The past few years for the Indian telecom sector have been marked by regulatory challenges and tariff wars, which took a toll on the top line and bottom line of mobile operators. However, Aditya Birla Group?s Idea Cellular managed to weather the storm and emerge stronger as the country?s third-largest mobile operator by revenues and subscriber base, behind Bharti Airtel and Vodafone.
Idea?s success is evident by certain operational metrics. For instance, it?s the biggest beneficiary of the mobile number portability (MNP) scheme (that allows subscribers to change their operator without changing their cell number), till June 30. As per the data shared by telecom minister Ravi Shankar Prasad in Parliament in August, Idea showed a net gain of 95 lakh subscribers.
A JP Morgan report dated July 23 hailed Idea as the ?strongest operational play? in India?s telecom sector.
By adopting a strategy of prudent network expansion (especially in rural areas that were underserved by competitors), Idea has managed to emerge as the country?s third-largest telco with a 16.2% share of the market, from being fifth-largest in 2011 when it had an 11.21% market share.
The ?rural-centric? approach that Idea took while building its telecom network entailed bold bets like establishing a presence in regions where it was difficult to do business, such as Naxalite pockets in Madhya Pradesh, Andhra Pradesh and Maharashtra.
?We never followed the practice of a secular allocation of resources across geographies, and over-invested in pockets where there was no mobility coverage, like parts of Kerala, Madhya Pradesh, Uttar Pradesh (west), Maharashtra; and in circles where there was just one operator like Andhra Pradesh, Madhya Pradesh (east), Gujarat, Punjab and Haryana,? says Himanshu Kapania, Idea Cellular?s managing director.
This was part of a conscious effort by the company to not compete directly with other telcos like Bharti Airtel and Vodafone in regions where they were strong and where multiple operators were battling it out for market share, said Kapania.
A telecom sector analyst with a domestic brokerage said Idea?s strategy of moving into the Hindi-speaking belts of north and central India, which comprises around a third of the country?s population, helped it significantly increase subscriber base. ?They bought mobility at an affordable price and launched cheap handsets,? the analyst said.
Idea Cellular then built on this foundation and constructed a slew of retail outlets in rural areas to help serve those who were technologically illiterate. Till August, Idea had over 2 million retail outlets and 25,000 call centre executives attending to concerns faced by its rural customer base. ?We try to better the logistics of even fast moving consumer goods companies in the rural areas,? Kapania said.
The result of this strategy is evident in the fact that it is either better or rapidly catching up with competitors on key operational metrics.
Idea?s average revenue per user (ARPU), a key indicator of the telco?s performance, is just behind that of market leader Bharti Airtel. For the first quarter of fiscal 2015, Idea?s ARPU stood at R181, while that of Bharti Airtel stood at R202. Anil Ambani-led Reliance Communications? (R-Com) ARPU was R136 during the same period.
Even when it comes to debt, which has been a cause of concern for Indian corporations across sectors over the past couple of years, Idea is the least leveraged among listed telcos. Idea?s net debt stood at R14,956 crore as on June 30, while Bharti Airtel had a net debt of R60,472 crore and that of R-Com stood at R40,223 crore. To be sure, while Idea and R-Com are largely domestic players, Bharti Airtel has built a significant international presence internationally by investing in continents like Africa.
However, while Bharti Airtel has presence abroad, notably in Africa, south Asia and channel islands, and has invested heavily at these locations, Idea Cellular and Reliance Communication?s operations are mainly domestic based.
Idea is now looking to leverage its rural customer base (largely consumers of voice services) for its latest data offerings. ?Our idea is to transform the life of consumers from being pure voice users to having an exciting, digital lifestyle,? Kapania said. He cited as an example the fact that a fifth of Facebook?s India users reside in the country?s hinterlands to demonstrate the potential for data services in the regions where Idea is strong. ?Many rural Indians who work in towns and cities today use Facebook and WhatsApp to communicate with friends and families,? said Kapania.
When it comes to data services, Idea?s rivals appear to have done better so far. Bharti Airtel?s total data user base in India rose 7% quarter-on-quarter to 58.07 million in last quarter of FY14. During the same time, Idea?s data subscriber base decreased from 25.25 million, from 25.52 million in the December 2013 quarter.
Idea Cellular?s focus on third generation mobile telecommunication technology (3G) has been quite effective, and its investments on the technology, along with its network optimisation, has been well aligned with its marketing strategies, said Kamlesh Bhatia, research director at Gartner Inc, who tracks the telecom sector closely. ?It is good for operators like Idea who are looking for opportunities to tap revenues beyond that of voice. We believe that the telecom industry is under-penetrated in terms of data consumption given the latent demand and demographics that can support a lot more growth, so operators need to continue to push, and Idea seems to be well positioned already,? Bhatia added.
