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We aim to be the operator of choice - Views of Rajat Mukarji, Chief Corporate Affairs Officer, Idea Cellular

July 15, 2010
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What is the biggest challenge faced by Idea Cellular today?
One of our biggest challenges came in 2006 when the Idea shareholding changed; the Tatas stepped out and the Aditya Birla Group took over the majority shareholding. Effectively, the company started to come into its own only in the latter half of 2006. Prior to that, as a result of multiple shareholders, the company's growth was always a little bit constrained from the regulatory standpoint.

Thus, single ownership brought in greater focus. At that point, we had only 11 circles in operation, of which eight were dominant circles while three were new. So, the first order of business in 2006 was to apply for new licences and achieve a panIndian footprint.

Unfortunately, those licences were held up and finally released only in 2008. This meant another two years of waiting for regulatory myopia to be cured. It was in end-2009 that we became a pan-Indian operator.

In the meantime, we launched national long distance (NLD) and international long distance (ILD) operations and now, we even have an internet service provider (ISP) licence. So, in every respect, we are a completely integrated telecom player.

After the Aditya Birla Group took over, each year there were a series of activities that were milestones in their own right. And yet, they were preparing us for greater challenges. Some of these milestones were the IPO and outsourcing to IBM in 2007; new licences in 2008; pan-Indian coverage in 2009; and 3G spectrum in 2010.

On the whole, the main challenges being faced by the industry include increasing competition with up to 15 players in the market, falling tariffs and lack of clarity in policy matters.

The Indian telecom sector has witnessed fierce price competition. Lower tariffs, coupled with higher channel payout by new competition, and increased incidence of multiple SIM ownership have led to record subscriber additions.

In such a scenario, improving capacity utilisation and operational efficiencies; leveraging of spectrum and scale advantage in incumbent service areas; a calibrated approach for new areas; sophisticated processes; brand power; and ensuring a strong balance sheet will enable Idea to emerge competitively stronger during and after the current difficult phase of market overcapacity and hyper competition. The company has recorded the highest revenue growth among the listed telecom operators in India.

When is Idea likely to cross the 100million subscriber mark?
As of end-May 2010, we had 67 million subscribers on our network and have been adding nearly 2 million month-on-month. However, subscriber numbers have never been too important for us. We have, however, always tracked our revenues very closely. Even when we calculate market share, we do it in terms of revenue market share, not subscriber numbers. Subscriber numbers are no longer a robust enough indicator to use. There was a time when subscriber numbers were the standard indicator for all calculations, including spectrum allocation. However, I do not think that this criterion was ever considered the dominant factor in financial terms.

So, the 100-million mark is not going to be that significant for us. Instead, we continue to look at revenue market share, which grew last year.

How has the company performed over the past one year in terms of market share and what has been its strategy so far?
In 2009, the company became a panIndian integrated GSM operator, with a presence in all 22 service areas in the country. We commenced operations in the telecom service areas of Orissa, Kolkata and West Bengal, Tamil Nadu including Chennai, Jammu & Kashmir,and Assam and the Northeast during financial year 2009-10.

All these rollouts were carried out quite successfully. We got an especially warm response in the east, where business is stable today.

The company is now the third largest operator in India in terms of revenue. We have consistently grown our revenue market share despite increasing competition.

In a year characterised by the entry of new operators, it is expected that the incumbent would cede market share.However, during calendar year 2009, Idea increased its overall revenue market share from 11.4 per cent to 12.7 per cent. Even in our 11 established service areas, the share increased from 17.5 per cent to 18.8 per cent.

What is the company's rural expansion strategy?
Idea Cellular's rural strategy was developed in 2006-07. Our aim has always been to scale up to accommodate future growth, and a sound rural marketing and sales strategy is one of the most critical drivers to achieve this. This is further highlighted by the fact that most of the expansion is currently coming from the non-urban areas.

In fact, towards the second half of last year, two out of every three Idea users were from non-urban environments. This provides an indication of how large our rural penetration has been. If our penetration has been positive, it has been due to the fact that we have been able to develop and support innovative rural marketing plans.

This will continue to be a priority.The important thing is going to be to get users onto our networks.

To ensure this, we have developed customised products and tariffs for the rural market. For example, Idea Cellular was the first to introduce small-denomination recharge vouchers; customised VAS; agri-related information for the farmer community, etc.

What are Idea's key thrust areas?
Managing growth in the competitive environment is very important. Areas such as scaling up; supporting 3G; developing innovative products and services; ensuring effective customer service delivery; and building a strong customer service brand are very important for the company.

The telecom industry is not one where a specific criterion is important; rather the players have to fight the battle on multiple fronts. We have to keep growing. If you miss that growth curve, you fall behind and miss numerous opportunities. One has to keep up.

What are the company's investment plans for the next one year? How much has been invested so far?

Idea Cellular's total capex (network and non-network) for financial year 2010-11 is approximately Rs 30 billion. This does not include any payouts on account of the 3G auction and 3G capex. We have already made a payment of Rs 57.68 billion to the government for winning the 3G bid in 11 service areas.

So far, the company has invested Rs 200 billion.

What is the road ahead for the company?
We have identified several key areas for future growth. We will continue to build on the growth momentum to increase our market share. In addition, we will focus on VAS; prepare for 3G, which is in the offing; and increase our NLD and ILD services. We aim to be the operator of choice for every new subscriber.

Idea Cellular has won 3G spectrum in 11 service areas, namely, Maharashtra, Gujarat, Andhra Pradesh, Kerala, Punjab, Haryana, Uttar Pradesh (East), Uttar Pradesh (West), Madhya Pradesh, Himachal Pradesh, and Jammu & Kashmir, at a total cost of Rs 57.68 billion.

Our 3G spectrum footprint covers a very high proportion (81 per cent) of the company's total national revenues.Idea Cellular's bidding strategy and the auction results have significantly enhanced the company's competitive position in the market. 



 
 
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