Idea Cellular PPT

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Telecom Industry Analysis & Study on Idea Cellular Limited

Submitted to: Prof. Srinivasan RGroup-5, Section FSandip Datta 1511430

K.E.K.Sashank 1511393Sanket Kale1511398

Sangbarta Chakraborty 1511431Pooja Gupta 1511444

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Industry Analysis

Industry OverviewLow Rural Penetration

(48%,418 mn) Overall

(69.9%, 818 mn)

In FY 15, 65% of new subscribers from rural areas

Wireless Internet Penetration 28.9% of

total mobile subscribers

Strong Mobile Data Penetration

(92.8% yoy growth for Idea 15-16)

91% spectrum by value bought by 4 players

Trend towards consolidation

231.7

185.4

162.8

110.4

77.8

83.4

61.7

47.222.8

Wireless Subscribers (in mlns)

Airtel Vodafone Idea Cellular Reliance BSNL

Aircel Tata Teleservices Telewings Others

Source: Idea Cellular Investor presentation Q1 FY ‘16

Idea

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Attractiveness of telecom industry

• High Capital Requirement (Infrastructure and spectrum)

• Low Product Differentiation• High government and Legal

barriers

Threat of New Entrants: Low

• Cheap Routers and WiFi• Internet calls and SMS

substitutes

Threat of Substitutes: High

Supplier Bargaining Power: Low Buyer Bargaining Power: High• Low Switching Cost due to

Mobile Number Portability• Readily Available Information• High price sensitivity due to

low differentiation of product

Industry Rivalry: High• Fragmented Industry with

few major players• High exit barriers• Marginal Cost Conditions• Basis of Competition: Price

Power of Complements: High

Value Added Services, Exclusive Payment Gateways, Smartphones, Mobile Banking, Call Centers etc.

• Most tower companies owned by telecom providers

• Inability to Forward Integrate• Low product differentiation

: LOW

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Critical Success Factors• Large subscriber base to recover huge fixed costs involved in infrastructure,

land etc.Economies of Scale

• Necessary to offer a range of services across various locationsSpectrum and License

• Outsource non core activities like ITES, infrastructure• Shared licenses to operate in various circlesStrategic partnerships

• Highly price sensitive customer• MNP option, very low switching cost for consumerPrice

• Good network coverage, better call quality, customer serviceCustomer satisfaction

• Reach to large number of regions and customersExpansion and

penetration5

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Firm Analysis

Idea Cellular: Overview

1 Revenue Market Share based on TRAI Q1FY16 revenue for UAS and Mobile licenses only. 2 VLR subs as of June 30, 2015 (Source: TRAI) 3 Single Country Operations, data from GSMA Intelligence as of March 2015. 4 As of June 30, 2015

Source: Idea Cellular Investor presentation Q1 FY ‘167

Business ModelPassive Infrastructure• Sharing towers with rivals reduced cost • 16% stake in Indus Towers; 9,500 (approx.) towers owned, particularly in the rural areas

Customer Support• Firstsource provides services - Customer Service, Billing, New Product Information and

Plan details related interaction services to IDEA

IT Services• IBM to manage Idea’s IT infrastructure and applications till 2020

Network• Ericsson, Huawei and Nokia Siemens Networks (NSN) for data network maintenance

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Company Financials

Source: Idea Cellular Investor presentation Q1 FY ‘1610

Resource analysis• Culture, Favorable debt financing deals, interest rates, shared leadership

ideasABG Advantage

• ~371,0001 Towns & Villages on GSMOwned Towers in rural

India• Theme based advertising, Positioning as smartness in using idea,

Celebrity ambassadors: No idea – Get Idea, Idea 3G Pe BG, What an Idea Sirjee, No Ullu Banaoing, Idea Internet Network

Brand

• 50,0002 distributors, 15,0002 contact center service agents, 'My Idea' stores, data analytics Distribution/Service

• 2G : 8 states, 3G : 11 states, 4G plan by H1’16Spectrum/Network

• Decentralized management approach, BTS profitability, Sons of the soil Employee Empowerment

1.Idea Cellular Investor presentation Q1 FY ’162. http://forbesindia.com/article/boardroom/why-idea-cellular-chose-bharat-over-india/41339/3

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Sustainability advantage analysisValuable Rare In-imitable Non-Substitutable

ABG advantage

Owned Towers Rural India

*Marketing

Innovation/BrandDistribution and Service Delivery

Spectrum/Network *Employee

Empowerment

* Imitable in long run12

Strategy focus shift• In 20091

• Rural Teledensity 15.11%• Idea market share 10%

• Idea focussed on rural penetration• In 2009, urban teldensity reached

100%• Airtel and Vodafone entered rural

markets• Idea broadened focus to include

data driven urban markets

Low cost

Differentiator

Focus broadened to include urban areas

Broad focusNarrow focus

Idea CellularVodafone

Airtel

1. http://www.trai.gov.in/WriteReadData/WhatsNew/Documents/PR-34-TSD-Mar-12052015.pdf 13

Strategies• Late entrant, focused on consumer experience, reached people through

plans, pricing and networkPositioning

• Similar model as Airtel, major focus on operational expenditure and not capex, outsourced all non-core activities to leading companiesOutsourcing

• Focus on Sales and Operations, strength in rural and semi urban areas, KPI- Revenue per BTS, Sons of Soil approachFocus on ‘Last Mile’ delivery

• Wins the ‘MNP’ game, flank approach, huge capex in rural network, largest sales program in rural, leadership in specific areasCustomer acquisition

• Promoting hassle free Data sharing through ‘Easy Share’, launched ‘Freedom packs’ (30-40% lower prices), Launched ‘Idea Money’Data consumption push- VAS

• Plans to avoid head on competition with Airtel, focus on leadership in its dominant circles, plans to increase capex in FY 16 by INR 65001 croresDefensive 4G strategy

2. http://www.moneycontrol.com/news/business/to-launch-4gjan-2016-revise-capex-to-rs-65k-cr-idea_3319341.html14

Recommendations• Continue to follow a Defensive strategy, enforce customer acquisition before entrance of Reliance Jio, increase

switching costs• Finalize the launch of low cost branded 4G smartphones because of huge scope for LTE phone penetration

4G strategy

• Market growing at a CAGR 44.6%, Expected to grow from $12.3 billion(2014) to $78 billion (2019) • Transition from Idea Money to Idea Payments Bank can create ample revenue generation opportunities

Utilizing growing Mobile Money market

• Mobile penetration in India 73%; Internet penetration 19%*; only 25% of Idea subscribers use 3G• Meaningful data penetration possible only by bundling with right content and applications (OTT applications)• Focus on branded digital services apps with focus on regional content through investments or partnerships

Diversification into branded digital services

• Revive Idea ‘Netsetter’ business & increase internet penetration in rural areas where wired connectivity is low• Venture into related services like DTH, Broadband, Fixed Line that are possible with current resources

Diversification into new businesses

• Increase in capex to develop 4G infrastructure in 10 circles. Investment in IT infrastructure to improve service• Foster Inter-circle roaming pacts to have better reach in circles where Idea lacks its own spectrum Increase in scale

*http://www.livemint.com/Industry/VThUq5I4BivpTDZdQb5sNN/Mobile-Internet-users-in-India-to-double-by-2017-says-study.html15

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Thank You