StRATEGIC Management

Company name ; IDEA

t.Y B.B.A (Finance)
6th Semester

Prepared By:
NiSHIT DIWAN (15)
SAURAV RANA ()
SNEHAL PATEL (64)
GROUP No. : 17
Submitted To: dr. jayesh Desai
Submitted on: 07/03/2013

History of IDEA

We were incorporated as Birla Communications Limited on March 14, 1995 and granted a
certificate of commencement of business on August 11, 1995. Our registered office was in
Mumbai, Maharashtra. Our name was changed to Birla AT&T Communications Limited on May
30, 1996 following the execution of a joint venture agreement dated December 5, 1995 between
AT&T Corporation and Grasim Industries Limited pursuant to which the Aditya Birla Group
held 51% of our Equity Share capital and AWS Group held 49% of our Equity Share capital. Our
registered office was transferred from Industry House, 1stFloor, 159 Church Gate Reclamation,
Mumbai 400 020, Maharashtra to Suman Tower, Plot No. 18, Sector 11, Gandhinagar 382011
Gujarat.
on October 22, 1996. With effect from January 1, 2001 following our merger with Tata Cellular
Limited the joint venture agreement between AT&T Corporation and Grasim Industries Limited
dated December 5, 1995 was replaced by a shareholders agreement dated December 15, 2000
entered into between Grasim Industries Limited on behalf of the Aditya Birla Group, Tata
Industries Limited on behalf of the Tata Group and AT&T Wireless Services Inc. on behalf of the
AWS Group following which our name was changed to Birla Tata AT&T Limited on November
6, 2001. Consequent to the introduction of the Idea brand, our name was changed to Idea
Cellular Limited on May 1, 2002. The AWS Group exited from the Company on September 28,
2005 by selling 371,780,740 Equity Shares of the Company, which constituted 50% of the
holding of AT&T Cellular Private Limited in our equity share capital, to ABNL and by
transferring the remaining 371,780,750 Equity Shares to Tata Industries Limited. The Tata Group
ceased to be a shareholder of the Company on June 20, 2006 when Tata Industries Limited and
Apex Investments (Mauritius) Holding Private Limited (formerly known as AT&T Cellular
Private Limited) sold all their shares in the Company to the Aditya Birla Group.
On October 26, 2006, P5 Asia Investments (Mauritius) Limited (P5 Asia) acquired 14.60% of
our Equity Share capital. Under a Governance and Exit Rights Agreement dated October 23,
2006 between P5 Asia, ABNL and Birla TMT, so long as an initial public offering has not
occurred and P5 Asia holds no less than 10% of our Equity Shares, ABNL and Birla TMT are
required to procure that (a) our Company and its Subsidiaries shall not take or pursue any of the
following actions without P5 Asias prior consent (such consent to be obtained in a board and/or
shareholders resolution) including in respect of (i) any merger with, acquisition of, or

amalgamation or consolidation with another company or business; (ii) assuming or permitting to

exist any borrowings or indebtedness in the nature of borrowings if the amount of all such
borrowings of our Company and its Subsidiaries would exceed Rs. 6,800 million; (iii) entering
into a new line of business; (iv) increasing our authorized or issued share capital; or (v) entering
into a joint venture and (b) our Company makes available to P5 Asia certain financial
information relating to our Company and its Subsidiaries such as monthly management accounts,
quarterly unconsolidated balance sheet and profit and loss account and the annual audited
consolidated balance sheets and profit and loss accounts.
P5 Asia also has a right to appoint one director to our Board so long as it holds at least 10% of
our total issued and outstanding Equity Shares. Mr. Biswajit Subramanian has been appointed to
our Board by P5 Asia pursuant to the exercise of the above right. In addition, any IPO of our
Equity Shares requires P5 Asias written consent, and, further, in any such IPO, P5 Asia has the
right to offer for sale such number of Equity Shares representing up to 10% of the total Equity
Shares which are held by it. By its letters dated December 2, 2006 to ABNL and Birla TMT, P5
Asia has given its written consent for the Issue and has confirmed that it does not intend to offer
for sale any of the Equity Shares held by it in such Issue.

We, either directly or through our Subsidiaries, provide mobile services in the Andhra Pradesh,
Delhi, Gujarat, Haryana, Kerala, Madhiya Pradesh, Maharashtra and Uttar Pradesh (West)
Circles, and have recently launched services and as such are in the process of fully rolling-out
our network in the Uttar Pradesh (East), Rajasthan and Himachal Pradesh Circles pursuant to
licenses issued by the Dot.

Company Outline

Date of Establishment

1996

Market Cap

388674.1441245 ( Rs. in Millions )

Corporate Address

Suman Tower,Plot No 18 Sector 11, Gandhinagar-382011,

Gujarat

Management Details
Chairperson - Kumar Mangalam Birla
MD - Himanshu Kapania
Directors - Ambrish Jain, Arun Thiagarajan, Biswajit A
Subramanian, Gian Prakash Gupta, Hans Wijayasuriya,
Hansa Wijayasuriya, Himanshu Kapania, Juan Villalonga
Navarro, Kumar Mangalam Birla, M R Prasanna,
Madhabi Puri Buch, Mohan Gyani, P Murari, Pankaj
Kapdeo, R C Bhargava, Rajashree Birla, Rakesh Jain,
Sanjeev Aga, Shridhir Sariputta Hansa Wijayasuriya,
Tarjani Vakil

Business Operation

Telecommunication - Service Provider

Background
Idea cellular, a part of Aditya Birla group, is one
of Indias leading GSM mobile services operator.
This telecom company has licenses to operate in all 22
service areas. Presently it is operating in 13 circles. Idea
Cellular value-added services like GPRS, call conference,
GSM, GPS and also

Financials

Total Income - Rs. 193604.82 Million ( year ending

Mar 2012)
Net Profit - Rs. Million ( year ending Mar 2012)

Company Secretary

Pankaj Kapdeo

Bankers
Auditors

Deloittee Haskins & Sells

Current Performance
The country's fourth largest telecom operator by revenue has been reporting a gradual revival in
its established 13 circles. Since the September 2010 quarter, revenue from these regions has
increased by nearly 22%. Not only that, the growth is accompanied by higher profitability
notwithstanding the pressure on tariff rates. Its operating margin has expanded by 260 basis
points to 29.6% despite a 3% fall in perminute revenue during the period.
However, the strong momentum in the relatively older circles is partially offset by its operations
in the nine new circles, including Mumbai, Bihar, and TN among others. Though revenue in
these circles has increased by a strong 42% in the past 12 months, it is not enough to cover
operating expenses.
The new operations are yet to break even. The fact that the operating loss from these operations
widened to.`139.7 crore during the June 2011 quarter from .`117.3 crore in the previous quarter
raises concern. This restricted the overall operating margin improvement to 124 basis points for
the quarter even though older circles reported a two-fold improvement in margins.
Having a firm foothold in the domestic telecom market is a big positive. The company boasts of
having one of the highest proportions of active subscribers among peers.
According to Telecom Regulatory Authority of India (TRAI), nine out of every 10 Idea
subscribers had an active account as defined by the regulator in May 2011. This combined with a
stable trend in its per-minute revenue and the launch of new services under 3G technology puts
Idea in the sweet spot. This should support its stock in the near term, which has gained 40% in
the past three months.

Mission
We will delight our customers while meeting their individual communications need any
time anywhere. We survive because of our customers.

Vision
To be the most customer focused mobile service brand, continuously innovating to help liberate
our customers from the shackles of time and space.

WHAT STRATEGIC ACTIONS SONY SHOULD TAKE TO SUPPORT ITS BUSINESSLEVEL DIFFERENTIATION STRATEGY?

Build on our strong position in the Established Circles

As at September 30, 2006, the footprint of our Established Circles alone covered approximately
47% of Indias subscriber base. We enjoy a strong market position, distribution strengths, brand
recognition and the use of the 900 MHz band in seven of the eight Established Circles. This
platform, now leveraged through increased investment in our network and our brand, has
delivered growth in market share upon which we believe we can build to strengthen our position
in our Established Circles.

Derive synergies and economies of scale from an expanding operation

Since our incorporation in 2002, we have grown both organically and through acquisitions and
takeovers. In January 2004, we operated in only 5 Circles whereas now we have operations in 11
of Indias 23 Circles. We believe that standardizing and centralizing our operations, wherever
appropriate, will help eliminate duplication and improve operational efficiencies. We have, for
example, standardized our approach to
customer care. We have successfully centralized several applications, including Enterprise
Resource Planning using Oracle Financials, interconnect billing using customized software, a
call management system and a fraud management system.

Build a meritocratic organization with a strong focus on people

We are an equal opportunity employer and encourage diversity. The values we embrace are
integrity, commitment, passion, seamlessness and speed.

We place emphasis on employee

development and we have, for example, committed ourselves to an average of 10 days training
per employee this financial year. As part of the Aditya Birla Group, we make full use of the
facilities of Gyanodaya, the Aditya Birla Groups renowned management institute located outside
Mumbai, to ensure adequate training and team building. We regularly evaluate our employees
engagement levels to help ensure that subscribers experiences exceed expectations. It is with
this objective that we are optimizing and standardizing our processes across the organization
using the 6 SIGMA approach which is designed to minimize human error and enhance revenue
and productivity.

Focus on customer service to enhance brand appeal

We place significant emphasis upon delivering an efficient and friendly experience at all contact
points in the subscriber life cycle. Our tariffs are designed to be transparent and easy to
understand. We have developed call centers to focus on our subscribers needs for service and to
cross-sell our various products. We have consistently focused on innovative products that
address existing and latent needs of our subscribers. For example, we have recently promoted a
free one-year life insurance cover of Rs. 10,000 to a section of customers who subscribe to our
Dialler Tone VAS. The simplicity of application for and the security provided by the cover
matched the profile of the segment of customers to which it was targeted.

At present,

approximately 46% of our employees serve in customer-facing roles.

Corporate Governance
The provisions of the listing agreement to be entered into with the Stock Exchanges with respect
to corporate governance will be applicable to us immediately upon the listing of our Equity
Shares on the Stock Exchanges. We intend to comply with such provisions, including with
respect to the appointment of independent directors to our Board and the constitution of the
various statutory committees in accordance with the corporate governance code as per Clause 49
of the listing agreement to be entered into with the Stock Exchanges prior to listing. In
accordance with Clause 49 of the listing agreement (to be entered into with the Stock
Exchanges), the Company has constituted an audit committee and a shareholders / investors
grievance committee. In addition the Company has also constituted a finance committee, a
remuneration committee and a compensation committee.

Board of Directors
Type of
Board
Membe
r

Name (Connections)

Board
Relationships

Himanshu Kapania

15 Relationships Managing Director and Director

--

51

Tarjani Vakil M.A.

51 Relationships Independent Director, Member of

Audit Committee, Member of
Esos Compensation Committee
and Member of Remuneration
Committee

--

76

Arun Thiagarajan
MSc, Engg., GBA

60 Relationships Independent Director, Member of

Audit Committee, Member of
Esos Compensation Committee
and Member of Remuneration
Committee

--

67

Title

Age

Others members on Boards

Name (Connections)

Board
Relationships

Type of
Board
Member

Primary Company

Age

Kumar Birla

130 Relationship
s

--

Thai Rayon Public Company 45

Limited

Gian Gupta

71 Relationships

--

Swaraj Engines Ltd.

71

Biswajit Subramanian 24 Relationships

--

Providence Equity Partners

LLC

47

Mohanbir Gyani

106 Relationship
s

--

Primera Capital

60

Rajashree Birla B.A.

74 Relationships

--

Hindalco Industries Ltd.

67

Sanjeev Aga

47 Relationships

--

Aditya Birla Nuvo Limited

60

Pejavar Murari IAS

(retired)

107 Relationship
s

--

Aban Offshore Limited

78

Shridhir Wijayasuriya 34 Relationships

--

Axiata Group Berhad

42

Ravindra Bhargava
M.Sc. (Maths), M.A.
(Dev. Economics)

100 Relationship
s

--

Polaris Financial Technology 78

Limited

Rakesh Jain

13 Relationships

--

Idea Cellular Limited

--

Name (Connections)

Board
Relationships

Type of
Board
Member

Primary Company

Age

Madhabi Buch

18 Relationships

--

Greater Pacific Capital LLP

46

Idea Cellular:
Idea Cellular is nothing but a company (wireless telephony) that operates in around
twenty two telecom circles i.e. in India. In 1995 it came into existence. It began as a joint
business enterprise in between Aditya Birla Group, Tatas, and AT&T by appending Wings
Cellular (that operated in UP, MP), Tata Cellular and Birla AT&T communications. At the
starting it had just some degree of footprint in the field of GSM. In the year of 2004 Escotel
acquisition provided Idea a properly pan India presence wrapping MP, AP, Goa, Gujarat, UP,
Maharashtra, Chhattisgarh, Haryana, Delhi, West Bengal, Kerala, Rajasthan. It had won award of
GSM Association for best billing as well as customer care solutions for two successive years.

Pestle Analysis:
The growth of telecom sector is very fast in India. Indian telecom industries have third
highest position in the globe. At present there are 225 million mobile subscribers.

Political Attention

Government is giving special attention to these private

sectors. TRAI is the government body for telecom
industry which controls all service providers. In India out
of 100 people 1.38 people have telephone, but set target is
6 people per 100. It means there is requirement of more
45 million connections which cost around 60 billion US$.
In todays condition the there is political stability is in

Economical Attention

favor of the telecom industries.

Wealth of any country depends upon its economic

condition. India comes under growing economy. India was

also less affected by the recession than other developed
countries. So there are more chances of continuous
growth for India. Telecom Industry contributes 1% to
GDP. Therefore the economic condition of India is good
Social Attention

for the telecom sector.

The telecom industry has brought revolution in the
societies of India in the field of communication. It is
decreasing the cost and the time-period for the transfer of
messages. In 2005 there were 110 million connections
which increased to 250 million in 2007 which proof
people

Technological Attention

eagerness

to

adopt

new

medium

of

communication.
Technology has its own value in telecom companies.
Adopting new technology like 3G has become the mode
of survival for the companies. Sooner the company adopts

Legal Attention

the technology greater opportunity it enjoys.

Telecom companies in India are controlled by government
there are bodies like ministry of communication and
Information Technology which make rules for these
companies. Indian telecom policy in 1994 encourages
foreign and private investment which became more

Environment Attention

liberalize in the form of Indian Telecom Policy in 1999.

Environment play important role for the existence of the
company. It includes culture, behavior, demographic
condition which affects the company. It is important for
the

company

environment.

to

mould

itself

according

to

the

Porter five factors:

Threat of rivalry:

Today there is lots of competition between telecom companies to be ahead of each other.
There are government companies like BSNL and MTNL. Some private Indian companies like
Tata, Reliance and some are foreign companies like Vodafone, spice.
Threat to new entrants:
Indian telecom companies facilitates opportunities to foreign companies in different
fields like; VPN, satellite phone calls, 3G, international calls and value added services.

Market for idea Growth Avenue:

Rural telephony.
Enterprise telecom service.
VAS (value added services)
3G
WiMAX
Infrastructure sharing
Virtual private network.
Managed services

In India big amount of players up-and-coming in the market national level from its state
level existence like;

Aircel
Virgin
Spice
Idea
Vodafone

Threat of substitute product and service:

The services like; GSM, internet, VOIP, CDMA mobile, Wire line, broadband, carriers, VSAT,
MPLS-VPN, etc. are provided by telecom industry. While talking about internet telephony, it is
increasing as a good alternative. With cheaper rate it offers video conferencing just like Skype.

ISP
1.
2.
3.
4.
5.
6.

BSNL
MTNL
SIFY
BHARTI AIRTEL
RELIANCE
TATA PHOTON

MARKET SHARE (%)

45.2
19
8.9
6.8
6.1
4

Bargaining Power of Customer:

As it is offering services at cheaper rate, bargaining power of its customers is very low.
But due to the launching of mobile services at cheaper rate by Airtel and other telecom
companies, customers acquired many options. So it could be bargaining power from the
customers point of view.
Bargaining Power of Suppliers:
Idea cellular consumes iron, aluminum, electric wires for tower making. It purchases
these raw materials in bulk quantities that every supplier wants to sell their product. Thus the
bargaining power of suppliers is very less.

Opportunities:
-

Increasing number of cellular phones

Starting of 3G services
Nokia providing Idea the vender-atheist consultancy services
Idea offers Internet connectivity in 20 circles
Idea joined IBM to integrate some IT work

Increase in the number of mobile phone is an opportunity for Idea because it can be a reason
of increase in consumers of services. 3G technology is a new technology in mobile world. It is
costly to setup but once it is setup then it gives profit in the sense of speed, quality and coverage.
People are also moving to the 3G. Today Nokia is also manufacturing mobile with 3G
functioning. Nokia is helping idea in their business models, effectively of systems, and
technologies.

Threats:
- Brand name of other companies
- Force by courts to reduce tariff
- New Players Promotional prices
- Increased network costs
- Decline of ARPU
There are many other companies like Airtel, Vodafone which has very repudiated brand
image and are potential threats for idea. Force by the courts to reduce tariff has resulted in
lowering of service tax of service provider. New players like Aircel started one paisa per second,
as a result it become very difficult to reduce call rates, but for survival in market it is necessary
to do. Adopting new technologies in the network is costly and increases the cost price.
According to ABI research ARPU of telecom including India is falling.

EFE Matrix:

KEY Factors
Opportunities
Increasing number of cellular phones
Starting of 3G services
Nokia providing Idea the vender-atheist
consultancy services
Idea offers Internet connectivity in 20 circles
Idea joined IBM to integrate some IT work
Threats
Brand name of other companies
Force by courts to reduce tariff
New Players Promotional prices
Increased network costs
Decline of ARPU
Total

Weight

Rating

Weight Score

.3
.1
.2

4
3
3

1.2
.3
.6

.05
.05

3
3

.15
.15

.11
.04
.08
.02
.05
1

2
1
2
1
1

.22
.04
.08
.02
.05
2.81

We can observe in EFE matrix that Strategies of handling the opportunities is average and need
to improve.

A brief about Internal Analysis:

Internal analysis is very essential for strategic management of an organization. To

identify organizations strength and weakness we need the help of internal analysis. By going
through this analysis the organization will be able to know about the merits and demerits which
will help to fulfill the needs of organizations target markets. From the organizational
sustainability and customer point of view the strength as well as weakness is identified. (David,
2008) It is because sometimes the customers recognize what an organization could not recognize.
It anticipates well about the capabilities of an organization.

Significance:

It estimates the size or quality of such things like; market condition of business,
differentiation from the competitors, problems faced by the customers with companys products
and the way to deal with their problems.

Profit analysis:

This analysis can be done through different resources as explained below:

Physical: It is a public listed company. It has license to operate on twenty two fields. Now in
around fifteen service fields its operations are present, incorporating a customer base of twenty
four million wrapping greater than sixty percent of population in the total Indian telecom.
(Capitaline, 2009) Now in Mumbai it has got its corporate office. And in Gujarat it has got a
registered office. The whole spheres of offices are situated in around seventeen states. It has joint
venture with some famous organizations like; NDTV for value added services, Cellebrum India
Pvt. Ltd. and for roaming Bharti Telesoft. It has joined with Lowe India Pvt. Ltd. on behalf of
marketing communication and on behalf of network; Nokia and Ericson are its major partners.
(Bureau E. , economictimes.indiatimes.com)

Reputation: it has acquired a strong reputation in Indian telecom industry. It is listed in BSE
and NSE (Bombay Stock Exchange & National Stock Exchange). In 2009 by Economic times it
has got award as Emerging Company of the year. (The Economic Times, 2009) And also it has
got awarded for Care services in the best billing or customer care at GSM association award
which was in Barcelona, Spain. It got prestigious Golden Peacock Award on behalf of its modern
product My gang in 2008. Idea cellular limited is one of the official supports for IIFA awards.
(Idea Cellular)

Organizational: Aditya Birla Group is the company which reflects its operations via Idea
Cellular. It has the link with its distributors as well as the suppliers. To prize to the employees,
distributors and suppliers it conducts award functions every year. Each and every employee as
well as shareholder gets dividends and bonuses in each year.

Financial: The Idea Cellular has acquired a current ratio of 1.38:1 and quick ratio of
1.3:1. It illustrates that converting assets into cash is very convenient for them and
also thet pay the current liabilities (Capitaline, 2009). $1.5 billion is the working
capital. It proves that it has got a lot of cash for day to day operations and financial
tasks. They have shareholder funds incorporating equity share as well as general
reserve i.e. of $ 23 billion. The whole long-term debt is $6 billion (long-term debt
< capital), therefore it is an advantage to obtain loan. (Idea Cellular Revenue,
2009). In 2009 in all thirteen operating service fields, revenues for Q1 @ Rs. 26
million increased by 13.9%. (The Financial Express, 2009). In large mutual fund
companies it invests, like in ABN(Amro Mutual Fund), SBI Mutual Fund, ICICI
Prudential Mutual Fund, Birla Sun Life Mutual Fund and in HDFC Mutual Fund.
Therefore we can conclude that the company has got well-built financial resources
management. (Capitaline, 2009).

Intellectual: R&D department is separated by Idea Cellular. It helps in enhancing market share.
Advertisement investment is very big for example brand ambassadors like Abhishek Bacchan as
well as Mumbai Indians (Indian Premiere League). Idea has found to be very innovative (Idea
Cellular Revanue). They have the punch line called An idea can change your life. It is their self
image. In 2008 it provided radio services to the customers as Idea radio.

Technological: It invests a lot towards enhancing technology, CRM (Customer

Relationship Management), network, and wireless space. (Our Partners, 2009). They
have link with IBM having a contract of $19.2. It uses IBMs application server for
their information transaction like; financial transaction. For CRM (Customer
Relationship Management) it uses Supply Chain Management and Oracle Siebel
Customer Data Integration. They use Online Transaction Process (OLTP) and
Customer Information Control System (CICS) packages to make the best of data
network, mobility management, and security (Idea Portal, 2009). They also use
Vehicle Tracking System i.e. by Global Processing System (GIS).

Foundation of Internal Analysis:

The analysis of VRHN is the internal analysis foundation. The process of any
organization is considered to be the capability which has the integration with the resource. The
resources can be technological, financial, equipments, plant, organizational expertise and brand
equity. So to get a competitive advantage any organization has to know about the availability of
its resources which should be rare, valuable, non substitutable and hard to imitate.

Rarity: Idea has link with companies like; Oracle, Nokia and Ericson. We know that the
infrastructure and technology are dissimilar. Technology is changing day by day. These
companies facilitate software packages to Idea which Idea Cellular Company uses. As describe
in the above it implements their servers, CRM software (Oracle Siebel Customer Data
Integration), OLTP (Online Transaction Process), etc. (The Financial Express)

Valuable: The Telecom sector in India is providing better services and its growth is also very
fast. Some of the multinational companies like; AT&T (USA) and MTN (South Africa) want to
take a control in India, but companies like; Idea Cellular and Airtel prevent them to become the
market leader. Idea cellular in India has acquired better goodwill. It is a component of 12$ billion
of Aditya Birla Group which is the first multinational group of India. The operations are
spread in 18 countries (Idea Cellular, 2009). Idea was not there as the first in telecom industry
but the GPRS was first launched by Idea Cellular, The Economic Times awarded for this in 2009

as an emerging company of the year (The Economic Times, 2009). Therefore the products have
given good values to the customers.

Not Substitutable: All other players have the similar services with different name. Suppose a
customer is not satisfied by any service then he can easily switch to other brands. So other
players are getting benefits of these reasons and coming with similar and lower services. Pricing
strategy is still a negotiating factor for lots of companies.

Hard to imitate: TRAI is the body which controls the rules and regulation of the telecom
company. Service name, product and punch line are registered trademark which cannot be copied
by other company but they can have them with different name and packages. Idea Cellular have a
punch line An idea can change your life will be only used by the Idea cellular.

Internal Factor Analysis:

Strength:
Reputation of Brand : Aditya Birla Group operates in 25 countries and it is the owner of Idea
cellular. It is the first Indian multinational company and also it is part of 100 fortune companies
which gives a lot of strength to Idea. (Idea Cellular)
Increase in Profit margin with high rate: As compared to its competitor like Bharti Airtel and
Vodafone, Idea had a growth of 15% in 2007-2008. This growth can be the strength for the
company because it gives competition to other competitor. (Idea cellular, 2008)
Financial power: The balance sheet of Idea in 2009 shows that current ratio is 1.38:1 and quick
ratio is 1.3:1, therefore Idea can easily convert its assets into cash so liability is not a big issue
for the company. Also it show that Idea has $1.5 billion of working capital therefore it can easily
used for daily, other operational, and financial works. Its shareholder funds are $23 billion and
long term debt is $6 billion, so in future they can get loan very easily in future. (Capitaline,
2009).
Market share of Idea: Idea cellular has a good rate of increase in market share. Currently it is
operating with US based research agency from where there is expectation of increase in growth

rate of $1.3 trillion (Insight research corporation New Jersey). Also Idea cellular has a huge
market, target audience, and operations in many parts of India (The Money control, 2009).
Technology innovation used in Idea: Idea cellular is the company which started the services of
GPRS India and come up with new product like My gang and Idea radio. Idea cellular always
innovate the technology (http://news.oneindia.in).
Advertising and promotion in Idea: Idea cellular does many promotional advertisements, and
also uses Bollywood stars like Abhishek Bachan. The punch line WHAT AN IDEA SIR JI made
idea very popular and was very effective (http://www.bollynewz.com).
Strategic agreement with other brands: Idea cellular also has strategic agreement with
companies like IBM and Oracle. These companies have its own brand image in the field of
software and solutions like CRM, OLAP. It also has tie up with Nokia which shows that Idea is
dedicating superior services (Idea Portal).

Weakness:
No Broadband service: Like other companies BSNL, Airtel, Tata, and Reliance Idea does not
provide the broadband services. Today these companies are providing data card also which is
adding the value to their services and on the other hand it weakening the Idea cellular market.
Low coverage in India: Presence across nation of Idea is low as compared to other companies
like Airtel and Reliance. So there is a huge market available which Idea cellular is missing.
Market leader only in North India: In North India Idea Cellular has very good market but on
the other hand in south market share is very small. So other companies are benefiting this
market.
Direct to Home Service is not available: Idea cellular does not provide DTH services to its
customers whereas Reliance and Bharti Airtel provide DTH services. If we try to analyze the
future then DTH will be common service. Customer looks for better and more facility so unavailability of DTH seems to be weakness for the company.
Less market share in urban market: In the rural market Idea Cellular has very good position
that is 70% but in case of urban market it has only 32% of market

IFE Analysis Matrix

Weighted
Key Internal Factors:

Weight

Rating

Score

Strengths:
Reputation of Brand

0.06

0.24

Increase in Profit margin with high rate

Financial power
Market share of Idea
Technology innovation used in Idea
Advertising and promotion in Idea
Strategic agreement with other brands
70% coverage in rural areas

0.07
0.09
0.08
0.09
0.08
0.07
0.08

3
4
3
4
3
4
3

0.21
0.36
0.24
0.36
0.24
0.28
0.24

Weakness:
No Broadband service
Low coverage in India
Market leader only in North India
Direct to Home Service is not available
Less market share in urban market

0.09
0.09
0.09
0.09

1
2
1
2

0.09
0.18
0.09
0.18

0.02

0.02

TOTAL

2.73

Understanding the competition:

When a product of a company enters the market then the company tries to get position in
the market with its image. So understanding the strength weakness, opportunities and threats of
other competitors become important. It gives a brief idea what a company is capable of with
respect to other brands where it is lack behind. It also helps in forecasting and future planning.
Product or service substitution is strong weapon in the hands of customers and if the companies
pricing policy is matching with the customer expectation than there is no one who can take away
the business of that company.

Identifying the competitors:

It is very important to know for the company that who are the competitors. Studying the
profile of competitors gives their strength and weakness. It helps in creating the strategies for the
product and market share.

Competitive Profile Matrix

CSFs

Wt

Market Share
Brand Image
Management

0.15
0.15
0.07

2
3
3

Score
0.30
0.45
0.21

4
4
4

Score
0.60
0.60
0.28

3
3
3

Score
0.45
0.45
0.14

1
2
3

Score
0.15
0.30
0.21

experience
Quality of services
0.08
Promotions
and 0.06

3
3

0.24
0.18

4
3

0.32
0.18

4
3

0.32
0.18

1
3

0.08
0.18

advertisement
Sales Channel

0.40

0.30

0.40

0.20

0.30
0.32
0.15
0.12
0.15

4
3
4

0.40
0.24
0.20
0.12
0.20

3
2
3

0.30
0.16
0.15
0.12
0.20

3
3
2
2
1

0.30
0.24
0.10
0.12
0.05

0.15
2.97

0.20
3.64

0.15
3.02

0.10
2.03

like 0.10

Outlets, Distributor
Financial Status
Organization Culture
Growth of sales

0.10
0.08
0.05

4
4
3

Loyalty of customers
Globalization

0.06
0.05

2
3

Image of company
Total

0.05
1

CPM and IFE Analysis:

Wtd

Airtel
Rating

Wtd

Vodafone
Rating Wtd

Reliance telecom
Rating WtD

Idea
Rating

2
4

2
4

After studying CPM and IFE Matrix we can conclude that company is in better condition.
There is a requirement of some new strategy to increase its strength and position in market share.
There is also requirement of providing the DTH and broadband services which is todays
requirement. With the help of IFE and CPM matrix strategy for future can be decided.

On the basis of different tools and techniques for example SWOT analysis, Competitive
profile matrix, Internal Factor evaluation, Resource based view, and we can suggest the suitable
strategy for Idea Cellular. Now we will use GE matrix and BCG matrix to come to exact
conclusion to select the right strategy for the firm for the coming years, and also considering the
fact that in upcoming years telecom sector will grow at high speed.
Idea cellular is one of the branches of Aditya Birla Group. Aditya Birla Group is a
multinational company which operates in more than 25 countries. It is the repudiated company to
be the first Indian multinational and part of 100 fortune companies. This is the biggest strength
which Idea cellular get benefit of being the part of high-status group (Idea Cellular). The profit
margin of Idea cellular in 2006-07 has relative growth of 4% and in 2007-08 it increased to 11%15% when it get compared with its competitors like Vodafone and Bharti Airtel. This gives
strength to the organization to others a competitive edge (Idea cellular). Idea cellular has
strategic alliance with IBM and Oracle. Both IBM and Oracle have unique brand image in the
market for providing best class software solutions like OLAP and CRM. Idea Cellular also has
tie ups with Nokia whose position is in top of mobile producers. From here we can get the
picture that the organization is committed towards providing better services to its customers.
(Idea Portal)

TOWS MATRIX:
This matrix is one of the important matching tools which help in developing four types of
strategies on the basis of strength, opportunity, weakness and threat.
1. SO strategies Idea can take benefits of external opportunities by using internal
strengths of the firms.
2. ST strategies in this type of strategy Idea can use firms strengths to decrease or keep
away the impact of external threats.

3. WO strategies with the help of taking advantage of external opportunity Idea can
improve the internal weakness.
4. WT strategies these strategies are defensive tactics which is used to reduce the
internal weaknesses and avoid the external threats.
On the basis of analysis of the SWOT analysis of Idea cellular of the previous report we will
construct the tows matrix.
SO strategies: Since the mobile users in rural India is increasing at very fast rate so according to
Strength and opportunity strategy the company should penetrate the rural market. In other words
we can say it is the strategy of becoming very close to urban consumers. Since Idea Cellular
inherit the good brand reputation of Aditya Birla Group, the position of being first organization
to launch the services like GPRS, the company can easily penetrate the rural market and grab the
market by offering extra services at affordable range. In this type of situation Brand image play a
important role. A good advertisement can be used to gain this large pool of customers
WO Strategies: This is a tool to understand the weaknesses and weigh against them with the
opportunities that is available in hand. Then this strategy is used to see how weaknesses can be
utilized in maximizing the existing opportunities.
In past the firm was concentrating only the consumers of Northern India. Bu now in its new
development plan it has slowly covered the other parts of India also, but value added services
like mobile broadband and Direct to home which other player like Reliance and Tata are doing,
Idea has not provided any such services. If the company will provide these services then it will
give a unique strength to company and also some diversification can be observed
ST Strategies: Company biggest strength is its brand name and the growth of market share in
both north and west part of India. The company also enjoyed the benefits of its promotional
strategies. Many of the new advertisements have given success in executing the brand message
to the consumers. But there is a requirement of carefully analyze the threats which cannot be the
ignored and it should be converted into strength. The company should be always upgraded in
latest infrastructure and technologies. Company reputation can also be effected by poor
execution of promotional activities. Special care is required in selecting the technology, with

whom the firm should tie up (like strategic alliance with Nokia and other major software
providers like IBM). Untrained workforce can be another major threat.
So on the basis of above information strategy which company can use is provide appropriate
training to workforce and at appropriate time. Second strategy which company can adopt is
dealing with local distributors which will require effective convincing power. Idea cellular can
reduce this threat by providing time to time suitable training to its workforce. Upgrading the
technology and introducing more innovative promotional activities can bring many changes in
companys business.

BCG matrix:

Market Growth Rate (in %)

BCG Matrix of Idea Cellular Limited with respect to Airtel and industry growth rate:

Idea

32x
0.1X

22x

16x

Relative Market Share

The whole Telecom Industry is increasing at a rate of 35% as compared to the base year 2006-07.
We can see moderate company growth and also it is likely to grow in the coming years.
According to the latest report of TRAI, an apex body regulate telecom affairs, the number of

mobile subscribers has touched 50 crore. The first position is captured by Bharti Airtel for long
time with 32% share but now there market share is decreasing. In India in the total GSM market
Idea Cellular Limited has a share of 22% (as on July09) and has growth rate of 18% annually.
At Present it is working in 11 service areas, having a customer support of 24 million covering
more than 60 % of the total Indian telecom population (Capitaline, 2009). In present Idea cellular
has its corporate office in Mumbai, and a registered office in Gujarat. It has its Its circle offices
in 17 states. It also has partnership agreements with some famous organizations such as, NDTV
and Cellebrum India Pvt. Ltd. for VAS (value added services), and for roaming Bharti Telesoft,
for marketing communication it has tied up with Lowe India Pvt. Ltd. and for network, Nokia
and Ericson are its biggest partners. (Bureau E. , 2009). So it comes under star.

Internal-External Matrix:
This IE matrix is the planned tool which is normally used to study the operational condition and
the strategic position of the business. It includes both the external and internal factors which
affect the business on the basis of scores of both external and internal factor evaluation (IFE and
EFE) we decide the companys place in the Matrix. The matrix is divided in nine grids and the
strategy will be explained by the relative position of the company in the grid. The company lies
in the position of strong so it is in the strong grid of IE matrix so the company has to grow and
build which suggests that the company should go for intense and aggressive tactical strategies
like market penetration, product development or market development. The company can also go
for the alternative of backward, forward or horizontal integration.

EFE
Score
s

Grow

And

Build

Hold

And

Maintain

Harvest

Or

Divest

Idea

IFE Scores

Quantitative Strategy Planning Matrix:

This matrix is used to approach a strategic planning for evaluating the possible strategies; it uses
an analytical tool for the comparison of the alternative strategies. Here we are considering
following three alternative strategies for Idea this includes: 1. Strategic Alternative 1: Can go for backward integration such as Vodafone acquire
Hutch to increase market share or forward like acquire distributers
2. Strategic Alternative 2: Can go for marketing penetration: Target the urban segment;
launch a new service with same brand name like Tata Docomo has done Billing per
pulse rate, provide more high end services like GPRS, mobile internet services and
provide good customer service
3. Strategic Alternative 3: Can go for the horizontal integration activities i.e. Airtel has
gone for Dish TV, Reliance has gone for Big TV

Evaluating the above mentioned strategies with assigned weight to the strength, weakness,
opportunities and threats present in front of the company, and we have figure out that the
strategic alternative 2 i.e. Target the urban segment; launch a new service with same brand
name. Like Tata Docomo has done, Provide more high end services like GPRS, mobile
internet services and provide good customer service. This strategy has the attractiveness
score of 6.22.

Analysis of balance sheet:

After analyzing the balance sheet we can get idea on the financial position of idea cellular. Also
we can recommend some points on the basis of their financial performance. If we see the
company balance sheet there is a net current asset (Rs. 1,400.27 Crore in 2009, Rs. -1,117.67
Crore in 2008) which tells that the long term debt of the company is increasing. It may affect the
interest on the total equity or preference for the short term loans. It is also increasing the total
equity.

Current ratio:
Current ratio tells about the liquidity in the company. A company wants funds to run their
business and it should keep maintaining the cash flow. The ideal current ratio is 1.33 but here in
2009, the ratio is 1.39 and similarly for 2008 it is 0.59. If we see the 2009 ratio it indicates that
higher the margin of safety and higher the risk. According to 2008, Ratio Company had a lower
margin of safety and also lower risk.

Quick ratio:
The ideal quick ratio should be 1:1. Therefore the company is running short of the Current assets
which can be easily converted into cash. If the quick ratio of 2009 is 1.31 and of 2008 is 0.55,
which shows the current assets of the company and also tells that the company has good
liquidity.

Inventory turnover ratio:

Inventory turnover ratio tells the level of inventory that the company is holding. Inventory
turnover ratio in 2008 is 243.35 and in 2009 it is 230.69. The previous year ratio shows that
either the inventory is decreasing or sales are growing. The company has a turnover that is
slower than for its industry.

Debt- Equity Ratio:

This ratio indicates the long term solvency of the firm. It describes the efficiency of the
management in financial decision and forecasting. The debt equity ratio of the company is 0.67
in fiscal year 2009 and 1.84 in the fiscal year 2008. Ideal Ratio is 1:2. It means Long term Insider
Liabilities are more than the Long term Outsider liabilities for both the year which is good for
the company. The ratio is higher than the ideal ratio, it means that the company has a proper
capital structure and equity is also at an equilibrium condition. The firm has profit scenario and it
is in a good condition. It is also saving taxes.

Plan for next three years:

The company is having high operating cost i.e. the company is not utilizing its resources
properly, since by the IE matrix the company come under in the grid of Grow and Build which
also suggests that the company can go intense and aggressive strategy of market penetration or
the alternative of going for the vertical integration. According to the QSPM analysis as well the
alternative for going for the vertical integration was the most attractive one. The company should
also come up with new service like Tata Docomo has come up Billing per pulse rate and
increase its market share. In the BCG matrix Idea Cellular falls in the Stars category. Idea
Cellular should also try to acquire or tie up with other companies such as Vodafone and Hutch
and Airtel and MTN tried to tie-up in order to catch up with the competition and the growth of
the industry. They acquired spice in past and they have tie-up with Ericson but they do not have
any type of advantage in term of internet service or upcoming 3G service. Idea should come up
with new service for new segment of customers, try to focus on urban market which is again
found out to be best alternative from the QSPM analysis.

Conclusion:
As a conclusion of this report we figure out that the companys strategy to target the rural
segment; launch a new service with same brand name like Tata Docomo has done, provide fast
GPRS, mobile internet services and provide good customer service which is having the
attractiveness score of 6.22.

Annexure 1:

SO Strategy
WO Strategy
1. Can go for Marketing penetration: Target the
urban segment; launch a new service with same
brand name like Tata Docomo has come up
Billing per pulse rate, provide more good and 1. Can go for Forward Integration- Operate
fast services like GPRS, mobile internet services other showrooms which supplement the
and provide good customer service

distribution channels

ST Strategy

WT Strategy
1. Can go for the horizontal integration

1. Can go for Backward integration such as activities i.e. Airtel has gone for Dish TV,
Vodafone acquire Hutch to increase market share

Reliance has gone for Big TV

Annexure 2:

Strength

Strategic

Strategic

Strategic

Weigh

Alternative 1
Scor Weighte

Alternative 2
Scor Weighte

Alternative 3
Scor Weighte

d score

d score

d score

1 Brand reputation like

SBU

of

Indias

first

multinational group
0.15
2. Strong advertising and

0.6

0.3

0.3

promotion
3
Superior

0.03

0.03

0.06

0.03

0.04

0.12

0.04

0.08

0.1

0.4

0.4

0.4

0.05

0.1

0.15

0.18

0.18

0.12

Nokia
0.08
8. Better understanding of

0.16

0.24

0.24

rural market
0.12
Weakness
1. Target only North India 0.12
2 Net operating profit ratio

0.36

0.36

0.48
0
0.12

0.36
0
0.24

is decreasing
3.
No
presence

0.09

0.27

0.18

0.18

service
0.06
4. Increase in the operating

0.12

0.24

0.18

cost

0.4

0.4
1

Opportunities
1. Growth in market size
0.15
2. Scope for new and

0.6

0.45

0.1
1
0
0.3

innovative service
3. Opportunities for M&A
4. Growth in rural market
5.
Higher
disposable

2
1
3
2

0.1
0.04
0.36
0.2

3
2
2
3

0.15
0.08
0.24
0.3

1
3
3
2

0.05
0.12
0.36
0.2

inventory

turnover ratio and current

ratio
4.
Wide
network
5. Local

distribution
and

global

acquisitions
0.05
6.
Technological
innovation like Indias first
GPRS service provider
0.06
7. Strategic Alliance such
as

with

Broadband

IBM,

or

Oracle,

in

internet

0.1
1

0.05
0.04
0.12
0.1

income of consumers
6. Levi on fringe tax
0.06
7. Increase in FDI
0.09
8. Export potential
0.04
Threats
1.Price
sensitive

1
1
1

0.06
0.09
0.04
0

3
2
1

0.18
0.18
0.04

2
1
2

0.12
0.09
0.08
0

Unorganized market
2. Production malpractices
3. Competition
4. Disputes with retailers
5. Volume dependency for

0.1
0.05
0.04
0.02

4
2
1
2

0.4
0.1
0.04
0.04

4
2
1
2

0.4
0.1
0.04
0.04

2
3
1
1

0.2
0.15
0.04
0.02

sales
6. Transportation problem

0.07
0.07
1

1
2

0.07
0.14
5.33

2
2

0.14
0.14
6.22

3
2

0.21
0.14
5.46

COMPARATIVE BALANCE
SHEET OF IDEA CELLULAR
LTD.

Annexur
e_3
Mar ' 09

Mar ' 08

Absolute
change

PERCENTAG
E CHANGE

Sources of funds
Owner's fund
Equity share capital
Share application money
Preference share capital
Reserves & surplus

3,100.10
18.23
-

2,635.36
3.76
8,176.09
906.91

464.74
14.47

17.63
384.8404255

7,269.18

801.53

5,454.43
1,060.33
10,060.7
9

110.50
954.10
8,812.99

2.03
89.98
87.60

12,791.2
2
4,739.86 3,123.83

2,771.53

21.67

1,616.03

51.73

Loan funds
Secured loans
Unsecured loans
Total

5,564.93
2,014.43
18,873.78

Uses of funds
Fixed assets
Gross block
Less : revaluation reserve
Less : accumulated
depreciation
Net block
Capital work-in-progress
Investments

15,562.75
-

10,822.89
1,721.82
4,928.81

9,667.39
941.13
569.93

1,155.50
780.69
4,358.88

11.95
82.95240828
764.8097135

4,994.96

1,674.14

3,320.82

198.36

3,594.69

2,791.81

802.88

28.75840405

1,400.27 -1,117.67

2,517.94

225.2847442

Net current assets

Current assets, loans &
advances
Less : current liabilities &
provisions
Total net current assets
Miscellaneous expenses not
written
Total

18,873.78

10,060.7
9

8,812.99

87.60

2,724.62

569.93

2,154.69

378.0622182

Notes:
Book value of unquoted
investments
Market value of quoted

1,634.32 -

-29.46

investments
Contingent liabilities

2,279.41

Number of equity
sharesoutstanding (Lacs)

2,308.87

-29.46

31000.95 26353.61

4647.34

Ratio analysis: idea Celluler. Annexure 4:

Ratios:
(Rs crore)
Mar '
09

Mar '
08

absolute
change

% change

Per share ratios

Adjusted EPS (Rs)
Adjusted cash EPS
(Rs)
Reported EPS (Rs)
Reported cash EPS
(Rs)
Dividend per share
Operating profit per
share (Rs)
Book value (excl rev
res) per share (Rs)
Book value (incl rev
res) per share (Rs.)
Net operating income
per share (Rs)
Free reserves per
share (Rs)

2.65
6.66

3.55
6.87

-0.9
-0.21

-25.3521127
-3.05676856

3.23
7.24

3.96
7.29

-0.73
-0.05

-18.4343434
-0.68587106

10.06

9.45

0.61 6.455026455

8.13

8.13
31.8

25.5

6.3 24.70588235

25.71

2.66

23.05 866.5413534

31.63

37.07

0
-5.44

20.51

25.81

-5.3

-20.5346765

9.91

15.33

-5.42

-35.3555121

20.45

26.6

-6.15

-23.1203008

7.29

26.38

-19.09

-72.3654284

Profitability ratios
Operating margin
(%)
Gross profit margin
(%)
Net profit margin
(%)
Adjusted cash
margin (%)
Adjusted return on
net worth (%)

-14.6749393

1.275948841
17.63454798

Reported return on
net worth (%)
Return on long term
funds (%)

8.87

29.48

-20.61

-69.9118046

12.18

18.92

-6.74

-35.6236786

0.53

1.54

0
-1.01

-65.5844156

0.67
59.8

1.84
35.22

-1.17 -63.5869565
24.58 69.78989211

0.74

0.61

0.13 21.31147541

1.39
0.98

0.59
0.43

0
0.8 135.5932203
0.55 127.9069767

1.31
230.69

0.55
243.35

0.76 138.1818182
-12.66
-5.2023834

Leverage ratios
Long term debt /
Equity
Total debt/equity
Owners fund as % of
total source
Fixed assets turnover
ratio

Liquidity ratios
Current ratio
Current ratio (inc. st
loans)
Quick ratio
Inventory turnover
ratio

Payout ratios
Dividend payout
ratio (net profit)
Dividend payout
ratio (cash profit)
Earning retention
ratio
Cash earnings
retention ratio

100

100

100

100

Coverage ratios
Adjusted cash flow
time total debt
Financial charges
coverage ratio
Fin. charges cov.ratio
(post tax)

3.67

3.6

2.78

3.71

-0.93

-25.0673854

2.86

3.76

-0.9

-23.9361702

Component ratios
Material cost
component (%
earnings)

0
0.07 1.944444444

0.19 -

Selling cost
Component
Exports as percent of
total sales
Import comp. in raw
mat. consumed
Long term assets /
total Assets
Bonus component in
equity capital (%)

4.32

4.79

-0.47

-9.81210856

0.69

1.17

-0.48

-41.025641

0.84

-0.09

-10.7142857

0.75

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