Bihar, piggybacking on some 300 distributors and more than 50,000 retail outlets selling Airtel cards. This reliance is reflected in other parts of India as well, as the New Delhi firm counts one-third of its new customers—it has been adding more than two million of such customers every month recently—from areas such as the inner reaches of Bhagalpur district.
Such rural customers are expected to increase to half of fresh additions next year, making for a larger share of the total user base at the firm. “By 2010, when we reach the 125 million customer mark, the rural customers will definitely account for over one-third of our subscriber base,” Manoj Kohli, president and chief executive of Bharti Airtel, had told Mint in January. Currently, around 20% of the firm’s customers are from rural areas, where just one in 10 people owns a mobile phone.
Stay connected: Bharti Airtel is also planning to provide rural users with text alerts about crop diseases, timely inputs on what to grow and where to sell the harvest. Boston Consulting Group says that globally, operators such as China Mobile have used text-based services to expand in rural areas. (Ramesh Pathania / Mint)
Bharti, which already covers around 300,000 or half of India’s villages, plans to increase its network spread by one-third or 100,000 more villages by March next year. At internal meetings, Kohli refers to the rural reach out effort as Bharti Airtel’s “matchbox strategy”. It “is about making available Airtel recharge cards wherever matchboxes could be found”, said Kohli. Nearly nine in 10 mobile phone users in India use pre-paid connections, topping them up with recharge coupons.
In many parts of mineral-rich but economically backward Bihar, as in many villages and small towns in the country, a mobile phone is the first reliable form of connectivity, implying a big latent demand for such services. Bharti Airtel, for instance, aims to serve more than 41 million rural mobile phone customers by 2010. But, given the low levels of affordability in such markets, phone firms are faced with a dual problem: how to manage profits in a scenario where a customer’s billing is as little as one-fifth of what an urban user bills a month, but costs of network roll-out are higher than in bigger cities.
One of the biggest challenges faced by mobile phone firms is to reduce the cost of serving rural customers, “especially since they are not high Arpu customers”, said Carol Borghesi, director customer service until last month at Bharti Airtel, in a recent interview.
Average revenue per user (Arpu) per month is a measure of how much money an operator makes by serving a mobile phone user.
(Borghesi, who was hired from BT Group Plc.’s contact centre operations in the UK, has quit Bharti Airtel and gone back to the UK. Bharti Airtel’s director of technology, Jai Menon, who has since taken over the customer service responsibility, was not available for an interview for this report.)
“While a user in a metro city of Delhi or Mumbai can give an Arpu of Rs300-500 on an average, Arpu for a rural subscriber could be even lower than Rs100,” said a retailer who sells Bharti Airtel connections in Muzaffarpur, Bihar.
This is where distributors such as Mawandia step in. Bharti Airtel is rolling out a programme where its distributors and retailers help it acquire new rural customers, apart from acting as local one-stop shop for supporting these users. “These folks can provide a highly personalized service to our rural customers, which is very critical,” said Borghesi. “We are holding training workshops with these retailers and distributors every month for sensitizing them while dealing with rural users.”
The premise here is that rural customers, many of them first-time phone users, are more comfortable dealing face to face with a retailer rather than making a call to a customer service centre and receive instructions. By getting such customers to interact with retailers, Bharti Airtel saves on customer service costs. If the company is successful in its efforts, the savings, which it declines to disclose, could be substantial, given the number of such retailers. By next month, the number of rural retailers is expected to rise to 60% of an estimated 800,000 points of sale where Airtel cards are available, according to a Bharti Airtel executive, who did not wish to be identified because this information is not in the public domain.
Firms such as Boston Consulting Group (BCG) say Indian operators can lower the cost of serving mobile subscribers in rural areas by as much as 60%. This can be done “by providing an ultra low-cost handset of around Rs1,000, outsourcing local management of operations and maintenance, and by improving their distribution and reach,” James Abraham, David R. Dean and Arvind Subramanian of BCG wrote last December in a report, which surveyed some 15,000 potential mobile phone customers.
Bharti Airtel is also trying to stoke usage and billing. In order to get these users to talk more, the company has also been selling mobile talktimes in lower denominations of Rs10, Rs20 and Rs30. “Going forward, we could even look at Rs5 as a top-up option,” Borghesi had said.
The initiative has already started paying off at Bharti, with Bihar alone accounting for more than 10% of total recharge revenues at the company last year.
Meanwhile, potential mobile phone users in rural India could also be very demanding when it comes to services such as the Internet, and movie and song downloads.
Take, for instance, Babloo Kumar Sharma of Kulhara village in Ghaziabad, Uttar Pradesh, who is planning to buy a cellphone connection soon. “I want a phone that allows Internet browsing because my friends at college tell me that one can now even search for jobs online,” he said.
For mobile handset makers such as Nokia Oyj, which is currently working with Bharti Airtel to address the real needs of a rural subscriber at more affordable costs, are keen to respond to potential customers such as Sharma. “Mobile entertainment could be a smart way to get into this segment, especially since many of these villages do not even have proper electricity to watch television without any interruption,” said Bob McDougall, sales director at Nokia India.
McDougall, who now plans to make frequent trips to villages such as Kulhara to understand the consumers better, said retailers could help increase the penetration through different innovative methods. “We have this alliance with Bharti, wherein both the companies go to a village where Airtel has recently entered, and create awareness about what mobile could do for them,” he said, adding that the two have, in a pilot project, half a dozen co-branded vans going from village to village.
Beyond entertainment, Bharti Airtel is also planning to provide rural users with text alerts about crop diseases, timely inputs on what to grow and where to sell the harvest.
“We have partnered with Iffco for offering such alerts in (the) states of Punjab, Haryana, Uttar Pradesh and Rajasthan,” Borghesi had said. Iffco stands for Indian Farmers’ Fertiliser Cooperative Ltd.
Potential rural customers such as Kiranpal Yadav, who is the sarpanch, or village council head, at Kulhara, are ready to pay for such inputs. “If we could get the prevailing rates at nearby mandis, we can go to a market that gives the best rate for our harvest,” he said. Mandis are local village markets meant for selling and buying of agricultural products.
There are around 300 families in his village, with a total population of some 1,200. The entire village has only 20 mobile phone connections, primarily used for talking to relatives living in other cities. “If inputs on crop prices are provided, more farmers will see value in acquiring mobile phones—currently it is more about children downloading wallpapers and games,” said Sharma.
Globally, operators such as China Mobile Communications Corp. (CMCC) have used text-based services to expand deeper into the rural areas, according to BCG. A few years ago, CMCC, the world’s biggest by mobile phone customers, launched a service for farmers and fishermen in the rural areas, providing them with inputs on weather forecasts, pricing information and employment opportunities. In October 2006, “the service had more than 12.7 million subscribers, and daily traffic exceeding 1.6 million text messages, apart from around 20,000 voice calls”, the BCG report said.