The Telecom Business: Fluctuating with Agriculture

Posted in Finance Articles, Total Reads: 1797 , Published on 06 February 2014
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The late 20th century drastically revolutionized the way people communicate with each other. The era of landline telephones, postal letters, telegrams etc were all in jeopardy. And this was only because of the launch of a new wireless technology known as the mobile phone. Mobile phones have completely reformed the way people stay in touch with each other. Mobile phones are an integral part of a persons day to day life. From personal use to business discussions, from emails to internet, from study to entertainment; the lives of people have started revolving around the cellphone. Thus, prominent telecom players like Vodafone, Airtel, Idea, AT&T etc have a big say in the world. But one interesting fact which perhaps is an unbelievable fact is that the one industry on which the telecom business thrives is nothing but agriculture.


image:freedigitalphotos.net, Stoonn


As odd as it might seem, the telecom business is hugely impacted by the agricultural business of that particular country and affects revenues substantially. Let us consider an example for large agriculture-based economy like India. India has approximately a 60% farmer and rural population out of its 1.2 billion. All of these 700 million people stay in villages and rural areas, and the primary source of livelihood and income is farming, poultry, cottage industries and other small businesses related to agriculture. Add to that the huge mobile phone penetration in India, i.e. more than 80% and gives a very interesting picture about the telecom business in India.

 

Villagers and farmers have extensively adopted the use of mobile phones for their businesses in India. With limited education and literacy, mobile phones have given them the power of knowledge as they have access to the internet through 2G and 3G facilities, even though its sparsely used in rural areas. With the press of a button, they can call grocery stores, ware-houses, shops in cities and calculate the demand-supply equation to get the best price for their yield. Also, they can remain updated about the latest fertilizers, pesticides, weather information etc which would help them boost their business. Mobile phones have reached even the remotest of areas connecting the people in villages to their family and friends from neighboring towns also. Thus, the mobile phone and telecom businesses thrive a lot on the farming population.

 

On the other hand, lack of timely rainfall affect the crop yield and productivity, which in-turn affects the financial position of the farmers and this directly impacts his/her spending power and hence the number of “recharges” done reduce. This greatly impacts the mobile phone usage as rural families have to concentrate on intelligently spending the limited money they have, and mobile phone usage is the first thing that gets sacrificed.

 

In India, April-May-June are the months where farmers have invested all their money in seeds, plantations, fertilizers etc. This summer time is when the telecom business is most affected as the outgoing calls reduce drastically due to limited finances with the farming population. The following months of monsoon are extremely critical for both agriculture and telecom. If it rains well, and there is a flourish of produce, then the farming population earn extremely well which directly boost the telecom revenue as the cell phone usage is enhanced. On the contrary, if there is a drought, it causes great financial losses to the agricultural sector which impacts the telecom sector also. Below is representation of the calling pattern of outgoing and incoming calls of a telecom player in India.

 

The impact of seasons are clearly reflected, which is a result of the direct impact of the agriculture business.

 

Mobile phones have changed the way we live our lives these days. In cities, people live by their cell phones for calling, business, entertainment, shopping, banking and almost every possible thing. But the increasing penetration in the rural areas has ensured that the telecom business now piggy rides the business trends in the agricultural sector.



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