The total mobile penetration may have reached 14 per cent of India's population. However, industry experts assert 13 per cent of this is in urban centres and only one per cent in villages.
The opportunity is not lost on market players like Bharat Sanchar Nigam Limited and Reliance Communications who have been present in this segment for a while.
Now Hutchison Telecom, Bharti Airtel and Tata Teleservices too have descended on the turf with big network expansion plans and innovative marketing strategies specially tailored for these regions.
"The B and C category census towns are raking in good business for us. Currently, almost 35 per cent of our business comes from these circles. However, the potential here is immense as only a per cent of the total population actually use mobile phones," says a spokesperson for Tata Teleservices.
TTS, operating in 20 of the existing 23 mobile telephony circles in India, is using a door-to-door marketing strategy, involving members of gram panchayats and trained market-feelers to make residents of villages and small towns aware of the usefulness of mobile telephony and how the system of pre-paid refills work.
According to the company spokesperson, value-for-money handsets priced between Rs 1,000 and Rs 1,400 with a plethora of tariff plans to choose from is what is driving subscription growth in these regions.
Sanjay Kapoor, joint president, mobility, Bharti Airtel, agrees with the trend and says his company had enjoyed a growth of 166 per cent in June of 2005-06 in circle C towns, as compared to a growth of 65 per cent in metros.
"We are concentrating on improving network connectivity in the rural areas along with existing circles we and are spending $1.5 billion this year for that purpose only," says Kapoor. Airtel is appointing distributors at the tehsil level and using existing channels of fast moving consumer goods in these areas to push their products.
Reliance Communications will also make investments to the tune of Rs 1,500 crore (Rs 15 billion) till March 2007 to enhance its network in the eight global system for mobile communication circles it operates in.
The company plans to extend its GSM network to 4,000 towns in the existing circles of Bihar, Orissa, West Bengal, Himachal Pradesh, Assam, north east, Madhya Pradesh and Kolkata. Currently, its GSM network covers 340 towns in these circles.
A company spokesperson says the company has added over 200,000 subscribers in its eight Category C circles in the previous quarter alone. Reliance is importing handsets in bulk for use in these markets and is trying to leverage its low tariff plans to increase subscriber vase.
Handset manufacturers too are gearing up. Devinder Kishore, director of marketing at Nokia India, notes that handsets priced between Rs 10,000 and Rs 15,000 are reasonably popular in these regions.
"While the handset market in India is growing at an approximate rate of 75 per cent annually, about 30 per cent of the demand comes from metros now. The rural market, therefore is growing rapidly in terms of sales and it has a tremendous potential in future," he says.
Nokia is using channels with territorial reach like Doordarshan and All India Radio to reach the interiors. The company has also incorporated nine Indian languages on certain handsets to promote sales.
Says Dinesh Sharma, marketing and sales head of Samsung CDMA, "Sales in category C towns are growing at a rapid pace. Currently the fasted growing circles for us are the categories A and B. Sales in metros have been slower, although absolute numbers are growing as almost a per cent of urban populace buy a phone every month".
Sharma feels that for rural areas, incorporating local languages in handsets will become a focus area in future, as will be voice short messaging service, the latter dependent on service providers.
"Rural India is keen on high feature phones but not as much as urban India. A customer in the rural area is happy to have features, which are available in the urban markets. They are happy to have colour handsets, other accessories like phone book wherein he can store details of contacts, games, alarm tones and so on," explains H S Bhatia, National Product Group Head- GSM Division, LG Electronics India.
Industry experts feel an estimated investment of around $6.5 billion would be needed to increase India's rural tele-density to four per cent from the current one. With the current investments, the expectation may not be far off the mark.