VNL

The Rural Makeover 29 Jan, 2009

Urbanization is a subjective concept and has a different meaning in every individual’s mind; but what remains common is the idea that urbanization defines a change in the way people think, live, and interact.

All those of you who have studied Sociology must be well aware of how urbanization is changing the rural landscape, as the latter expands to merge into urban areas. What is more interesting is the ‘city lifestyle’ which is redefining the way rural folks live.

I’d like to look at the business side first – with SEZs (Special Economic Zones) being set up across the remote regions in the country, the rural population has not only been blessed with employment opportunities, but also higher wages and a better standard of living. A majority of the people who migrate from rural to urban areas do so for the job opportunities that cities have to offer. But with BPOs and manufacturing units setting up shop next door, the rural youth don’t seem to be complaining. In fact, the BPOs have started a new trend in rural India, one which prevailed in the metros, and then trickled down to the tier II and III cities – earning enough money not only to support family needs, but also to engage oneself in small indulgences. The income earned is also giving many the opportunity to study further with the money they save up.

The rural business story also has another side, where some of the biggest retail and FMCG brands have opened their chains in rural and remote areas, because as urban markets reach their peak, and begin to stabilize, rural India is on a high. As technology penetrates into the semi-urban and non-urban regions, and TV sets, PCs and mobile phones enter rural homes, there is an increase in the way that individuals and families are emulating the lifestyle of city people.

From a consumer’s perspective, people in rural India have enough reasons to smile; after all, they are the next billion users of every product and service that companies across sectors have to offer. The economic slowdown has accelerated this development, as even the biggest corporate houses are eyeing the domestic market. In all this, the telecom industry is one of the few that has already touched lives in rural India, mainly because it was one of the first sectors to realize the potential that the untapped rural market held.

Rural urbanization can not only ease the pressure of surplus labour in rural areas and change the way India lives, but it also curbs the flow of rural laborers into big cities and helps stimulate national economic development.

So, where is your next business venture headed?

Further reading:

• “Rural BPO : Winning by Going Rural” (Voice & Data) ››
• “A definition of urbanization” (wikipedia.org) ››

Surviving Competition – Regional Mobile Operators Strategize 4 Sep, 2008

The evident demand for mobile phones in India has created a very interesting business and entrepreneurial opportunity for the nation’s retailers – setting up mobile stores.

With the call rates and handset prices declining day by day, the mobile retail sector is creating a ripple in the Indian market. There are two segments fighting for space in this sector – retail stores backed by known corporates, and the traditional shops that rule regional India. Who will win this tussle?

“Business opportunities are like buses, there’s always another one coming”

–Richard Branson

Clearly, the advantage that regional players have is that of location; set up in the interiors of the country, these mobile retailers are able to reach the untapped target audience. More importantly, they are able to understand the psyche of their consumers, who usually come from the same geographical location. Price is also an advantage for retailers such as UniverCell, Sangeetha and Global Access, because their relatively small size allows them to change prices within two hours of the market price change; bigger stores, however, take 2-3 days to solve the issue.

In this scenario, the competition being generated by corporate-backed mobile retailers has come as a surprise to the regional players. Retail outlets such as The MobileStore (Essar and Virgin), HotSpot, Subhiksha and Mobile NXT are setting up shops countrywide. While some like HotSpot have tied up with neighbourhood stores as their franchisees, others like The MobileStore have stuck to investing in their exclusive outlets.

In a country like India, where more than 70% of the mobile retail sector is unorganized, the franchisee model seems to spell the way ahead.

As mobile penetration continues to grow in the Indian subcontinent, mobile retailers – organized & unorganized – are fighting for their share of the pie in the urban, semi-urban and rural parts of the country.

What remains to be seen is whether the struggle between the regional mobile retailers and the national mobile retailers will continue, or if they’ll come together to fulfill the demand of the next billion mobile users.

Further reading:

• “The growth of regional mobile retailers” (economictimes.com) ››
• “Corner stores next hot spot for mobiles” (economictimes.com) ››

Indian Mobile Market Breaks New Record 26 Aug, 2008

9.22 million. 9,220,000. That’s how many new Indian GSM and CDMA subscribers were added in July. It breaks the earlier record of 8.94 million that was set a month earlier.

Out of all the mobile operators, Bharti Airtel expanded the most with 2.69 million. Vodafone Essar welcomed 1.7 million new subscribers, and Reliance 1.5.

Close to 300 million people now have a mobile phone in India. This makes India the world’s second largest mobile phone market after China.

The split between GSM and CDMA is currently roughly 74% vs 26%.

As new GSM operators, such as Videocon, Unitech, Reliance and Tata Telservices, start launching mobile services by the end of this year, growth is expected to grow upwards of 10 million new subscribers per month.

A market with amazing contrasts

Rafat Ali recently wrote a blog entry about Cyriac Roeding’s (former EVP of mobile at CBS) travels in India.

He visited the spiritual city of Varanasi, and found himself standing at an intersection, observing his surroundings:

“The backdrop of this ancient scenery is dominated by a giant billboard from the mobile carrier Vodafone. And on the sidewalk, where men in wet orange T-shirts pass by after their spiritual bath in the Ganges River, a young entrepreneur has set up a booth on two wheels, which carries only two stationary telephones on a counter. This is a mobile phone recharging station, where consumers can add credit to their prepaid cell phones.”

There are many reasons for India’s mobile revolution. One of the most important is accessibility. Only a couple of million Indians - around 5% of the population - have Internet access. And getting a traditional wired phone installed is often a cumbersome process.

As it’s possible to get a new mobile phone for as low as $25, and as mobile services (voice, text messaging, data) are priced very competitively (the average country-wide ARPU lingers around $7), getting a mobile phone is the way to go.

But an enormous challenge still remains - making sure that mobile services are accessible to everyone. Which in the case of India translates to close to 400 million people - a majority located in rural areas - that still can’t use a mobile phone because there’s no coverage.

That’s where VNL’s WorldGSM™ system comes into the picture - helping operators reach rural markets profitably.

Further reading

To learn more about India’s mobile market, here are some resources worth visiting:

• Our own “India & the Indian Telecom Market Q & A” »
• More on the July subscriber record at The Hindu Business Line »
• Mobile telecom info & stats at TRAI (Telecom Regulatory Authority of India) »
• Contentsutra.com: “This Mobile Life: Roeding’s World Travels: India” »

Crank your phone 19 Aug, 2008

How do you charge your mobile phone when there’s no electricity grid? A hand cranked dynamo may be the simplest, and most cost-efficient, answer.

We’ve earlier mentioned companies like Solio and Suntrica that make portable solar chargers.

Solio’s product is definitely at the high-end of the spectrum and retails for around $100, which may be a bit steep for a rural citizen. Suntrica’s product range is a bit different both in regards to price and product range, and they will soon publicize more information about the products. We’ll return with a new report on Suntrica then.

On a related note: if you have soldering skills and a DIY mindset, you can even make your own solar charger.

Solar chargers can be used collectively in a village - shared between a group of people. So can hand-cranked chargers, of course. And they do retail for quite a bit less than many of their solar peers. VNL-er Nikhil Swadia has done some research on what’s available.

The Chinese manufacturer Wenzhou Kaishi Electric offers a couple of different hand-cranked phone chargers. Cranking at 150 rpm/for 1 min provides enough power for 8 minutes of talk time. The chargers come with plugs for charging most common brands of mobile phones. It costs $1.8 in large quantities, most likely translating to a retail price point of around $10.

CNET has reviewed some hand-wound mobile phone chargers that cost around around $20 to 25. And there are more to be found at NexTag.

Clearly, there are many options for a villager to charge a mobile phone. And these portable chargers – both solar and hand-cranked – are quite convenient for anyone outside the range of the electricity grid.

As solar power technology matures further, and as adoption of mobile communication in rural communities increases, the field of portable chargers will evolve quickly. We’re tracking the development right here on the blog.

The Long Tail in microtelecom – Enhancing lives through mobile communication 8 Aug, 2008

With his article “The Long Tail,” in the October 2004 issue of Wired, writer Chris Anderson popularized the idea of the “long tail” in explaining why online retailers such as Amazon.com, Netflix etc. are uniquely positioned to fill a huge demand that traditional retailers cannot serve cost-effectively.

Sites like these try to market more obscure products to a large number of customers, realizing profits in doing so.

This same concept can impact the business models of mobile operators as they also face a similar market curve (see figure below).

Until now, operators haven’t offered mobile services to villages because it has been impossible to do it profitably.

The reason for excluding the “Long Tail” from mobile services is simply because of the threshold of viability - explained in the figure below:

By adjusting the cost base, we have been successful in driving down the threshold of viability to $3. Now, with the advent of WorldGSM™, it is possible to connect the unconnected long tail - and help to improve the lives of billions of people around the world.

Find out more »

Going rural, going green 27 Jun, 2008

There has been some recent buzz around the rural opportunity. And about the need for sustainable energy sources.

Everyone wants to get connected. Mobile operators want to reach new growth markets. And oil is, after all, going extinct.

On the 24th of June, The Economic Times wrote that:

“The government is considering a proposal by which companies using solar or biogas power for running the rural telecom infrastructure would be subsidised.”

India’s Department of Telecom (DoT) has, according to Economic Times, around Rs 15,000 crore of unutilised money under the USOF (Universal Services Obligation Fund) scheme and is finding ways to spend it.

Unstrung Insider recently released the report “Mobile Networks Go Green: The Lean Base Station” which examines the opportunities for using sustainable energy sources to power radio sites in remote areas.

John Blau, research analyst at Unstrung, recently underlined the importance of new energy sources:

“The growth in mobile networks over the next few years will come from emerging markets. Of the more than 1.5 billion new subscribers from emerging markets by 2015, nearly two thirds live in remote parts of the world, where access to electric grids isn’t guaranteed.”

The most common way to reach areas where there’s no power grid is to deploy conventional base stations with diesel generators. And even in emerging market cities, the power grid is often so unreliable that diesel generators have to run several hours every day to keep the mobile network running.

Unstrung estimates that around 1 million new base stations will be needed to extend connectivity to rural areas in emerging markets.

The good news is spelled WorldGSM™ – VNL’s complete GSM system that helps mobile operators reach rural markets profitably.

We also have a new white paper in the works about the mobile energy crisis. It’s coming soon, and will explain mobile operator’s power woes further.

It will also provide ideas for how the mobile industry can move forward sustainably. Which is, actually, the only way forward.

A weapon against poverty 13 Jun, 2008

Many people in rural communities don’t have enough money saved to start a regular bank account. And even if they had an account, getting to the bank office could take days.

So it’s no surprise that smart new mobile banking services have taken off like wildfire. If you have a phone, you can save money and transfer your savings just like if you had a regular account. And it’s all in your pocket (providing that you have coverage - something which WorldGSM™ aims to solve).

Tom Standage recently summarized the value of mobile banking in the Economist:

“Lack of access to financial services increases the cost of borrowing and hampers entrepreneurship. Carrying large amounts of cash around, or storing it under the bed, is insecure. And sending remittances [...] is subject to high transaction costs. Mobile banking and payment schemes can address all of these problems.”

The mobile banking revolution started in 2001, and was spearheaded by Smart Communications in the Philippines. Since then, the ideas have spread all over the world.

Aside from the more established mobile banking players, there are also grassroots initiatives based on a creative take on prepaid airtime, as mentioned in the New York Times article “Can the Cellphone Help End Global Poverty?“:

“Ugandans are using prepaid airtime as a way of transferring money from place to place, something that’s especially important to those who do not use banks. Someone working in Kampala, for instance, who wishes to send the equivalent of $5 back to his mother in a village will buy a $5 prepaid airtime card, but rather than entering the code into his own phone, he will call the village phone operator (“phone ladies” often run their businesses from small kiosks) and read the code to her. She then uses the airtime for her phone and completes the transaction by giving the man’s mother the money, minus a small commission.”

We’ve researched and compiled a list of the most popular mobile banking (M-banking) services.

Most of these are based around the most basic need: sending and receiving money. But some are also connected with a standard debit card that can be used for retail purchases.

SMART COMMUNICATIONS

Smart Communications – one of the major Philippine mobile operators – offers two mobile banking services: Smart Money and Smart Padala.

Smart Money is one of the world’s first M-Banking services. It enables Smart subscribers to manage their money from their mobile phones. Person to person fund transfers only requires a mobile phone, and an additional debit card is used for ATM withdrawals and retail purchases.

Smart Padala is an international cash remittance service linked to the mobile phone.

Learn more at smart.com.ph »

GLOBE GCASH

Globe GCash, from Globe Telecom in the Philippines was launched in October 2004.

It gives subscribers access to “a cashless and cardless method of facilitating money remittance, donations, loan settlement, disbursement of salaries or commissions, and payment of bills, products and services, with just a text message”.

Apart from a wide range of personal services, GCash also offers partnerships for retailers and rural banks.

M-PESA

M-Pesa, developed by Vodafone and offered through Safaricom in Kenya, is a simple mobile money-transfer service that has become wildly popular since its launch in 2007.

The Guardian wrote about M-Pesa a year ago, and described how simple it is to use:

There is no need for a new handset or SIM card. To send money you hand over the cash to a registered agent - typically a retailer - who credits your virtual account.

You then send between 100 shillings (74p) and 35,000 shillings (£259) via text message to the desired recipient - even someone on a different mobile network - who cashes it at an agent by entering a secret code and showing ID.

A commission of up to 170 shillings (£1.25) is paid by the recipient but it compares favourably with fees levied by the major banks, whose services are too expensive for most of the population.

You can find more info about M-Pesa at Safaricom.com »

WIZZIT

South African banking service Wizzit has been in operation since 2005 and offers person-to-person payments, airtime top up, electricity vouchers and payment of accounts.

Aside from the regular mobile banking services, Wizzit also offers the iWizz internet banking service.

Learn more about Wizzit at wizzit.com »

MTN BANKING

MTN Banking is a South African joint venture between the mobile operator MTN and Standard Bank.

Very similar to Wizzit (mentioned above), the MTN MobileMoney Account includes person-to-person payments, make payments to and receive payments from any bank account in South Africa, and make account payments to various municipalities and other service providers.

More info at mtnbanking.co.za »

VNL and M-banking

WorldGSM™ from VNL helps mobile operators reach rural markets profitably.

Billions of people still don’t have access to a mobile phone. Simply because mobile coverage hasn’t reached them yet. When it does, mobile banking becomes possible.

Want to learn more?

Here are some good places to start:

• “How banking on a mobile phone can help the poor” (blog.foreignpolicy.com)
• “M-banking to Surpass Internet Banking in 2012” (cellular-news.com)
• “Smart Communications’ BoP-driven business model” (digitaldividend.org)
• The Mobile Banking Blog (brandonmcgee.blogspot.com)

And if you have something to say – join the discussion!