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India's Massive Mobile Phone Market Expands to Rural Areas

In India, five million new subscribers are signing up for mobile phone connections every month, as the wireless telecommunications market booms. And, one of the world's fastest growing mobile phone markets is now expanding into the countryside.

Five years ago, India had five million mobile phone users. That number has now exploded to 105 million, and the frantic growth shows no signs of slowing down.

But many new mobile phone subscribers no longer come from the booming towns and cities. As growth in urban areas begins to plateau, mobile operators are eyeing the next big market - the vast rural areas, where 70 percent of India's more than one billion people live.

Over the next year, telecom operators plan to spend billions of dollars to expand coverage to the sprawling countryside by rolling out the towers and base stations needed for wireless phone networks.

The new investments are expected to enhance wireless coverage in the countryside from just 30 percent at present to 85 percent next year.

Naveen Chopra is head of marketing at one of India's largest mobile operators, Hutchinson Essar. He says the response from rural consumers has been extremely encouraging.

"It is quite heartening to see that, whenever we do put up what is called a base station, or a tower in a small village or hamlet, the number of people who actually want to go mobile right upfront within two to three months is quite a large number, the urge to go mobile is almost universal, it is only a question, do people have the means to do it," he said.

Telecommunication companies are trying to ensure affordability for low-income consumers. They hope that low calling rates and cheap handsets will create a mobile phone revolution in rural areas, as they did in the cities.

India has the lowest calling rates in the world - about two cents a minute.

The huge market for handsets has also driven down the prices of phones. Nokia, which has the largest market share in India, now sells a basic handset for $44. Motorola plans to launch a mobile phone for under $30 in October.

Chopra says the rural market will be important for both mobile operators and manufacturers.

"The revenue per subscriber may be lower, but the number of subscribers that are on offer are going to be significantly more, so there will be a change in the balance to some extent," he added.

India began liberalizing its heavily regulated telecommunications sector in the mid-1990s, when telephone density was less than two percent. That figure has since climbed to around 22 percent, and the government's target is for 500 million subscribers,or around 50 percent, by the end of the decade. Mobile phones are expected to account for most of the new subscriptions.