idea cellular iim lucknow strategy

STRATEGIC ANALYSIS OF IDEA CELLULAR

Section ‘D’ Group 3Vaibhav Sathe (PGP26182)Varun Boppana (PGP26206)Rahul Satpathy (PGP26233)Sai Chand Chintala (PGP26239)Sneha Pandit (PGP26242)Gopi Krishna NV (PGP26248)Chandrasekhar Y (PGP26254)

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Strategic Analysis of Idea Cellular

ABOUT THE COMPANY

Part of the ABG conglomerate

Current market share of 11%

22 Telecom circles

ABG – 49.1% and AXIATA – 14.99%

3G licenses in 11 circles

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SWOT ANALYSIS

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KEY CHALLENGES

Need for diversification

Reduce Operational Costs

Increase ARPU

Increase Enterprise Customer Base

Increase presence in metros

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CORPORATE LEVEL STRATEGY

Mergers & Acquisitions

Industry heading towards imminent consolidation

Should target smaller companies with synergies

Subscriber base linked to allocation of additional

spectrum

Proposed M&A norms by TRAI to revise upward the

minimum number of competitors to be present in

each telecom circle.

Idea should consider gaining first mover advantage

in consolidation.

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Diversification – Broadband & IPTV +

Broadband Penetration of 1% (11.21 million) Government Plan to increase broadband connectivity

like Bharat Nirman 60,000 km of fiber optic network can be leveraged for

backhauling

- High Capex costs - Last mile connectivity Existing fixed line DSL – Easier to convert to

Broadband rather than new provider IPTV – Not enough bandwidth commissioned

Idea shouldn’t diversify into Broadband services

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DTH

220 out of 370 million TV sets belong to low

density rural areas

Synergize with telecom services for billing and

customer support to the DTH

Leverage powerful telecom brand and marketing

campaign of “What an idea sirjee”

Customer acquisition from the local cable operators

In-flight WiFi – using use DTH infrastructure for the

same

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BUSINESS LEVEL STRATEGY

Coopetition Indus Towers

Joint venture between Airtel, Idea and Vodafone

110,000 towers - world’s largest tower company

Decrease in CapEx and Opex costs 3G Tie-up

Airtel, Idea and Vodafone - sharing the 3G networks in the circles where they do not have licenses

Idea offering 3G services in Delhi, Kolkata via Vodafone’s network

Vodafone offering 3G services in Andhra, Kerala through Idea’s network

Airtel offering 3G services in Gujarat through Idea’s network

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BUSINESS LEVEL STRATEGY

Rural Penetration

Relative saturation of the Metros and Urban Areas -

Urban Tele density for wireless subscribers is 150.06

Lower penetration in the rural areas – Rural Tele

density for wireless subscribers is 32.75

The growth rate in the rural subscribers has been

48% and 71% over the last 2 years

Lower ARPU, increased CapEx and OpEx

Margins to be a result of the volumes rather than

higher ARPU

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RURAL PENETRATION – FUNCTIONAL STRATEGY

Product Cheaper handsets from Chinese ODMs

Preloaded application providing information about weather, agriculture, market prices etc.

GPRS at nominal/subsidized rates

Marketing - Distribution Leverage the ‘Business Correspondent’ channel –

‘My Cash’ tie up with Axis Bank as a distribution channel

An alliance with ITC e-choupal should be considered

Operations Indus towers alliance – Decrease in Opex

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FUNCTIONAL STRATEGIES

Operational

Tower Infrastructure – Indus Towers into all 22

circles

Sharing of the backhaul infrastructure, pooling of

resources

Outsourcing of the call center operations

(English)

Financial

Low Cost Debt Financing in International Markets

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BALANCED SCORECARD Target

Sr

No Objective KPI 2011 2012 2013 2014 2015

1

Improve corporate

profitability Profit % 7% 8% 9% 10% 11%

2 Rural Diversification Rural ARPU (in INR, in real terms) 120 150 180 210 240

Mobile device as % of e-choupal

users 2% 5% 7% 9% 12%

3 Diversification

Revenue of DTH as % of total

revenue 1% 4% 7% 10% 12%

In-flight WiFi as % of business

travellers 1% 2% 3% 4% 5%

4

Operational Efficiency

Improvement

Power and Fuel Cost as % of

revenue 7.79% 7.20% 6.60% 6% 5.40%

Manufacturing Expenses

48.34

%

45.43

%

42.52

%

39.61

%

36.70

%

5 Financial performance

International to local currency

loan ratio 0.33 0.37 0.415 0.457 0.5

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QUESTIONS