Our rural telecom market seems to be ready for a bull run. All stakeholders?telecom operators, equipment sellers, regulatory authority, industry bodies and analysts agree that the village connectivity is finally poised for a take-off.

While regulators have been firming up plans for improving rural connectivity, GSM and CDMA operators are now lining up their ?Rural Chalo? and ?Gramin Mobile Kranti? plans. The rural lag or the connectivity divide is now spelling opportunity. Telcos like Bharti Airtel are already adding half their new customers from villages. Analysts expect the rural market competition to hot up and get as fierce as in the urban areas.

Three out of five Indians still live in the villages, but urban areas boast of at least four times bigger connectivity numbers. Rural India has 62 million phone lines?50 million mobile and 12 million landlines. Average revenue per user is a mere Rs 150 and telecom density is a paltry 8%.

About 7.5 million new connections are being added. A total of 23.86% of the 261.07-million mobile users as on March 2008 are from rural areas, according to the latest data from Telecom Regulatory Authority of India ( Trai).

However, majority of the next 500 million telecom customers will be from the rural areas. Telcos are now experimenting with new models, as they get ready to enter new geographic and socio-economic regions in the next three years. Aim is to achieve rural teledensity of 25% by means of 200 million rural connections at the end of the 11th Plan.

Analysts agree. Around 40% of the new customers will be from rural India, according to a recent study by the Federation of Indian Chamber of Commerce and Industry (Ficci) and Ernst & Young (E&Y). Of the next 250 million mobile users, around 100 million will be in rural areas in the next 5 to 10 years, it says.

Many feel that the lower capital expenditure to set up the passive infrastructure along with lower cost of phone calls and handset prices have contributed to this optimism.

?The rural telecom market is up for growth in the years to come. There has been significant evidence that the problems associated with both the supply and demand side in the past that stunted the growth no longer exist,? explains Mahesh Uppal, a telecom analyst.

The government support through Universal Service Obligation Fund (USOF) to set up passive infrastructure like telecom towers and power supplies and sharing by the mobile service providers with lower cost of telecom equipment have made supply side attractive.

Recently, both CDMA and GSM operators have come up with a discounted tariff structure for the rural users. Telcos, who are otherwise ready to slit each other?s throat with tariff cuts, seem to be joining hands to cut down tariffs instead. They are offering an initial discount of Rs 50 to new customers and Rs 75 would be passed on as free talk time over six to nine months.

?There has been significant reduction in the tariff. The lower tariff rate has made the mobile affordable to a large section of the rural population,? says Uppal.

?Our internal estimate is that we are going to see a minimum subscriber growth of about 50 million or more every year in the rural areas till 2010. So, that is the positive side of the story that we will have, a much better teledensity than what we have today,? says Nripendra Misra, chairman, Trai.

?Collaboration with local organisations is an essential part of the operators plans in the rural expansion project,? says Angel Broking research analyst Harit Shah.

According to Bharti Airtel chief marketing officer, Sanjay Gupta, ?Collaboration with people and organisations that share similar aspirations become essential as Bharti?s network goes deeper into the countryside to connect millions of people on the telecom bandwagon.?

Airtel says that more than 50% customers that are added month-on-month now come from the rural sector. Besides tariff concessions, the large operators have already started entering alliances with the sectors that are close to the rural masses.

Airtel enjoys around 25.42% of the total rural subscriber base in the country. It has now enterted into a strategic tie-up with Andhra Pradesh-based SKS Microfinance, which has 7.5 lakh members. Airtel will offer mobile handsets bundled with prepaid connections, especially for SKS

Microfinance members.

Airtel will provide free prepaid SIM cards to SKS members, which in turn, will provide loans to its members to purchase Nokia handsets.

Others like Vodafone are equally bullish. ?We were conscious of the fact that there was a huge potential in the interiors and a deep penetration with our network was the best strategy,? recalls Sridhar Rao, chief executive officer Vodafone Essar East, who sprearheaded Vodafone?s move across West Bengal and steered it to market leadership after two years of launch.

?Today our network covers over 94% of the population in Bengal and have over 3.2 million subscribers,?, he adds.

Clearly, operators have to extend their network wider into hinterlands, where telecom service has not reached. Without an extensive network, it would not be viable.

?It is not necessary for the operators to have their own network. Many newcomers will ride on third party network and will start offering vanilla services to the rural masses,? says Shah.

Insiders agree and many feel that Bharat Sanchar Nigam Ltd?s (BSNL) success in the rural areas is due to its wide presence in terms of network. BSNL, which has the highest percentage of rural subscribers (33.69%) among all mobile operators, has 50% of its base transceivers station (BTS) in the rural areas; of 32,000, as much as 16,000 are in rural areas for their GSM operations. Around 75% of our BTSs are in rural areas, roughly 6,600 in rural areas. And most of the new additions will go to the villages,? says Kuldeep Goyal, chairman and managing director, BSNL.

Optimism in the industry is hard to miss. But there are big hurdles too. Misra of Trai mentions two important issues, which can be a dampener to the whole process of rural growth.

The first is the affordability of a rural subscriber. ?Why I ask this question is because, on an average, 5-7% of the monthly expenditure of an urban family is on phone. Now, the question is?if that is the expenditure and if there is a major initial expenditure for getting the connection, can we, with a degree of confidence think that the rural population is capable of getting the connection,? says Misra.

Prices are already being slashed. Many advocate IP telephony as the ideal affordable solution.

Another deterrent to rural connectivity, according to Misra is, content. ?Why would he spend unless he is assured of getting relevant content? If we do not have the kind of content, which is going to be of use to the rural population, then the growth will be, let us say, tardy and slow. And that will be a cause of concern for most of us,? warns Misra.

Equally big problem is the lack of energy to run the base stations and charge mobile phones.

Industry insiders and analysts agree that the challenges are big, but not insurmountable. And telcos just need to click on the right spots to write the rural chapters of their growth story.