Idea Cellular Limited - IIMA IDEA Telecom Centre of … · Idea Cellular Limited “We talk a lot about how we are the fastest growing mobile company, how come we are not as good

Indian Institute of Management Ahmedabad

Prepared by Professors Rekha Jain, Piyush Kumar Sinha, and Manjari Singh.

Research assistance provided by Mr Varun Chandra, Research Associate, IIMA-Idea Telecom Centre of Excellence is acknowledged. Funding support provided by IIMA-Idea Telecom Centre of Excellence and the Indian Institute of Management, Ahmedabad, is gratefully acknowledged.

Cases of the Indian Institute of Management, Ahmedabad, are prepared as a basis for classroom discussion. They are not designed to present illustrations of either correct or incorrect handling of administrative problems.

2010 by the Indian Institute of Management, Ahmedabad.

IIMA/ IITCOE0002

Idea Cellular Limited

“We talk a lot about how we are the fastest growing mobile company, how come we are not as good as Vodafone on postpaid? How come our customer satisfaction scores are going down?” … Sanjeev Aga, MD, Idea Cellular Ltd. Mr Sanjeev Aga, Managing Director of Idea Cellular Ltd (ICL), a part of the Aditya Birla conglomerate in India, was doing a year end review of the implementation challenges his company faced in the highly competitive, fast growing cellular services market in India in December 2008. The areas of concern identified by him were broadly in the growth of rural business, management of Information Technology (IT), marketing, and human resources (HR). While other functional areas were equally important, Mr Aga felt that these four areas presented unique challenges in the context of the telecom sector in India.

In response to the severe competition in the sector, ICL had taken several initiatives. Mr Aga mused that in earlier assignments where he had headed several challenging businesses, he had felt cynical about ’transformational’ projects or specific initiatives that promised to bring about fundamental changes. “Why did a cynic like me feel the need for a transformational project? However given the complex challenges faced by ICL, I felt there was no alternative but to bring about changes this way as the models that had worked in other sectors were not applicable to the telecom sector. Therefore, I approved six transformational projects that were important for ICL. I hoped that these would bring speed and scalability although they required huge investments of money, managerial time, and change effort.” Four of the transformational projects were related to managing the complexities associated with the four recent mergers; developing a new sales management system for the entire organization and HR automation were the fifth and sixth ones respectively.

Some of the challenges identified by him were:

a) “We were growing very fast. We were expecting our revenues to increase from ` 20,000–30,000 million in 2006 to `200,000 million by 2012. The magnitude of the scale of operations was overwhelming. The operational intensity of our business is very high. Our customers create the voice service each time they connect to the telecom network. For example, there were 400 million calls every month this year, each of which had to be tracked; not only for billing purposes but also for understanding our own operations. Not only is it a 24x7x365 business, it is a service that may be generated by the customer at any point in time from any place. As our customer base increases, the number of producers of services increase the complexity of not only assessing the

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capacity, but also the network planning and deployment effort. Our capacity planning had to take this variability into account.

Since the last three years, the size of our operation has nearly doubled each year and this trend is expected to continue for the next three years. To get a feel of the rate of growth, consider that whereas earlier we had been putting up five towers a month, now it is 1,500.

b) We realized that a majority of our investments were going in rural areas and we were not equipped to manage this. Our immediate reaction was to put more people. However, this did not lead to commensurate outputs. Then we began to recognize the specific challenges of managing rural operations. For example, when the sales person visited tower locations that exhibited no or low traffic, his/her entire working day could just be spent on traveling up and down from the city to the location. It took a sales person four to five hours of travel (including the waiting time) one way because such locations would typically be around 40-50 km from an existing district head-quarters. Often there would not be a direct bus and changing a bus could add to the travel time. The wait-time and poor condition of the roads in semi-urban and rural areas aggravated the situation. Such trips left little or no time for the salesperson to strengthen the sales process, meet distributors, etc. So we needed to review the processes designed for rural areas.

c) Our customer profile was changing very fast. Average Revenue Per User (ARPU) was decreasing fast and this had put pressure on margins and profitability. Earlier our customers were predominantly urban middle class, in the age group 25-35 years. Now we were covering non-urban areas with younger people. Thus, there was a huge diversity in customer types. Earlier the variation in ARPU ranged from ` 3,000 to ` 135. Now it ranges from ` 600 to ` 60.

d) Often there was little understanding of how decisions made by one business unit influenced the workings of the other departments. For example, when a new tariff plan was introduced, it was necessary to understand that the number of calls to our call centres may suddenly increase as subscribers may seek clarifications regarding the new announcement. From ICL’s perspective, such calls use system capacity without generating any revenue. (ICL estimated that the cost of responding to each such call was nearly ` 7 per call).

e) Even as we needed better systems for operations management, we simultaneously needed to innovate to add value-added services to our bouquet. For example, how do we devise mobile-based application for truck companies to manage their fleets or for banks to provide banking services?

f) We needed an environment within the company where we could discuss the policy and regulate the debate to influence it.

g) New areas of geographic expansion posed challenges. In the new licensed circles, the frequency band was 1,800 MHz, which required higher investments. Further, covering the North-East circles was difficult as the population density was low and high vegetation caused difficulty in telecom transmission. However, if ICL did not penetrate in such areas, then its customers in other parts of the country would not get coverage when they went there.”


EVOLUTION OF ICL

ICL is a part of the Aditya Birla group, one of India’s largest industrial conglomerates that has interest in finance, retail, textiles, chemicals, mining, among several other sectors. Over a period of time, the group’s ownership pattern of ICL had changed significantly. The Birla’s had not considered active role in the telecom sector earlier, but seeing the growth potential, they increased their presence in the sector. ICL (at that time named Birla Communication Ltd), was a joint venture between the Birla group and AT&T in 1995. (Presence of a foreign partner was a necessary condition for participation in the licensing process at that time). ICL had been an early participant in the private provisioning of cellular services by acquiring licenses to operate in two of the larger states (Gujarat and Maharashtra). This opportunity had become available when the Department of Telecom (DoT), Government of India, opened up the telecom sector for private participation in 1994 for Global Services for Mobile (GSM) services in the 900 MHz band. Driven by a growing economy, regulatory initiatives, and competition, the cellular market in India saw several mergers and acquisitions. In 2000, Birla AT&T merged with Tata Cellular,Andhra Pradesh (AP)), to form Birla Tata and AT&T (BATATA). In 2001, DoT announced GSM licenses in the 1,800 MHz band in the subsequent licensing process. BATATA bid for and won Delhi metro circle. In 2002, it acquired Celcom (900 MHz), in Madhya Pradesh (MP). In subsequent acquisition in 2004 of Escotel license in Haryana, Uttar Pradesh (West) (UP (W)) and Kerala, (all in the 900 MHz band), it gained presence in eight circles. In 2006, ICL launched services in Himachal Pradesh, Rajasthan, UP (East) by acquiring Escotel licenses in the 1,800 MHz band. In 2008, ICL acquired licenses for Mumbai, Bihar, Tamil Nadu, and Orissa through payment of a fixed license fee in an open entry basis that was introduced by DoT in 2007. ICL acquired Spice that had operations in Punjab and Karnataka in 2007-08. These acquisitions had given ICL an almost pan India presence. ICL had plans to start services in Tamil Nadu, Chennai, and Orissa. It was awaiting spectrum in West Bengal, Kolkata, Assam, North East, and Jammu and Kashmir. Exhibit 1 gives the geographic location of ICL services and service status as of December 31 2008.

Over a period of time, as the Indian telecom sector liberalized, ICL, like several other Indian operators acquired the National Long Distance (NLD) and International Long Distance (ILD) licenses. Bharat Sanchar Nigam Limited (BSNL), the wholly-owned government incumbent organization was the largest player in the NLD space at that point of time. Amongst the private enterprises, Bharti Airtel and Reliance Infocomm had a growing presence in this space, but for ICL, this move was aimed not so much to become an integrated service provider, but more to shield itself from policy and regulatory changes that the incumbent government service provider could impose as a consequence of its dominant position in the sector.

INDIAN TELECOM SECTOR

Like several other countries in the world, Indian telecom sector had undergone significant reforms over the last three decades. Service provision was largely through the state-owned monopoly of Department of Telecom (DoT) under the Ministry of Communications and IT. Government-controlled enterprises—MTNL (for service provision in Mumbai and Delhi) and VSNL (international services)—also provided services until the early 90s. By 2008 competition and private players had been introduced in all segments of the services such as fixed, NLD, ILD, mobile, etc. Corporatization of DoT into BSNL in 2000, privatization of state-owned incumbents, and introduction of competition through private players had led to both public and private players. In 1992, two mobile private operators per service area and one fixed line operator had been licensed through auctions. Service areas or circles for


licenses, mostly along state boundaries, were administrative units of DoT and classified as metros A, B or C depending on their revenue potential. Exhibit 2 gives the states in India along with their classification. Mobile operators were required to use the GSM standard in the 900 MHz band, while private operators for fixed services were to use wireless in the local loop (WLL)

The Telecom Regulatory Authority of India (TRAI), set up in 1997, was the regulatory authority mandated with tariff regulation, fixing interconnection terms, maintaining quality of services, etc. The Telecom Dispute Settlement and Appellate Tribunal (TDSAT) was a quasi-judicial body that adjudicated and settled disputes between service providers or licensor and licensee and reviewed appeals against TRAI directions. Appeal against TDSAT lay with the Supreme Court of India

Evolution of Wireless Services in India

Subsequent to winning the 2G bids, private operators claimed that they had bid too high and could not provide services in a commercially viable way. The government then came out with a National Telecom Policy, 1999 (NTP 99) that allowed the operators to convert their license fee in to a one-time entry fee (which was much lower than the license fee) and also get an annual revenue share for the duration of the license. As a part of NTP 99, each circle could have potentially any number of operators. The government introduced the state-owned operators, BSNL and MTNL, as the third mobile operator in each circle in the 900 MHz band. Subsequently, in 2001, DoT auctioned licenses for the fourth mobile operator, with the GSM standard in the 1,800 MHz band. Some of the operators, after acquiring fixed line licenses (whose entry fee was much lower), used the Code Division Multiple Access (CDMA) based WLL services to provide ’limited’ mobility services which, for all practical purposes were similar to GSM-based mobile services. After several legal hurdles and protracted regulatory and political interventions, CDMA operators were allowed to provide mobile services, after giving the license fee paid by the fourth cellular operator.

Subsequently, DoT came out with the Unified Access Service License (UASL) regime, under which operators could provide either mobile or fixed line service using the same license. Calling Party Pays regime was also implemented for all operators. These regulatory changes led to the rapid uptake of mobile services, as due to competition, prices of services fell significantly. Moreover, since the Indian economy had been growing between six to nine per cent during these years, the services became affordable for a large numbers of Indians.

The shift to UASL resulted in five to six operators per circle. The service licenses gave an initial allocation of spectrum (4.4 + 4.4 MHz, which was later increased to 6.2 + 6.2 MHz), with the proviso that additional spectrum would be allocated based on availability and operator requirements. The allocated spectrum was far below the international norms where operators had been given upwards of 12 + 12 MHz. As subscriber numbers grew exponentially, operators clamored for more spectrum allocations. However, DoT claimed that there was shortage of spectrum for commercial applications as various government departments (mainly the defense services) had previously been allocated the spectrum in bands where commercial mobile services could now be provided.

In order to prioritize spectrum allocation amongst competing bidders, DoT came up with a Subscriber Linked Criteria that allocated spectrum based on number of subscribers of the operator in the respective service areas. By January 2008, it had greatly tightened the allocation basis of spectrum for subscriber-linked criteria for existing operators. The subscriber-linked criteria were not used anywhere else in the world as operators elsewhere were given fixed amounts of spectrum. In January 2008, DoT announced that additional


players could get UASL licenses and start-up spectrum (minimum amount of spectrum required to start services) would be given based on availability. This led to a rush for UASL licenses and 243 licenses were allocated. However, due to spectrum scarcity, start–up spectrum could be allocated only to a few of the applicants.

Despite these regulatory hurdles, the mobile services continued to grow as was the global trend. Exhibit 3 gives the data on revenues from different services for the years (2003-08). Exhibit 4 gives the teledensity figures

Competitive Scenario

There were six large players, Bharti Airtel, BSNL, ICL, Reliance Infocomm, Tata Teleservices, and Vodafone Essar, who had a pan India or almost pan India presence. Some relatively smaller players (who had operations in a few circles only) were also active.

Among the large players, scale and scope of operations varied considerably. Some of them were a part of larger Indian industrial conglomerates, (ICL, Reliance Infocomm, and Tata Teleservices), while some others were a part of larger global telecom companies (Vodafone Essar) or were public operators (BSNL, MTNL) and yet others like Bharti Airtel had begun their operations in telecom. Over time, although Bharti had diversified into insurance and other services, a large part of its revenue came from telecom services. While players like Bharti provided a whole range of telecom services including fixed NLD, ILD, satellite etc, others like Vodafone concentrated on mobile voice and data. The subscriber base (as of December 31, 2008) ranged from 0.14 mn for Stel, the newest operator to 118.867 mn for Bharti Airtel, the largest operator. Exhibit 5 (Aand B ) gives the details of large operators in terms of their subscriber bases and revenues.

Government Support for Rural Telecom Infrastructure and Services

A Universal Service Obligation Fund (USOF) was set up by DoT in 2002 to give support to private companies wishing to provide infrastructure and services in rural areas. All telecom service companies contributed five per cent of their aggregate gross revenue to USOF. Though USOF was administered by DoT, the annual allocations were made by the Ministry of Finance. DoT identified the areas qualifying for USOF support based on non-availability of towers, socio-economic profiles, etc. A single winner for network infrastructure services was selected on the basis of lowest subsidy sought. This support was available only for companies that had successfully participated in auctions designed by the DoT. Three service provision companies were also selected for the same service area on equal basis. This scheme envisaged support for faster roll out in rural areas.

Going Forward

As of December 2008, the telecom sector in India was contributing significantly to economic growth and also provided infrastructure for other services to be carried out efficiently. The number of telecom subscribers in the country reached 346.32 million as on March 31, 2008. With this the overall teledensity (telephones per 100 people) has touched 33.32 per cent. According to Gartner Inc, an industry research firm, the total mobile services revenue in India was projected to grow at a compound annual growth rate (CAGR) of 12.5 per cent from 2009-2013 to exceed US$ 30 billion in June 2007. The India mobile subscriber base was set to exceed 771 million connections by 2013, growing at a CAGR of 14.3 per cent in the same period from 346 million in December 2008. This growth was poised to continue through the forecast period, and India was expected to remain the world’s second largest wireless market after China in terms of mobile connections.


Although SMS as a value added service (VAS) was the major contributor to non-voice revenue, it was expected that with relatively inexpensive feature-rich phones, consumer education, and economic growth (increasing the propensity to pay); VAS revenues, both in absolute terms and in relation to the total revenue, would grow.

ICL’S PERFORMANCE

ICL prided itself that it was growing very fast, as with the new licenses it would have a pan India coverage. It was the market leader in terms of subscribers in Maharashtra, Goa, MP, Chhattisgarh, (MP had subsequently been split into MP and Chattisgarh) and Kerala. It was among ’Top 3’ in other circles and was the ’fastest’ growing operator in India. Exhibit 6 gives the market share from September 30, 2007 to September 30, 2008 in terms of subscriber numbers for ICL and other top six players (constituting more than 99%) of the market. Exhibit 7 gives the subscriber numbers of ICL segregated by eight established circles and recently-acquired three new circles. Exhibit 8gives the operating and financial metrics for ICL from the financial 2004-2008.

Imperatives for Rural Growth

Given the competition in the Indian telecom sector, one option for operators was to expand in rural areas as with increasing penetration, customer acquisitions in urban areas was becoming very difficult. In terms of the profile of rural populations in those states where ICL was the market leader, out of total population in AP, Gujarat, Kerala, Maharashtra, and MP (that constituted nearly a third of the total current subscriber base), of nearly 356 million, nearly 248 million was rural (as of March 31, 2008). ICL covered 210 million of the rural and 105 million of the urban population. There were 1, 60,810 population centres in these five states. Of this, 2,044 were urban, of which ICL covered 1,834 and 1, 58,766 were rural of which ICL covered 41,410. By September 2009, ICL was expected to cover 1,873 urban and 55,401 rural population centres. Exhibit 9 gives ICL coverage of rural population in these five key states.

Nearly 75 per cent of the newly installed sites were in rural areas. With the new installations, ICL covered 105 mn (97%) of the urban and 106 mn (43%) of the rural population. Exhibit 10 gives the urban and rural Base transceiver station (BTS) provided by ICL during the period April 1, 2008 and September 30, 2008.

Rural Infrastructure

While ICL had an aggressive rural penetration plan, it was concerned with the relatively higher cost of operations in these areas. The average per month cost of operation (including the cost of utilities for servicing the site, security, depreciation etc) of a rural site was nearly ` 76,500 compared to nearly ` 65,000 for an urban site. Electricity in rural areas was available only for a few hours, if at all. Installing towers in rural areas was difficult as roads were poor. Nearly 75 per cent of ICL’s new towers were in rural areas which posed both erection and maintenance challenges. Putting up a tower required numerous clearances including for site acquisition/rentals, local authorities/municipalities, pollution/environmental control, and from state electricity board, Standing Committee on Frequency Allocation, airports etc. Security guards also had to be employed else thefts of petrol/diesel for DG sets could take place.

ICL had not won USOF support. However, it was awaiting the development of towers built by successful bidders using USOF so that it could utilize them for service provision. But, the USOF-supported roll out was delayed. On the other hand, since ICL relied on this


infrastructure, it had not planned to roll out its own towers in rural areas. As a consequence ICL’s rural service roll out had not been as per its plan.

ICL Rural Infrastructure Roll Out Plan

ICL recognized that planning tower infrastructure was critical, as it required huge investments and needed to be located with great care. Therefore, it sent its team to villages to understand the social dynamics and location of activities such as weekly haat1, hospital services, places for selling produce, etc. Proper sequencing the provision of rural towers was of importance to business. For example, should ICL cover all the villages with population over a certain level (say 10,000) and then in subsequent phases cover villages with population over 5,000 or cover all villages irrespective of their population around a village of greater population and so on were managerial issues. ICL decided that it would cover all villages that were close together or in a cluster rather than only cover villages with high population. Such a coverage plan which ’nucleated’ a tower around a high population village and also covered lower population villages in an early phase of coverage was considered more viable as the cluster approach could lead to higher traffic. It was felt that there was no point in putting single towers, as then it would not allow for exploiting the economies-of-scale related to maintenance, distribution vans, petrol refilling for power generation at the tower, etc.

Rural Distribution

There was an attempt to service the markets daily for recharge coupons, etc., even though from a purely supply point of view, it was not necessary to do so. ICL felt that a daily service increased the degree of retailer engagement. Recharge coupons were retailed through a number of customer touch-points including grocery stores. Besides the commission that grocers got from recharge coupons, they also saw retailing of recharge coupons as a mechanism that increased or brought customers to their shops, and possibly increased the propensity of buying other products.

Retailer penetration plans were done in conjunction with the ’Idea Pratinidhi (Representative)’ program that included identifying enthusiastic village folk who were trained to do door-to-door selling of ICL products. The company needed to periodically upgrade the product knowledge of these people and enhance their skills. Further, visibility for ICL was provided through canopies, POS material etc. ICL also deployed specially-fitted vans that toured rural areas and retailed handsets and recharge coupons (Exhibit 11 shows ICL Vans in Rural Areas). Such initiatives also provided employment and income opportunity for the rural youth.

Since ICL felt it had been a late starter, it recruited nearly 700 people as channel partners in a ’project’ mode. This was a big task but a necessary one as from an addition of 100,000 customers per month, the numbers had gone to 300,000 customers per month. ICL soon realized that distribution channels needed to be in place where the towers were, as traffic would be generated along those routes.

ICL was aware that rural business had several idiosyncratic aspects that required special attention. Taking cognizance of the problems in rural distribution and the availability of staff to work there, ICL realized that to make a rural-based system work, it was important to hire locally. Therefore, it formed a sales company called Idea Cellular Sales Company (ICSL)

2 Haat: rural market where vendors sell goods typically on pre-specified days of the week or special occasions.


to focus on rural operations and train youth to become Territory Sales Executives (TSE). It knew that rural institution such as the Panchayat (village council) played a significant role in the villages and decisions regarding daily lives of villagers, and therefore, their input was sought in employing sales territory personnel. Further, to respond to the changing scenario, ICL decided to work on designing a different allocation of geographical units/territories than the existing ones.

ICL had to provide extremely low cost coupons (` 10), as the retailers’ ability to invest was low. (Pre payments for the recharge coupons were a norm in the industry). While in the beginning, retailers mostly bought low cost coupons, over time, they increased this value as their business increased. By initially handling low value coupons, the retailers’ capability and confidence in handling larger value coupons increased as they learnt about the mechanisms of typing in the recharge coupon numbers, various tariff plans, and responded to customer queries.

While rural revenues were lower than urban, handling rural operations was more complex than that of urban areas. For example, there was a variation of only two per cent in the Minutes of Usage in the rural and urban areas indicating near parity in volumes of business, but since the number of rural subscribers was very high, keeping track of the balance of recharge coupons for all its subscribers, led to huge load for data maintenance. Nearly 60-65 per cent of the accounts had less than ` 10 balance. The cost of maintaining such data was often higher than the value of the total balance maintained in such accounts.

Another area of complexity was the large variation in the traffic handled by different towers. While most towers in rural areas were sparsely distributed, there were areas where within a 4X4 square kilometer area; there were nearly 20 BTS, because the traffic was high. Such towers typically gave extremely high revenues (` 10 million/distributor). Variations in traffic across time periods also added to the complexity of capacity planning. For example, in a specific area the traffic peak was between 4 am and 7 am, as it was a soya bean growing area, and during that time, scheduling for crushers happened.

Another aspect of business that was different from urban areas (where ICL had concentrated) was that revenues in rural areas were cyclical. This needed to be taken in to account when making revenue forecasts. For example, since the sowing season coincided with the sowing season, performance of the operators was usually the weakest, as farmers often did not have adequate liquid funds for spending during this period, prioritizing money for seeds and other inputs.

MARKETING

Since in the past ICL had been laid back in the telecom space, there was an organizational inertia that had to be managed. It perceived itself as being reactive to changes, rather than being proactive. It waited for subscribers’ complaints and suggestions for new services instead of seeking them. It was planned that the sales team would get a large support from advertising, promotions, and Point-of-Presence displays. A new campaign was launched with a leading cine star (both Airtel and Vodafone too had leading cine stars for their advertising campaigns). The effort was targeted at changing the perception of IDEA from a laggard to leading the way consumers would use their phones. A popular catch line “What an Idea, Sirji”* was designed to appeal to masses so as to counter the up market appeal of

3A colloquial way of addressing a senior person, especially teacher. Teachers are associated with new ideas and concepts.


Airtel and Vodafone. These campaigns also highlighted key rural social problems so that rural people could identify with the messages (Exhibit 12 gives the Idea Advertisement Campaign).

ICL’s increasing network coverage also implied increasing the sales and distribution footprint. Since providing telecom services required a strong distribution network, ICL initially started services in those areas where a distribution network already existed. As ICL expanded, there was pressure on work allocation. The company had been inducting 3,000-4,000 retailers per circle in the recent past. The salesperson who was earlier responsible for six to seven towns, had to look after 60-70 towns. Such a growth required addition of new people. But additional recruitment did not necessarily lead to commensurate additional business. Besides challenges of identifying new retailers, upgrading skills of sales people, and redefining scope of work allocations, ICL also had to deal with poor quality of information for planning. For example, what ICL had envisaged as a small task, turned out to be otherwise, causing unanticipated changes in planning.

ICL had thought that being the seventh operator, would be a challenge. It was true, but not to the extent it had been perceived. In ICL’s assessment, all other operators too had limited engagement with distributors and retailers in rural areas. They also had earlier focused on larger metros and cities and hence had not significantly expanded geographically.

Distributor selection was normally done on the recommendation of zonal managers, through circle heads and the finance departments. Distributors were given four per cent margin from company on MRP value for every recharge. They would pass on 2.71 per cent margin to retailers. Commission was the same for all distributors as well as for all retailers. It was automated and programmed accordingly. There was no practice of volume-based discount. However, the company, at times with special approvals, could run some volume-linked incentive program for distributors and retailers separately.

ICL realized that while retailers responded to customer queries fairly adequately, they did not proactively up-sell its products. The company’s management was concerned about how to select superior distributors and encourage retailers to up-sell. There were also challenges in the growth of VAS through the existing distributors and retailers, as VAS spanned a wide variety of areas ranging from information to entertainment. Educating and informing the retailers on various products was another challenge.

While there was 10 per cent revenue from VAS, the complexity of managing it was high. For example, ICL had nearly 2,000 contracts with a variety of providers such as content owners, platform owners, system integrators, etc. Reconciliation with VAS providers was also complex. Some of the contracts were of small value, but under dispute, resulting in disproportionate amount of time in resolution.

In rural areas, often the channel partners did not have financial strength, so there was a lot of churn (of channel partners). To be able to assign a distributor for a rural area, it was important to identify the extent of business potential to make it commercially viable for them. Telecom services required significant time engagement for selling, which the retailer should be willing to accept. For example, the channel partner must not only be able to understand the various tariff plans, but also explain these to the retailers/customer and manage the documentation associated with enrolling customers as well.

Mr Aga knew that the challenge before ICL was a shift in the way the sales team operated. The quest for a faster growth would necessitate a marked expansion as well as penetration


in the current market. He realized very early that the sales team was not in touch with the market. They were product-oriented and depended too much on the channel members. The dwindling market share had also affected the morale and zest of the sales team. Mr Aga called the sales head and said, “We need to revamp the system and make it more market-oriented. We must gain reach, service, and speed in the market. Let’s put up a task force to look into the issues and suggest a plan of action.” As a response, ICL developed a Crack Sales Systems (CSS) which was operationalized across 10,000 towns and villages and 4,300 cell sites.

Crack Sales System

Devising a sales system was a challenge, as this was new task for ICL. It looked at organizations like HLL and Gillette, which were considered as leaders in sales and distribution. The team set up linkages of enhanced performance to better cash flow by increasing ARPU, cross and up-sell, and reducing revenue leakages.

The team brought another dimension of the stage of market development to bring out the challenges. Markets were classified into Tiers I and II (Exhibit 13 shows Classification of Markets); Tier I consisted of metros and mini metros that constituted 30-40 per cent of the market. The penetration of mobile phones was very high in these markets as was the usage. Tier II included other markets including the upcountry and rural markets. The penetration was sparse and the markets were dispersed in this category. Further, the sales organization was based on a number of Zonal Business Managers (ZBM) reporting to the Circle Sales Head (CSH). The Zones were further divided into areas. Both at the circle and zonal level, the division was based on products (prepaid and postpaid) (Revised Sales Organization Chart can be seen in Exhibit 14).

Based on the matrix of the two dimensions of products and markets, the team generated suggestions. It also adopted a geographical marketing approach whose basic unit was a sales territory. Each circle would consist of several territories. Each territory was identified as a contiguous geographical area to be covered by a TSE or Territory Sales Manager (TSM) as per defined norms. These were carved keeping in mind new population centres that would emerge within a year. Territories in developed markets such as Pune, Hyderabad or Meerut, would be looked after primarily by TSMs while territories in developing markets like Simbhaoli, Babugarh, Kharkhod, were to be looked after by TSEs. Each territory would be serviced by a distributor who would add retail points. For each distributor, there were three to five TSE, who were hired locally or from nearby locations.

The CSS set the potential for the territory in value and number terms. The number of retail points needed to achieve the potential was also arrived and stated. The names of the reporting officers as well as the base town were specified (Exhibit 15 gives details of a specific territory - Meerut district).

The sales organization was revised to represent the market structure. The role and responsibilities for all positions were stated clearly and in measurable terms (see Exhibit 16 for detailed roles and metrics). For instance, TSEs/TSMs would be evaluated for their performance with regard to percentage achievement of target – gross and net activations and recharge, days of market working, days of full-beat working, share increase in top 20 outlets—activations and recharge, new distributors appointed against the target, forms collected against the target, and increase in percentage of active outlets. Similar matrices were set for CSH, Product Sales Head (PSH), and ZBM. Everyone in the organization, including the distributors, was mandated to visit the market and meet customers, distributors, retailers, and the field sales team at pre-specified frequency. For example, a


distributor was required to spend three days per week in the field. The Distributor Sales Executive / TSE would be mostly in the field (6 days/week). The TSM and the Area Sales Managers (ASM) were to visit the market for 19 days/month. The CSH would do 10 days a month of touring, whereas the ZBMs would ensure that all Direct Retailers have a full day working/month with him. They would meet the channel partners at predefined priority/frequency and ensure high level of engagement with top 20 outlets and key accounts.

Guidelines were also developed for market penetration. Exclusive distributors would be appointed for each center with more than 20,000 people. Every 1,000 recharge customers would be serviced through 1.0 - 1.5 retail outlets. Similarly, every territory would follow the following norms:

Percentage of activating outlets: 50

Outlets per DSE: 60 (max)

Minimum outlet servicing norm: twice a week

Number of DSE per TSE: Three

Number of DSE per TSM: six to eight

Outlets per TSE: 180 (Maximum)

Outlets per TSM: 360-480 (market working norm – 30 outlets/day)

Number of outlets per ASM: 1080-1440( TSE/ TSM per ASM: three to eight)

ASM to spend two to five days with each TSE/ TSM in market per month

Segmentation

The marketing team found that the market had evolved into two distinct product segments of prepaid and postpaid. Customer using postpaid were small in number but had high net worth. Prepaid was almost 85 per cent of the market. Relatively, the volumes of postpaid was going down, in comparison to prepaid.

Separate channels were designed for postpaid as these were viewed as high contribution customers. The entire geography for postpaid business was divided into territories having similar potential. A large number of postpaid customers were institutional, self-employed or members of a corporate entity. The team classified them as High Net worth Individual (HNI), Small/Medium Enterprises (SME), and Enterprise. They were serviced through a large number of outlets. Focus was required as these customers were not only high users but also a good target for VAS. It was decided that to focus on postpaid customers, ’Idea Centre would be created and key account management would be introduced. The former would service HNI, and SME as well as walk-ins. Idea Centres were 100–200 square feet showrooms to service 1,500 to 2,000 subscriptions. The physical design of Idea Centre was given by the corporate group. The current franchisee, dealer, DSA, showrooms, and CMA, were to be morphed into Idea Centres over a specified time frame and would be allocated existing postpaid base. The Idea Centre owner invested the capex. However, the bill delivery and enterprise collection were retained with the company.

The Zonal Sales Executive were required to target listed/unlisted SMEs in the allotted territory as per company norms. They would ensure collections as per ICL standards from subscribers allotted with Bad Debt Rider. They were made responsible for the upkeep of Idea Centre’s by ensuring that all tools like tele-callers, collection fleet, CRM systems, and


connectivity were in place for proper running. Current establishments (bigger than the standard size) were allocated higher base, even though they did not have bigger territories.

Public Call Office were considered a different segment of customers. A different system was designed for them. A distributor was appointed for every 2,000 to 2,500 PCOs. Prepaid and PCO distributors were combined for territories with less than 1,000 PCOs. One DSE was allocated for two to three distributors. One TSM for every zone would report to ZBM and PCO Sales Head. Every TSM was required to visit all PCOs with more than ` 2,000 monthly recharge once a month. Also, one TSE was allocated for every 5,000 outlets or three distributors and he would visit for service where ever required. All inactive and declining recharge PCOs would be met for revival or redeployment.

Availability of Data for Decision Making

Getting correct data was especially critical when new product launches were planned. For example, in a recent initiative to launch data cards, the data on primary sales was not available, putting extreme pressure on the teams, as they worked against a tight deadline, knowing that competitors were going to launch a similar product soon.

The concern was that despite the great deal of information that was generated during a call, making managerial decisions based on data had not taken off. Nearly 400 minutes of usage per month resulted in nearly 12 billion Call Details Records (CDRs) - electronic logs of calls - capturing the origin, destination numbers, call duration, etc. Outgoing call information was very rich, for example, it included whether the customer has a camera-enabled phone (from the IMEI* number that is automatically registered each time a call is made), whether a customer is moving etc. But such data needed to be effectively used.

In this sector, information on consumption pattern of subscribers was very rich in relation to that available in any other FMCG segment. For example, no FMCG dealer/distributor/retailer dealing with, say soap, knew exactly how much soap was consumed by each of the customers, when was it consumed etc., but in this sector, service providers knew the details of consumption of services such as when the customer made a call, how long was it, where did the call originate and terminate, etc.

Despite the richness of information that was generated at the point of consumption of service, getting information to support marketing had several challenges. Consequently, managers had little support for data-based decision making. For example,

1. Stand alone data on the PCO business was not available. Information was clubbed with prepaid cards data. ICL had 325 thousand PCOs that generated ` 3,000 million business, but it did not have data in a desegregated form from that of prepaid.

2. Managers were not able to get data until the 20th of the month, and that too, was only once a month.

3. Aggregate data on VAS was available (which was clubbed with SMS data), but ICL could not distinguish as to how much was contributed by SMS, and further, how many of the SMSs were B2B. As a consequence, managers were not able to assign VAS targets desegregated by different types of VAS, although overall VAS targets were specified.

*The IMEI number is used by the GSM network to identify valid devices and therefore can be used to stop a stolen phone from accessing the network


ICL was unable to segregate from the total SMS made, how many were free with the tariff plan.

4. With huge investments going in network expansion, managers needed to know which tower gave what return on investments. How many customers were there? Some of these towns have data on erlang basis (that defined the capacity of the network rather than on customer basis)).

5. ICL had nearly 140 tariff plans, but had no firm information on the relative effectiveness of these. While there was so much past data available, ICL was unable to use it for deciding when to launch a new tariff plan, how many additional calls would be generated after the launch of the plan, etc.

6. ICL’s performance measures were based on number of ’gross’ adds (additions to the subscriber base). However, there was no measure for the ’quality’ of the subscriber in terms of the profitability.

7. Important parameters like effectiveness of churn control measures etc needs to be evaluated, but there was no data support for the same.

8. There was a need to assess the effectiveness of promotions, since it was a highly competitive market. A visibility audit carried out indicated that several signboards had been missing, despite ICL having paid for them.

From a marketing perspective, based on this data it was important to be able to identify Who were ICL’s high ARPU users? Who had high churn probability? What was the best plan ICL could offer (depending on usage)? Could ICL migrate some subscribers from pre to post paid?

Mr Aga also wanted the usage data to be mapped with markets and sales channels. The team developed reporting systems that would help in merging the two sets of data for implementing a data-based decision making process. Territory Score Cards were developed (Exhibit 17). Similarly, the TSEs were required to provide market share reports on a regular basis (Exhibit 18). These reports were at the retail levels which would be aggregated to arrive at the market, territory, and then circle level shares of companies competing in that circle.

INFORMATION TECHNOLOGY

“As an organization, we were growing so fast, that we could not address some of the IT challenges adequately. Given our growth in our network and people, I feel, we did not make commensurate investments in IT. We were still struggling with the legacy systems. There was a lot of pride in saying that the system was developed in house.” Mr Paranjape, CIO, ICL.

ICL found that typically, though such systems were rich in functionality and tailored to its needs, these were not scalable. A solution that was developed for one million customers often did not scale up to 20 million customers. As its network and subscriber base expanded, ICL realized there were no commercial off-the-shelf (COTS) products available for managing the operations. The IT department had to consider how to support this growth.

“Even where COTS systems were available (billing, mediation, fraud management, and financial), the organization perceived the costs of procurement to be very high and took a decision to develop them in house.


Most such applications were stand alone, and the value that would have been realized through integration was lost. Further, integrating the systems of those circles that had been acquired as well as those developed was extremely difficult. While some integration was attempted and done internally, maintenance of such applications continued to be an issue. When later COTS was implemented for a few business units, integration of such in house applications created problems.”…. Mr Paranjape.

Since the business processes were not mature, the IT department had a lot of difficulty in supporting the operations. During the rapid expansion of the network, more emphasis was placed on investments in the telecom network rather than on IT. The realization that ICL was like any other FMCG business and therefore needed to collect detailed customer data came much later. For this it required appropriate systems and process. On the other hand, business functions felt they had little IT support. Many applications used PC-based packages like Microsoft Excel or Project. There were no industrial grade solutions.

The nature of ICL’s business was such that it generated a huge amount of data. For example, if four calls/per subscriber/month to call centre’s were assumed, then, it led to nearly 120 million calls, whose information needed to be stored. The cost of storing this information needed to be incorporated in to ICL’s service provision costs and could impact the profitability. So much data also required huge effort in organizing and managing it. However, there were no organization wide standards for data definition and architecture. Various circles had a variety of applications at different levels of maturity. So, a lot of streamlining was required to develop a ’national’ system. Over time, there had been mutation of the original data definitions (for example what does the subscriber mean: is it a person who has purchased a recharge coupon, or is it someone who has made a call etc.).

Outsourcing

Since ICL had a prior partnership with IBM as it had used IBM’s DB2 database, it decided to leverage that for furthering its IT objectives. ICL decided to outsource its IT development to IBM Global Services as it felt that IBM Global Services had the domain expertise in the sector, having being the outsourcing partner for Airtel and Vodafone. At the same time and similar to the initiatives of Airtel and Vodafone, ICL gave a long term contract for GSM networks to Nokia, Ericsson, and Siemens. This required a significant mindset change.

As per the contract, IBM Global Services got 2.5-3.0 per cent of the revenue over the entire 10 year life cycle of the project. In March 2007, ICL had 243 employees in IT, 198 of who were transferred to the IBM rolls. In order to successfully implement the various initiatives, 700 people, 400 in the transformation team and nearly 300 in the operational part were deployed. It was expected that the peak would be in May 2009, when there would be nearly 1,200 people.

While IBM Global Services had significant experience in working as an outsourcing partner, for ICL it was a new experience. In order to define Service Level Agreements (SLAs), ICL decided that these would be business-oriented rather than technical. For example, ICL decided that it made more sense to measure the success percentage of virtual top ups, rather than server or database availability. Measurability of SLAs was another concern. How should each SLA be measured? To arrive at meaningful estimates, a six month study was done to understand the range within which operational parameters may vary. Some SLAs were not business-oriented, but referred to ’softer’ aspects such as adherence to time schedules, delivering functional requirements in the appropriate format. For example,


although the Interactive voice response system (IVRS) solution that was presented by one of the vendors met its functionality requirements, it could not be easily modified and hence got a lower weightage.

In identifying a portfolio of projects for working with IBM, ICL selected them based on an analysis of the required business capabilities from applications. ICL assessed each application on attributes with associated weight factors as follows:

Fitment with capability: 40 per cent

Relevance: 40 per cent

Viability of vendor, growth path of the functionality provided and scalability: 20 per cent

These templates were provided to the Architectural Review Board that consisted of three ICL and 21 IBM staff.

Over time as ICL began working with several outsourcers, it became necessary to clearly identify the boundaries amongst them and between them and ICL

Issues in Managing Growth

Several of the global vendors did not have solutions for the kind of business situation faced by ICL. Considering the life cycle of an application, say, billing, to be for the next five to six years, it was also required to be maintained during that period. With the current rate of growth, it was expected that this would normally mean doubling the capacity. For example, with nearly four million subscribers currently, expected to be eight to nine million in five to six years time, not all vendors could supply this kind of support. ICL, therefore, worked with some of the global vendors such as Cisco to see how Cisco’s solutions could be made more scalable. It was not only that the volume of business was growing, (because of increase in number of subscribers) there were other aspects to growth. There were nearly hundred thousand distributors and tens of thousands of dealers. No FMCG company had such a strong distribution network. Therefore, IT solutions that could work in the FMCG domain may not necessarily work for ICL. ICL was adding 40-50 million subscribers per year. The network planning effort that went into this deployment was huge. The complexion of the business was also changing. With ICL’s acquisitions, there was a diversity of systems. Also, while ICL was changing from a postpaid to a prepaid business, the distribution management system was not good enough to support the changes in the businesses. Mr Paranjape opined -“Integrating data across business units was problematic. Management felt that data capture for analysis was insufficient, while at other times timely availability was a concern. When data was available, its timeliness, reliability, availability, adequacy, accuracy, and consistency were issues. There was little flexibility for incorporating changes.”

Before the IT applications could take off, certain changes were required in the organization. Any analysis required that each business unit had a common Key Performance Indicators (KPI) framework allowing for cross-functional approach. “For the data warehouse and Business Intelligence application to take off, we needed to get the business definitions right, in the first place, For example, the business heads needed to decided what were the KPIs. The service provider needed to deliver in stages to derive business benefits for ICL from each stage.” Mr Paranjape.


For the data warehouse and BI solution, ICL needed to acquire several analytical skills to use the data. It had divided its BI activities into phases, some of which had been completed. It also had a stage-based plan for developing the analytics of various revenue streams such as postpaid, prepaid etc. Examples of operational business areas where such analytics would help the company includes profitability analysis, target marketing campaign, analyzing customer behavior, usage analysis, etc. The BI approach was based on ICL’s strategic objectives which helped it to identify the current and future value drivers, e.g., market/revenue growth, product and customer service strategies, and regulatory and information support needs. ICL’s BI plans included analysing not only structured data but also behavioural data such as who calls whom, rate of diffusion of a new tariff plan, analysis of social networking data and lexical data, etc.

To support the above approach, ICL needed to plan for the BI target capabilities within a specified time schedule, detail out the BI operating model, e.g., functions, roles, and responsibilities across the enterprise including for data capture, management and governance, and plan for the specific required enabling technology/IT capabilities. Based on the above, it needed to list out future infrastructure requirements, both hardware and software.

HUMAN RESOURCE MANAGEMENT

ICL’s organizational structure was divided into the Corporate and Circles. Exhibit 19 gives the detailed structure at both levels.

People at ICL

As on September 30, 2008, there were 5,300 employees working for the company. Exhibit 20 gives the distribution of employees across eight levels of hierarchy in the organization.

When Aditya Birla Group made huge investments in ICL, it put all the people management issues under scanner to revamp the organization. According to Mr Vinay K Razdan, HR Head of ICL, the organization was facing four challenges: (1) speed, scalability, complexities warranted change in strategic intent; (2) internal organizational systems and processes needed relook; (3) huge talent requirement in new circle and extended organization with huge cost of talent acquisition; and (4) keeping employees in a expanded and extended organization (dealer, contact centers, etc.) culturally aligned and engaged.

The First Challenge – Organizational Transformation and Restructuring

The first challenge for ICL was in dealing with the impact of sudden growth on its employees, particularly in the prepaid sector. This needed alignment of HR policies and practices with the changed strategic intent. This included making changes in the organizational structure to improve operational efficiency and time taken for decision-making. An early restructuring initiative was the appointment of two Directors (Operations) at the corporate level and Circle Heads were asked to report to one of them.

As mentioned before, modular structure was adopted for the sales team to support scalability. The sales structure was based on a two tier approach – circles and zones. At the circle level there was change in nomenclature of various designations and also in reporting structure in some cases. In the new set-up, subordinates may be required to report to a different superior. This had implications for superior-subordinate relationships in the organization. This relationship was a key factor in employee retention. Employee anxiety would be more when such changes were happening. HR needed to deal with such anxiety through various initiatives and processes including proper grievance handling mechanisms.


Norms developed to improve efficiency at ground level was based on linking market working to the face time required for customers/ business partners and other stakeholders. The importance of face time was more relevant in marketing the product in new markets, particularly the rural areas. Creating more awareness among rural population was a big challenge for employees as was directly dealing with customers/external partners at the ground level.

The Sales Management Model standardized the sales processes to improve efficiency. In general, this was designed to improve the clarity among employees regarding their work design and work processes. One pitfall that the organization needed to safeguard against was that standardization and focus on short-term performance should not be at the cost of individual creativity and initiative. Clearly defined roles and metrics for each designation (Exhibit 16) was another feature of the transformation process. This would help in improving employee efficiency and performance through clear goal-setting and achievable targets.

Managing HR issues in ICSL had a very different set of challenges. Although ICL had not been effective in retaining employees who were not interested in working in rural areas, especially those with family commitments or those who found relocation or travel more difficult, ICSL could address these issues. ICSL required HR systems in place for a very different workforce. The ICL systems and process could not be adopted without changes.

Appropriate processes for recruitment of local youth and their training, career progression, salary structure, and performance incentives had to be separately designed for ICSL. Working in a formal organization was a first-time experience for most employees of ICSL. While this was a growth opportunity for most rural youth, (due to paucity of good job prospects in rural areas), it was also difficult for them to accept a more discipline approach that working in the organization demanded. Managing the recruitment for rural areas was also a challenge as corporate managers tended to assess the profiles of available people based on how similar they were to their own backgrounds and thus found it difficult to select from a pool that came from a different social, educational, and economic backgrounds.

Internal transformational projects were taken up to improve speed and manage scalability. This meant huge investment in terms of money and managerial time. Massive change management efforts were required for implementation and integration. For example, the 198 IT personnel who had been moved from ICL to IBM rolls were initially sceptical about the shift. In ICL they were the functional experts. They felt that their expertise may not get valued in an organization full of IT experts. On the other hand, they thought that they may have more scope for career growth, learning opportunities, and working on different types of IT projects. Similarly, the long-term contract for GSM networks with Nokia, Ericson, and Siemens involved mindset change of network employees to techno managers.

In addition, integration of all the acquired circles raised several HR challenges. While ICL was concerned about the employees feeling anxious, there were also issues of cultural and emotional integration. Moreover, there was a need to manage systems and processes change that were inevitable as a part of the integration process. The inorganic growth of the company had resulted in non-uniform systems, nomenclatures, and practices, albeit with pockets of excellence. The national team was a milieu of uncommon cultural characteristics. An urgent need to transform was felt. For example, the new sales management model was aimed at maximizing efficiency through design and standardization, eliminate wasteful individual efforts, be scalable and flexible, aid performance, and reduce non-performance. The team aspired to make the program process-driven and execution-focused right across.


With uniform structures and well-defined roles it would have clear, well understood, and visible metrics which would help in making reward and recognition objective and fair. The team suggested an approach focused on capacity-building of the team. A common language needed to be developed.

The Second Challenge – Hr Automation and Restructuring

The HR department realized that some drastic steps were needed to significantly improve the response time of HR processes as well as to connect a geographically dispersed workforce. In order to integrate HR processes a Human Resource Management System called Poornata had been adopted. Poornata was still in the implementation stage with few modules like Performance Management Systems (PMS), Employee Self Service (ESS), Recruitment, etc. been operational while others were still to be implemented or were facing teething issues.

Another way to improve HR related transactions was the implementation of an online employee expense management system known as i-expense. This Internet-based system allowed connection with people at remotest locations.

The HR department’s customers, i.e., employees, assessed the department’s efficiency by the response time to HR related queries and the speed of resolving employee grievances and complaints. With this focus, i-Mitra had been implemented for speedy redressal of grievances. However, employees were still not comfortable using this system. Successful automation of grievance handling system required changing the mindset of employees who until then were used to human contact when voicing grievances. Automated system made them uneasy and did not seem capable of drawing out reticent voices.

The Third Challenge – Talent Management

Various initiatives were taken by ICL in order to better utilize the resources across the organization and to manage aspirations of employees to develop their talent.. Internal job postings were done for all positions across the organization to provide better opportunities for employees to move to their location of choice.

Based on Aditya Birla Group’s philosophy, ICL also focused on creating a strong internal labour market for leadership positions. Preference was given to internal resources for staffing leadership positions in new circles. Leadership development initiatives included coaching of potential candidates and providing stretch roles to engage and retain talent. Clearly defined roles and metrics mentioned earlier were keys to these initiatives.

With rapid growth, the staffing of leadership positions, particularly in new circles was another HR issue. In addition to developing internal resources, aggressive lateral hiring was done for new circles, mainly through employee referrals. Around 120-150 people were hired this way. Alternate talent resources like students from institutes other than those having management programmes, ex-defence personnel, etc. were also tapped. However, more work was needed for identifying and properly utilizing alternate sources.

ICL also focused on recruitment of fresh graduates in streams like management, engineering, and chartered accountancy to improve the entry-level talent pipeline. Around 170 people were recruited from various campuses in 2007-08. Good entry level talent was very critical to develop strong internal labour market.


The Fourth Challenge – Cultural Alignment and Employee Engagement

With very fast growth of the organization, particularly in geographically dispersed areas, cultural alignment of employees across the organization became a big problem. Engaging employees to keep their commitment level high was becoming more difficult. To a certain extent, solution to both these problems was within proper communication channels being available to employees. For this an intranet was made available. However, it had not yet been scaled up to the level which facilitated smooth information exchange among employees separated by large distances.

The main point for cultural alignment was to focus on newcomers and to get them acclimatized to the organizational environment. This was done through an Induction and Orientation process at ICL. Interactions among team-members were ensured through regular All Team Meets. These channels were designed to increase direct personal contact among employees.

Certain other initiatives taken by ICL to keep the workforce well-informed included publication of a monthly newsletter known as ’Idea Post’ from the desk of MD and various e-magazines to engage the interest of diverse workforce. Organizational announcement were made for major events and road shows were organized and banners, posters, and stickers of important events were prepared.

Another initiative taken by ICL to align employees and hence engage them was through HR orientation and skills scale of DSE/Contact point executive. This initiative was still in its nascent stage and could prove an interesting challenge for the future, not only because it had a grass-root level focus but also because it would involve large number of employees located at different geographical areas.

THE WAY AHEAD

With the impending auction of 3G and the competition in the sector intensifying, Mr Aga wondered what else he needed to do. Would these transformational initiatives be enough? As he walked-in to meet the Heads of business units, he wondered what plans they had and how would he implement them?


Exhibit 1: Geographic Location of ICL Services and Service Status as of December 31, 2008

1995 Incorporated as Birla Communication Limited

Obtained licenses for providing GSM-based services in the Gujarat and Maharashtra circles following GSM bidding process

1996 Changed name to Birla AT&T Communication Limited following a joint

venture between Grasim Industries and AT&T Corporation

1997 Commenced operations in the Gujarat and Maharashtra circles

1999 Migrated to revenue share license fee regime under New Telecommunications Policy (NTP 99)

2000 Merged with Tata Cellular Limited, thereby acquiring original license for the Andhra Pradesh circle

2001 Acquired RPG Cellular Limited and consequently the license for Madhya Pradesh( including Chhattisgarh) circle

Changed name to Birla TATA AT&T Limited.

Obtained license for providing GSM- based service in the Delhi circle following the fourth operator GSM license bidding process.

2002 Changed name to Idea Cellular Limited and Launched “Idea” Brand name

2004 Acquired Escotel Mobile Communication Limited (subsequently renamed as Idea Mobile Communications Ltd)

First operator in India to commercially launch EDGE service 2005

2006

Acquired Escorts Telecommunications Limited (subsequently renamed as Idea Telecommunication Ltd)

Received letter of intent from the DoT for a new UAS license for the Mumbai circle

2008 Idea acquired 9 licenses for Punjab, Karnataka, Tamil Nadu and Chennai, West Bengal, Orissa, Kolkata, Assam, North East, and Jammu and Kashmir.

Source: Company Information


Exhibit 2: States of India and Classification of Telecom Circles

Source: www.dot.gov.in

*Chattisgarh has been carved out of Madhya Pradesh


Exhibit 3: Revenues and Growth Rate from Different Services for the Years (2003-09)

Revenue from Different Services

Revenue

(` in billion) 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Basic Services 259 330 326 342 302 267

Cellular Services 86 143 233 360 562 766

NLD 60 51 63 90 72 97

ILD 50 44 38 73 115 115

ISP 13 16 16 16 20 54

Others 3 4 5 5 6 6

Total 471 588 681 886 1077 1305

Source: Compiled from various Editions (June 2008, June 2007, June 2006) of Voice and Data Magazine

Exhibit 4: Teledensity

(in %)

Year (End of March 31st) Rural Urban Total

1999 0.52 6.94 2.32

2000 0.68 8.36 2.86

2001 0.93 10.37 3.58

2002 1.21 12.2 4.29

2003 1.49 14.32 5.11

2004 1.57 20.74 7.02

2005 1.73 26.88 8.95

2006 1.86 39.45 12.74

2007 5.88 48.52 18.31

2008 9.21 65.9 26.19

Dec-08 13.31 78.68. 33.32

Source: TRAI Performance Indicator Report December 2008


Exhibit 5: Financial and Subscriber Details for Various Operators

Exhibit 5 (A): Financial Details

(` in crores)

Operators 2003-04 2004-05 2005-06 2006-07 2007-08

Revenue Net Profit Revenue Net Profit Revenue Net Profit Revenue Net Profit Revenue Net Profit

BSNL 33,919 5,977 36,090 10,183 40,177 8,940 39,715 7,806 38047 3009

Bharti Airtel 5,003 620 7,903 1,211 11,229 2,012 18,020 4,257 27025 7601

Idea Cellular NA NA NA NA NA NA 4387 502 6737 1042

MTNL. 6,101 1,278 5,592 939 5,249 579 5,582 466 5407 507

RCOM 2,707 -390 5,387 51 NA NA 14,468 3,163 19068 5401

SSTL NA NA NA NA 3 1 240 -41 117 -181

Tata Communi cations 3,164 378 3,303 756 3,781 480 8,611 2 8263 -28

Tata Teleservices 598 -270 807 -528 1095 -541 1407 -311 1707 -126

Vodafone Essar 450 154 709 220 1,000 324 NA NA NA NA

Source: Company Reports

Essar was acquired by Vodafone is 2006 and data from subsequent years is not available


Exhibit 5 (B): Major Telecom Operators in India (December 31, 2008)

Bharti Airtel

Established in 1985, Bharti was the first private basic telephone service provider in the country. It was the first Indian company to provide comprehensive telecom services outside India in Seychelles, Maldives, Sri Lanka and first private sector service provider to launch National Long Distance Services in India. It operates NLD, ILD, fixed line, broadband, data, and satellite-based services.

Mobile Subscribers: 72.1mn

Mobile Market Share: 24.69% (Subscribers)

Annual Revenue (2007-08)*: ` 6.9 bn

Net Profit (2007-08): ` 1.7 bn

Bharat Sanchar Nigam Limited (BSNL)

On October 1, 2000 the Department of Telecom Operations, Government of India became a corporation and was renamed Bharat Sanchar Nigam Limited (BSNL). The state-controlled BSNL operates basic, cellular (GSM and CDMA) mobile, Internet and long distance services throughout India (except Delhi and Mumbai).



Annual Revenue (2007-08): ` 10 bn

Net Profit (2007-08): ` 1.9 bn

Reliance Communication

Reliance is a $16 billion integrated industrial conglomerate (Source: http://www.ril.com/newsitem2.html). It is also an integrated telecom service provider with licenses for mobile, fixed, data services and a wide range of value added services, domestic long distance and international services.



Annual Revenue (2007-08): ` 3.75 bn

Net Profit (2007-08): ` 1.3 bn

Tata Teleservices*

Tata Teleservices is a part of the $12 billion Tata Group, Tata Teleservices provided basic (fixed line services), using CDMA technology. In November 2008, Tata Teleservices entered into an agreement with Japanese telecom major NTT DOCOMO, as part of which the Japanese company acquired a 26% stake in TTSL for USD 2.7bn and was selected as a GSM partner.

* 2007-08 refers revenues during April 1, 2007 to March 31, 2008




*

Vodafone Essar*

It is the Indian subsidiary of global Vodafone Group and commenced operations in 1994 when its predecessor Hutchison Telecom acquired the cellular license for Mumbai is the world’s leading international mobile communications company. It currently has equity interests in 27 countries across 5 continents and more than 40 partner networks with over 289 million proportionate customers worldwide. The Essar Group is Vodafone’s principal partner in India. It operates only in the mobile voice and data services.



*Source: Compiled from Various Resources.

*These companies are not publicly listed and therefore, data on annual revenue and net profit is not available

Exhibit 6: Market Share from September 30, 2007 to September 30, 2008 in terms of Subscriber Numbers for ICL and Other Top 6 Players.

September 30, 2007 March 31, 2008 September 30, 2008

Competitive Analysis- Market Share (in %)

Airtel 23.8 24.2 25.0Reliance 17.7 17.9 18.1Vodafone 17.4 17.2 17.6

BSNL 14.8 14.1 13.8Idea 9.1 9.4 9.8Spice 1.7 1.6 1.2

Tata Tele 9.5 9.5 9.5


Exhibit 7: Subscribers Number of ICL Segregated by its Eight Established Circles and its More Recently Acquired Three New Circles

8 Established Circles 3 New Circles

March 31, 2008

September 30, 2008

March 31, 2008

September 30, 2008

Competitive Analysis- Market Share (in %)

Airtel 20.4 20.5

25 27.5

Reliance 18.9 19.8 6.0 6.3

Vodafone 17.6 17.8 20.5 22.1

BSNL 17.7 17.7 16.5 16.0

Idea 14.0 12.6 22.5 18.9

Tata Tele 11.4 11.5 9.1 8.8



Exhibit 8: Operating and Financial Metrics for ICL

Operating Metrics Financial Metrics (` iin billion)

Financial Year

Daily Minutes of Usage (mn)

Cell Sites (nos.)

Subs base (mn)

Revenue Net Profit

EBITDA Cash Profit

Cumulative Investment

04 17 1843 2.7 13.1 -2.0 3.9 1.0 42

05 36 3049 5.1 22.7 0.8 8.4 5.2 60

06 57 4763 7.4 29.9 2.1 10.9 7.6 6807 128 10114 14.0 43.9 5.0 14.9 11.7 97

08 236 24793 24.0 87.4 10.4 22.7 19.8 149


Exhibit 9: ICL Coverage of Rural Population in Five Key States (in %)

Circle

Universe (mn)

Urban Rural Total Rural

AP 22.7 59.6 82.4 72

Gujarat 22.4 34.5 56.9 61

Kerala 8.7 25.1 33.8 74

Maharashtra 30.6 60.0 90.6 66

MP 23.9 68.1 92.0 74

Overall 108.3 247.3 355.6 70


Exhibit 10: The Urban and Rural BTS Provided by ICL during the Period April 1, 2008 to 30, September 2008

As on April 1, 2008

Circle

ICL BTS

% Rural BTSUrban Rural Total

AP 1,485 1,709 3,194 54

Gujarat 1,242 1,352 2,594 52

Kerala 762 1,594 2,356 68

Maharashtra 1,591 2,269 3,860 59

MP 1,527 1,245 2,772 45

Overall 6,607 8,169 14,776 55

As on September 30, 2008

Circle

ICL BTS % Rural

Urban Rural Total BTS

AP 1,690 2,367 4,057 58

Gujarat 1,468 1,924 3,392 57

Kerala 953 2,083 3,036 69

Maharashtra 1,866 3,008 4,874 62

MP 1,772 1,963 3,735 53

Overall 7,749 11,345 19,094 59



Exhibit 11: ICL Vans in Rural Areas


Exhibit 12: Idea Advertisement Campaign “What an Idea Sirji”


Exhibit 13: Classification of Markets


Exhibit 14: Revised Sales Organization Chart

MIS Exe

DSE

TSM

DSE

TSE

ASM Prepaid I

DSE

TSM

DSE

TSE

ASM Prepaid n

ZSE

ZOM

ASMPostpaid

DST

KAM I

DST

KAM n

DSE TSE

TSMPCO

TSMAlt. Channel

Zonal BusinessManager

MIS Exe

Prepaid Sales Head

PostpaidSales Head

EnterpriseSales Head

PCOSales Head

Alt. ChannelSales Head

ZBMI

ZBMII

ZBMn

Circle Sales Head


Exhibit 15: Territory Identification and Mapping

Territory Identification (Meerut)



Territory Mapping

Cards

RC (in

lacs)HQ Retai

l TSI Status HQ Retail

Territory 1 Prashant Mishra

Mawana,Hastinapur,Ramraj,Behsuma,Rahawati,Tarapur,Latifpur

1400 22 Mawana 45 Ashish Meerut 110R.K TELECOM


Sardana,Daurala,Sakoti,Lawad,Dabatwa,Falawda,Saroorpur,Binoli

1500 30 Sardhana

60 Ashish Meerut 150INFOTECH COMM


Bhagpat, Jani, Siwalkhas, Baleni, Agarwal Mandi, Basi

1000 14 Baghpat 35 110 MONICA COMM


Khekra, Dhakauli, Rataul,Katha, Daula, Pilana, Sarurpur

450 9 Khekra 45 70 MONICA COMM


Baraut, Lohari, Chaprauli,Ramala,Biral,Doghat,Daha, Bawali, Tyodi, Kaotana,Sabga

1800 34 Baraut 80 Amit Sahu Meerut 150 SUPERFINE TELECOMNew PPD to be appointed in Chaprauli in 1st Qtr in 07-08


Silana, Rathoura, Tanda, Kisanpur, Teehri, Azampur Mulsam, Angadpur, Dhanaura, Gaadinagar Jalalpur(All Towns planned to be Launched)

400 6 Tanda 15 Amit Sahu Meerut 15 SUPERFINE TELECOM


Garh Town, Brijghat,Dhara,Bahadurgarh,Ladpura,Kila,Shajanpur, Kithore, Liliyana, Aghwanpur,Ajrara,Pachpara,Machra

1200 27 Garh 55 Anil Chowdhary Meerut 125 MAA GYATRI & MAA

AMBEY


Modinagar, Patla, Niwari, Faridnagar, Mohiddinpur, Daoli, Rawli Kalan, Duhai,Masoori, Dasna,Dhulana,Jindalnagar,Muradnagar,Pilakhwa

2800 78 Modinagar 135 Shekhar

Sharma Meerut 250

PIYUSH TRADERS,MOHIT AGENCIES, ANMOL TELECOM


Hapur,Simbhaoli, Babugarh, Kharkhoda, Sikheda, Vankhanda, Mundali 3300 65 Hapur 110 Anil

Chowdhary 250MANI ENTERPRISES, SHREE KRISHNA AGENCIES.


Meerut, Rohta, Kinaanagar, Kasi,Lisari Gaon,Tatina 9000 190 NA NA Shekhar

Sharma Meerut 920ART GALLERY,SAMARTH TRADERS

2 New PPD to be appointed in Mrt Town operational in April 07 & Rural Dist in 2 Qtr 07-08

Territory 11 Amit Tripathi

Baghra,Barwala(Tawli),Khusropur,Biralsa,Jasoi,Harsoli,Pinna,Kutersa

500 8 Baghra 15 Girish Mzn 10 TELELINK


Morna,Gadla,Tissa,Bhokarhadi,Kakroli,Shukrtal,Jauli,Sikri,Bhopa

500 6 Bhopa 20 Girish Mzn 30 NIDHI COMM


Muzzffarnagar, Bhadurpur, Pinna,Badhikhurd,Bilaspur,Jaroda 2700 70 Mzn 125 Girish Mzn 321 TELELINK

New PPD to be appointed in MZN Rural in 2nd Qtr in 07-08


Purkaji, Tuglakpur,Khojanagla,Barla,Basera, Chappar.

500 8 Purkai 20 Girish Mzn 35 TELELINK


Budhana, Kurthal,Nasirpur,Shoro,Fugana,Loi,Joli 600 9 Bhudhana

30 Girish Mzn 45AGGARWAL TELECOM


Kairana,Isarpur, Bhura,Titaayli,mansoora,Kahdela,Binada,

400 7 Kairana 25 TBA Mzn 40 MANOGYA TELECOM


Kandhla,Panjokhera,Lisad,Aldi,Jasala,Gangeru,Elam

450 7 Kandhla 35 TBA Mzn 45 MANOGYA TELECOM


Shamli,Lalukheri, Silawar, Adampur,Jalalpur,Lilon,Banat 1700 43 Shamli 55 TBA Mzn 140 MANOGYA TELECOM

New PPD to be appointed in Shamli Town in 2nd Qtr 07-08


Une, Kertu,Gharipukta,Toda, Datheda,Pindora,Singra,Jhinjhana

300 4 Une 10 TBA Mzn 15 MANOGYA TELECOM


Jansath, Kawal,Sambalkhera,Husianpur,Sikhera,Salarpur,Kasampur Khola

100 5 Jansath 15 TBA Mzn 20 VASU ENTERPRISES


Khatauli,Galibpur,Barsu,Mansoorpur, Navla,Gangdhari,Thamnawali 800 12 Khatauli 45 TBA Mzn 100 VASU ENTERPRISES

Amit Sahu Meerut

DISTRIBUTOR Remarks

Potential TDO TSI

Territory PPM LOCATIONS/ TOWNS



Exhibit 16: Detailed Roles and Metrics

Designation Role Measures

TSE/ TSM/ ASM

►Responsible for achievement of sales targets in the assigned Territory, by aggressive execution of Trade Programs, Market Workings, improvement in People Productivity and enhancement in sales capacity

% Achievement of Target – Gross, Net Activations, Recharge

Days of Market Working, Days of full beat working

Share increase in Top 20 outlets - Activations/ RV

New Distributors appointed v/s Target

Forms collected v/s Target

Increase in %age of active outlets

ZBM ►Plan, set and achieve prepaid, postpaid, enterprise, PCO, Alt. Channel Sales Targets through improvement in Sales capability and productivity in a defined area across existing and New towns. ►Ensure spends with in budgets. Provide first level leadership across functions in the Zone. ►Suggest course-corrections for executing AOP

Activation, Recharge - % to Target

Share increase in Top 20 outlets - Activations/ RV

No. of days market working, No. of full beat working


% of New Town business , % Low Utilization Sites

Collection, Bad Debt, and Churn

PSH ►Create and implement right processes and systems in the sales organization. ►Build capability and productivity by enhancing skills and monitoring progress. ►Conceptualize and drive the reward & recognition programs in sales & distribution Structure

Activation, Recharge - % to Target

Competitive intelligence and market working


% of New Town business , % Low Utilisation Sites

People, Distributor and COCA productivity

Claim settlement, Dash board creation and implementation

CSH ►Set, communicate, and drive the annual operating plan and take mid-course corrective action. ►Ensure superior distribution and market place execution. ►Build long term competitiveness through people, processes and systems

Increase in Revenue Earning Consumers, Revenue Growth v/s Target

Market share of Gross and Net Activations, Recharge, PCO & Modern Trade

People Productivity, Channel Strength v/s Target

COCA v/s Budget

% of New Town business, % Low Utilization Sites

Quality of sale and %age of forms collected



Exhibit 17: Territory Score Cards



Exhibit 18: Market Share Report



Exhibit 19: Corporate and Circle Organizational Structure

Corporate Structure

Circle Structure



Exhibit 20: Level Wise Distribution of Employees as on September 30, 2008


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