Corporate Business Project

Project Report On

Understanding the Strategic Business Model at IDEA Cellular

TABLE OF CONTENTS

TABLE OF Contents...................................................................................2 EXECUTIVE SUMMARY...............................................................................5 CHAPTER 1...................................................................................................6 1.1: Company Overview:...........................................................................7 a. Services in Delhi: ..............................................................................8 b. Services in Mumbai: ..........................................................................9 c. Services in Tamilnadu : .....................................................................9 1.2 OBJECTIVE OF THE REPORT..............................................................10 1.3 SWOT Analysis:.................................................................................10 Strengths:............................................................................................10 Weakness:............................................................................................11 Opportunities:......................................................................................12 Permission for the launch of 3G mobile services by DOT will be an area to progress into..............................................................................................12 The Indian telecommunication industry is expected to continue to enjoy growth due to its low tele-density and increasing affordability of mobile telephone and services. ............................................................................12 The contribution of service sector to the GDP has improved significantly from 29% in 1950 to more than 55 % now. This is primarily due to growth of information-technology and information technology enables services. This will further stimulate the demand for mobile telecommunication services.....................................................................................................12 The regulatory environment is improving and there is greater clarity in existing rules and procedures. This would enable operators in improving network quality. ........................................................................................12 Threats:................................................................................................12 There is intense competition in the Indian telecommunication industry. Idea Cellular faces significant competition from private companies that have a pan-India footprint such as Bharti Airtel, Tata Teleservices and Reliance Communications. Also it faces competition from government owned companies such as BSNL and MTNL...............................................12 The provision by CDMA operators of a free handset and extended validity card to their subscribers has led to increased competitive pressure and increased promotional expenses...............................................................12

Alternative technology is evolving very rapidly in the telecommunications industry. For instance, "Wi-Fi" and Wi-Max" which allows for voice data transfer have been tested and handsets with such technology may soon be available in the Indian market. ............................................................12 Deregulation led to the privatization of the telecommunication industry and allowed and encouraged foreign direct investment and the provision of services by several mobile operators in each Circle. Deregulation also allowed fixed-line operators, who previously offered only limited mobile services, to provide full mobility under the UAS License regime in addition to their fixed line, national long distance (NLD) and international long distance (ILD), data and other service offerings. ......................................12 Satellite communication voice data transport medium like "Skype" may become a serious competitor in the long distance voice data transfer business.....................................................................................................13 CHAPTER 2.................................................................................................14 2.1 Indian Telecom Industry overview....................................................15 2.2 Indian Telecom Industry Fact Book...................................................15 2.3 Telecom services in India:................................................................16 2.4: Environmental scanning PEST Analysis.........................................19 Political:...............................................................................................19 Economic:............................................................................................19 Social:..................................................................................................20 Technological:......................................................................................20 CHAPTER 3.................................................................................................21 3.1: Current position of the company - Ansoff Matrix: ...........................21 3.2: Current strategic orientation...........................................................22 a. Acquisition of Spice Communications:.............................................25 b. Idea Cellular Mumbai launch:...........................................................26 3.3: Segmentation Targeting and Positioning.........................................27 Segmentation: ....................................................................................27 Targeting:............................................................................................28 Positioning:..........................................................................................29 Chapter 4...................................................................................................30 4.1: Competitor analysis.........................................................................31 a. Bharti Airtel......................................................................................31 b. Reliance Communications................................................................31 3

c. Bharat Sanchar Nigam Ltd...............................................................32 CHAPTER 5.................................................................................................34 4.1: Strategic suggestions on marketing mix.........................................34 Product:...............................................................................................35 Price: ...................................................................................................35 Place: ..................................................................................................35 Promotion:...........................................................................................35 People:.................................................................................................36 Process:.........................................................................................36 Physical Evidence:...............................................................................37 References:.............................................................................................37

EXECUTIVE SUMMARY The Indian telecom has seen an unprecedented growth in the last 5 years or at least it is unprecedented when benchmarked with the growth of other infrastructure in India. The underlying cause of this growth is a widely debated topic in both the academia and the Industry. However, India is still lauded by international community for its success in the telecom sector. This paper studies a company , IDEA Cellular , and tries to analyse its business model with respect to various dimensions. The report talks about various circles the company is operating in and other players present in those circles. The study goes further to analyse the areas of Strength for the company and the various weaker sections company should improve upon . The threats faced by the company if from growing technologies and other big competitors but there are various opportunities lies for the company which are discussed in detail. The industry overview provides an idea which all services (CDMA, GSM etc.) are being provided by the players and which all strong and weaker players are currently operating in the industry and what is market share and the consumer preference. PEST analysis of the industry provides the various factors responsible for the growth of the industry and certain issues the industry is confronting. The study goes further to study the current strategic orientation of the company and various strategies being followed by it to gain considerable share of the market pie. IT talks about the segmentation. Targeting and positioning strategies being followed by the company . Competitors analysis is done to compare what the other players are doing and how IDEA Cellular is differentiating itself from others. Finally various suggestions are given for the marketing mix that the company can adopt and apply in order to have a differentiation from its competitors and remain competitive in this rapidly changing environment.

CHAPTER 1

1.1: COMPANY OVERVIEW: Idea Cellular, India's fifth-largest mobile operator, nationally, lags Bharti Airtel, Reliance Communications, Vodafone-controlled Vodafone Essar and state run Bharat Sanchar Nigam Ltd in number of subscribers. It is one of the leading GSM mobile services operator, has licenses to operate in all 22 service areas of India with commercial operations in 11 service areas, of which 3 were rolled out during the third quarter of FY 2007. With a customer base of over 24 million i.e., market share of 16.2% as on March 31, 2008 in its 11 service areas of operation. Idea cellular runs operations in Delhi, Himachal Pradesh, Rajasthan, Haryana, Uttar Pradesh (East), Uttar Pradesh (West) & Uttaranchal, Madhya Pradesh & Chhattisgarh, Gujarat, Maharashtra & Goa, Andhra Pradesh and Kerala, holds spectrum for Mumbai, Bihar & Jharkhand and Tamilnadu (including Chennai) and licenses for the remaining 8 service areas. With the planned launch of services in Mumbai, Bihar & Jharkhand in Q3 and Tamilnadu (including Chennai) in Q4 of the year 2007. Ideas footprint will soon cover approximately 77% of Indian telephony potential. For financial performance purposes, we have classified these as New Circles and other eight telecom service areas have been classified as Established Circles. Idea also has a license to provide National Long Distance services and the company carries part of its own traffic under the license. Idea is listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) in India. Idea Cellular is a part of the US $ 24 billion Aditya Birla Group, Indias first truly multinational corporation. The group has a market cap in excess of US $ 31.5 billion, operates in 20 countries, and is anchored by 100,000 employees belonging to 25 nationalities. The company would spend about 8 billion rupees ($180 million) on its Mumbai expansion in the financial year 2009. The company has agreed to buy smaller operator Spice Communications, which operates in Punjab and Karnataka service areas. Malaysia's TM International will take a stake of about 20 percent in Idea as part of the deal. Mission statement of the company: We will delight our customers while meeting their individual communication needs anytime anywhere

A. SERVICES IN DELHI:
Idea Cellular services were launched in Delhi on 7th November 2002, by then Minster of Communications, Information Technology and Parliamentary Affairs, Pramod Mahajan. Idea Cellular, redefines the mobile telephony standards in the capital by offering the following distinct advantages:

Indias first 3G compatible, EDGE upgradeable network that enables Idea Cellular to launch high-speed data services, offer multimedia services and operates superior quality of voice telephony network

Over 925 cells from day one for seamless coverage in Delhi and NCR and 6,00,000 simultaneous call handling capacity (BHCA) at any given time much higher than any other network

Delhis only GPRS (general packet radio services) enabled network that enables to experience wireless Internet on the mobile and computer at blistering speeds First time in India a full-capacity multimedia messaging service (MMS) on both prepaid and postpaid, and can add life to text messages by attaching coloured photographs and voice clips

Multiple tariff plans on prepaid; for the first time the pre-paid customer gets to choose a tariff plan that suits his needs and Idea philosophy (pay less for more) rewards him for higher usage

Five value-rich tariff plans that enable Idea subscribers to choose a plan that suits their talk needs M-coupon, a first-ever innovative value-added service from Idea, enables to avail of discounts at the flash of the mobile For the first time Delhi subscribers get full roaming on prepaid (in Mumbai and six more circles). Idea subscribers also get automatic national roaming for incoming.

Says Idea Cellular CEO Graham Burke: As the fastest-growing cellular service provider in India, we have set standards in service delivery for others to follow. The fact that we were voted No 1 in customer satisfaction in a nationwide survey conducted by NFO-MBL speaks

volumes for our service levels. We are also the only non-metro player to cross the 1-million subscriber mark owing to our range of superior products and services. We now bring all of these standards and many more value-added services for enhancing the productivity of mobile phone users in Delhi. Idea is committed to remain the most customerfocused mobile service provider in India, by continuously innovating so as to liberate our customers from the shackles of time and space. Says Idea Cellular COO Himanshu Kapania: To offer a truly revolutionary experience to its subscribers, Idea Cellular has not only set up a world-class network that enables us to offer a host of value-added services and innovative tariff plans, but we have also set up a full capacity 24x7 call centre that will offer personalized assistance to the Idea subscribers, within a response time of three rings. This is minutes ahead of current practice as voiced by the consumer research.

B. SERVICES IN MUMBAI:
On 20th august, 2008 launched services in Mumbai, with aims of getting 20 percent of the city's new users over the next year and breaking even in the zone in four years. India's financial capital has been a lucrative zone for all the telecom firms, but with more than 80 percent of the city's population owning mobile phones, compared with an all-India average of just 19%, the pace off addition has slowed down. Mobile subscriber numbers in the Mumbai service area rose by about 4 million in the year ending June to 14.5 million, with the population of the telecom zone estimated at 17 million. In Mumbai, Vodafone Essar, India's No. 3 mobile firm, had a market-leading 3.7 million users as of end-June, followed by Reliance Communications, the second-largest operator nationally, with just over 3 million.

C. SERVICES IN TAMILNADU :
Mobile penetration in the Tamil Nadu telecom circle is about 80 per cent the highest in India and would merit a different marketing strategy compared with other telecom circles. Though there is no detailed marketing strategy in place yet, the company leveraged on its `top quality' network infrastructure thereby assuring better customer experience. Nowadays, churn level (movement of customers from one mobile service provider to another) is low at about 5 per cent nationally. Customers are moving mainly because of network 9

related problems such as instability, call drops and congestion. Thus, the best way for Idea Cellular to enter the Tamil Nadu market would be by promoting its stable and efficient networks and focusing on its customer service and customer experience aspects to market itself. Value added service is the targeted segment in the State as it has huge potential to grow. The company is also testing the `Television on Mobile' technology. The recent TRAI decision to cut roaming charges would bring an annualized loss of about Rs 100 crore. But it won't affect the company because the number of roamers across India is very less. Optimism and confidence are two nouns which can be used to describe the ambitious business strategy of Idea Cellular, willing to invest US$2 billion by 2009, to hold out against other newly-arrived competitors such as Vodafone. In the coming years, the company plans to invest about 50 per cent of its funds in upgrading infrastructure in its existing circles of operation besides setting up fully integrated systems in new circles. In the last 9 months, it has invested about Rs 2,000 crore on infrastructure. 1.2 OBJECTIVE OF THE REPORT The primary objectives of the project were as follows: Understanding the Strategic Business Model for IDEA Cellular Studying the weaker and stronger sections of the company Developing an efficient marketing mix for the company

1.3 SWOT ANALYSIS: Based on the data from the secondary research and looking into the companies history over the years, we arrived at the following points:

STRENGTHS:
IDEA is a part of the strong Aditya Birla Group. The combined holding of the Aditya Birla Group companies in Idea stands at 98.3 % , i.e. Aditya Birla Nuvo Ltd. holds

10

35.7 %, Birla TMT Holdings Ltd. 44.9 %, Grasim 7.5 %, and Hindalco holds 10.1 % in Idea. Attractive existing footprint - It has licenses to operate in all 22 service areas of India with commercial operations in 12 service areas with a customer base of over 28 million. It has operations in Delhi, Maharashtra, Goa, Gujarat, Andhra Pradesh, Madhya Pradesh, Chattisgarh, Uttaranchal, Haryana, UP-West, Himachal Pradesh and Kerala. Idea is only operator to launch GPRS and EDGE in the country. Idea has received international recognition for its path-breaking innovations when it won the GSM Association Award for Best Billing and Customer Care Solution for 2 consecutive years. Acquisition of Spice Communications by Idea will prove to be highly beneficial as it will lead to ARPU uplift or reduction in network operating costs. It is the market leader in three of its established circles of Maharastra, west UP and Haryana. It ranks among the top three operators in six of the 11 circles and is one of the fastestgrowing mobile operators. Strong distribution channels - It has a good distribution network with approximately 154,070 retail outlets. These retail outlets are serviced through approximately 1,355 exclusive distributors. In addition there are approximately 540 Idea n U and other showrooms which supplement the distribution channels and provide customer service. A national brand idea has created a unique brand image in the minds of consumers through its advertising and promotional strategies.

WEAKNESS:
The Company revenues are dependent on four of the Established Circles for a significant proportion of its revenues. These are Andhra Pradesh, Delhi, Gujarat and Maharashtra Circles. Any changes in subscriber preferences or other related factors, such as increased competition in these Circles (which may come from new entrants as a result of license applications), could have a material adverse effect on its business, results of operations, financial condition and prospects. 99% of the companys revenues arise exclusively from providing mobile services while other competitors have multiple revenue streams. 11

OPPORTUNITIES:
Acquisition of Spice by Idea has given Idea an opportunity to gain a foothold in the regions of Karnataka and Punjab. Spice is currently operational in the Punjab and Karnataka circles. Spice Communications is the no.2 wireless operator in Punjab with a subscriber base of 2.73million implying a 22.3% subscriber market share in the state. In Karnataka the company has 1.77m subscribers with 9.8% subscriber market share. Idea is yet to roll out it services in these two circles and as such there is no overlap in the existing operations of the two companies. Permission for the launch of 3G mobile services by DOT will be an area to progress into. The Indian telecommunication industry is expected to continue to enjoy growth due to its low tele-density and increasing affordability of mobile telephone and services. The contribution of service sector to the GDP has improved significantly from 29% in 1950 to more than 55 % now. This is primarily due to growth of information-technology and information technology enables services. This will further stimulate the demand for mobile telecommunication services. The regulatory environment is improving and there is greater clarity in existing rules and procedures. This would enable operators in improving network quality.

THREATS:
There is intense competition in the Indian telecommunication industry. Idea Cellular faces significant competition from private companies that have a pan-India footprint such as Bharti Airtel, Tata Teleservices and Reliance Communications. Also it faces competition from government owned companies such as BSNL and MTNL. The provision by CDMA operators of a free handset and extended validity card to their subscribers has led to increased competitive pressure and increased promotional expenses. Alternative technology is evolving very rapidly in the telecommunications industry. For instance, "Wi-Fi" and Wi-Max" which allows for voice data transfer have been tested and handsets with such technology may soon be available in the Indian market. Deregulation led to the privatization of the telecommunication industry and allowed and encouraged foreign direct investment and the provision of services by several mobile operators in each Circle. Deregulation also allowed fixed-line operators, who previously

12

offered only limited mobile services, to provide full mobility under the UAS License regime in addition to their fixed line, national long distance (NLD) and international long distance (ILD), data and other service offerings. Satellite communication voice data transport medium like "Skype" may become a serious competitor in the long distance voice data transfer business. The SWOT analysis indicates that though idea holds the fifth position among mobile service providers, still it has a very good chance to improve its rank and reaching the top three bracket will be very achievable in near future. It has the strong backing of the Aditya Birla group which is its major strength. Its plans to enter the rural market are very timely and strategic and they are taking steps towards it through the way of their promotional campaigns, e.g. the recently launched education for all campaign. Its acquisition of Spice telecom was also a very strategic step in gaining a position among the top three, by increasing its size and market share.

13

CHAPTER 2

14

2.1 INDIAN TELECOM INDUSTRY OVERVIEW India has the second largest telecom network in the world after China. It is adding some 8.5 million to 10 million new mobile subscribers to the network every month and is emerging as one of the fastest growing telecom markets in the world. The telecom industry also approximately $8.5 billion in investment flow in during 2006-07 alone, of which $550 million was in the form of foreign direct investment. With 300 million telephone connections, the tele-density of the country is only about 26 %. Mobile telephony is growing at an annual rate of over 90%. On an average over 8 million subscribers are being added every month. Besides the basic telephone service, there is a huge potential for different value added services. The next phase of growth is expected to be in the countrys rural areas. Also, with a teledensity of just 8 % in rural India, as opposed to 50 % in urban areas, it offers a good scope for expansion. The top players in this booming telecom industry are Airtel, Vodafone, BSNL, Reliance, Idea Cellular and Tata Teleservices. 2.2 INDIAN TELECOM INDUSTRY FACT BOOK Total telecom subscribers : 225.21 million (June 2007) Teledensity : 19.86 per cent (June 2007) Addition of new mobile subscribers per month(June 2007) : 7.34 million Annual growth rate of telecom subscribers (2006-07) : 46.82 per cent One of the fastest growing cellular telephony markets in the world Average Revenue Per User (ARPU) for GSM : ~ US$ 6.6 per month More GSM subscribers than fixed line subscribers Telecom equipment market (2006-07) : US$ 17,100 million Handset market (2006-07) : US$ 4,750 million Expected to reach a mobile subscriber base of about 500 million by 2010 (i.e., more than one phone for every household) Source: TRAI Annual Report

15

2.3 TELECOM SERVICES IN INDIA: The Indian telecom industry can be divided into basic, mobile and Internet services. There are also some smaller segments such as radio paging services, Very Small Aperture Terminals (VSATs), Public Mobile Radio Trunked Services (PMRTS) and Global Mobile Personal Communications by Satellite (GMPCS). Basic Services: Basic services encompass fixed wire line and Wireless in Local Loop (WLLfixed) services. BSNL and MTNL are the two largest operators in this segment. MTNL is present in Delhi and Mumbai, whereas BSNL covers the rest of the country. Though private players, such as Bharti and Reliance, have registered notable growth, the Government-owned BSNL dominates the segment in terms of subscriber base. Mobile Services Stay Connected: Mobile services have led the spectacular growth of the Indian telecom industry. Currently, 12 players are active in this segment. The total number of wireless subscribers escalated to 185.13 million by the end of June 2007, with the monthly addition of more than 6 million wireless subscribers.

GSM continues to dominate this segment by a large margin as compared to CDMA, which has a share of only 23 per cent. India is one of the few countries in the world to have more GSM subscribers than fixed line subscribers.

16

Bharti leads the Indian telecom market. The company had more than 40 million subscribers in may 2007. Despite stiff competition, Bharti has been successful in retaining its position of leadership because of its successful strategies All the operators predominantly provide voice services, value added and data services such as SMS, mobile internet service, email, chatting, conferencing, GPRS service, etc. Services such as video conferencing and Closed User Group (CUG) facility are also gaining momentum. The commoditization of voice services has been a major magnet for service providers, compelling them to intensify their focus on data services. Revenues from value added services are growing at 30-40 per cent annually. These trends have paved the way for 3G services in India. Indian players have constantly reduced tariffs, which in turn has led to a constant reduction in the Average Revenue Per User (ARPU). However, though the ARPU is declining gradually, it remains well supported by the increase in subscriber base. The ARPU for GSM service in India is much higher than that for CDMA service. Notwithstanding a low ARPU, mobile usage is on the increase. India currently stands at number two in the world in terms of the Minutes of Usage (MoU). The declining ARPU implies that India Inc. is tapping the huge market at the bottom of the pyramid by reducing tariffs, thereby enhancing affordability. Internet Service Road to a Hi-tech India: Approximately 400 Internet Service Providers (ISPs) are offering Internet services in India.

17

As we can see from the above graph, the number of internet subscribers increased at a CAGR of approximately 60% from 1997-98 to 2006-07. Despite a slow penetration rate, this segment embodies huge growth potential in India. In June 2007, there were 2.52 million broadband connections in India.

BSNL is the largest player by market share in this segment. With the implementation of Broadband Policy in 2004, the Government has sent out signals of its positive intent to boost internet penetration in the country. Earlier in 2002, the Government opened internet telephony and issued licenses in this domain.

18

2.4: ENVIRONMENTAL SCANNING PEST ANALYSIS

POLITICAL:
Deregulation led to the privatization of the telecommunication industry and allowed and encouraged foreign direct investment and the provision of services by several mobile operators in each Circle. Deregulation also allowed fixed-line operators, who previously offered only limited mobile services, to provide full mobility under the UAS License regime in addition to their fixed line, national long distance (NLD) and international long distance (ILD), data and other service offerings Regulatory changes and refinements in recent years have brought greater clarity to existing rules and procedures, which should enable operators to focus on improving network quality and providing telecommunications services to subscribers under a stable regulatory regime Adverse changes in foreign exchange and custom duty rates will adversely affect the business. A lot of equipment is imported and requires payments in foreign currencies. Imports are subject to Government regulations and approvals, the availability of foreign exchange credit and the levy of customs duties. Indias infrastructure is less developed than that of many developed nations. Any material deterioration of Indias physical infrastructure could harm the national economy, disrupt the transportation of goods and supplies, and add costs to doing business in India. Banning of phone use in certain circumstances. There was a recent proposal by govt to ban use of mobile phones in religious places and in hospitals etc.

ECONOMIC:
Cost of technology and emerging opportunities like 3G licenses Cost of calls being driven down affects the revenues of the companies. Worldwide recession is causing a downfall and decrease in revenues of major firms. High inflation will increase the costs and decrease operating margins, which could have a material adverse effect on the business

19

SOCIAL:
Health issues The business may be adversely affected by real or perceived health risks. Media and other reports have linked radio frequency emissions from mobile handsets and cell sites to various health concerns, including cancer, and to interference with various electronic medical devices, including pacemakers. Social trends towards increased use of mobile phones. Pictures phones/mms the trend of obscene mms circulation has caused unrest among the social activists regarding the extent of technology use in mobiles. Mobile etiquette use of mobiles in places like hospitals and other important places like religious places etc is also an issue. Terrorism and mobiles the extensive use of various mobile technologies by antisocial elements has proved to be a threat. hearing aids and

TECHNOLOGICAL:
The telecommunications industry is subject to rapid and significant changes in technology. The GSM communications technologies currently being used may become obsolete or subject to competition from new technologies in the future. Emergence of new technologies like the 3G spectrum. GPRS/WAP technologies Idea is only operator to launch GPRS and EDGE in the country. Idea has received international recognition for its path-breaking innovations when it won the GSM Association Award for Best Billing and Customer Care Solution for 2 consecutive years The company has done an effective job of environmental scanning. It works and has policies in accordance with the political scenario of the country and takes into account the issues arising. The economic conditions are also very important for any company. Idea takes this into consideration and plans its strategies like pricing, promotion etc. The social and technological factors also effect the company. Idea has adopted good technology and was the first to launch EDGE in the country.

20

CHAPTER 3

3.1: CURRENT POSITION OF THE COMPANY - ANSOFF MATRIX:

21

According to the Ansoff matrix, Idea Cellular is adopting both the Market penetration and market development strategies. Market penetration strategy because it is focusing on selling existing products into existing markets by increasing market share in those markets. This it is doing through a combination of competitive pricing strategies, advertising and sales promotion e.g. introducing loyalty schemes. Its recent acquisition of Spice Communications indicates its market development strategy as through this acquisition, Idea Cellular has entered the new markets of Karnataka and Punjab where Spice is a leading player.

3.2: CURRENT STRATEGIC ORIENTATION

22

In a bid to create awareness for its brand, is set to embark on an aggressive advertising strategy. They plan to spend approximately 7 per cent of their net revenues on advertising. Back of the envelope calculations peg this figure at about Rs 63 crore. The company has recently launched a TV commercial for Idea and is currently working on a couple of more ad films (made by its agency Lowe India). Meanwhile, not divulging the company's future marketing initiatives, they would revolve around the company's positioning of `liberation through an idea'. Though not revealing its pricing or promotional strategy ahead of the launch, the service would be of much better quality than that which is being offered in the market currently. In addition, the company will offer several value-added services such as vernacular SMS (in 9 languages), games on the mobile, a large covered area for pre-paid roaming, and so on. Most recently, in a bid to build loyalty for its pre-paid cards business, Airtel has introduced the Airtel Magic Recharge Rewards. The scheme allows the consumer to accumulate free talk time for every fourth recharge card that a customer buys. Airtel is also using Bollywood stars such as Shah Rukh Khan, Karisma Kapoor, and Kareena Kapoor to promote its Magic cards in Delhi. Idea Cellular, initially, has decided against using any celebrities to endorse its brand, but later changed it strategy. The company will also use the mother brand `Idea' for all its services (for instance, the sub-brand for its pre-paid cards business is Idea Chit Chat), to avoid diluting the brand equity. In a clear strategic move to take on players like Vodafone, Bharti and Reliance, Idea Cellular has released its latest ad featuring Abhishek Bachchan which is sure to strike a cord with the consumers. It also signifies the shift in focus of the company from classes to the masses.

23

This diagram indicates the various options available for the company to sustain in the market as well as to become the leader over a span of several year along with facing the stiff competation form the well established palyers.

From the above graph it is very clear that there is a lot of growth potential in the rural market compared to the urban, market which has already reached 50%. Thus the strategy of the company is very much in line with their target audience, which is the rural market. It is the only company to cross the 1-million subscriber mark owing to our range of superior products and services, though being a non-metro player.

24

Above graph clearly indicates that, India is well ahead of china, in terms of the Minutes of Usage per month by the subscribers. With low teledensity than china coupled with high minutes of usage provides a huge revenue option for the service providers in the near future.

A. ACQUISITION OF SPICE COMMUNICATIONS:

The recent strategic step that Idea has taken is the acquisition of Spice Communications. Idea-Spice-TMI merger has reduced the number of players and marks the beginning of the in-market wireless consolidation. Also, TM Internationals stake in Idea reduces the threat of TM Internationals entry in India as majority player at a later date. Its exact implications and advantages are yet to be seen, but the deal is expected to give idea a strong edge ahead. Spice has strong presence in two existing circles. Spice is currently operational in the Punjab and Karnataka circles. Spice Communications is the no.2 wireless operator in Punjab with a subscriber base of 2.73m implying a 22.3% subscriber market share in the state. In Karnataka the company has 1.77m subscribers with 9.8% subscriber market share. Merger accelerates the time line for Ideas pan Indian presence. With the Spice acquisition and launch of Mumbai circle and Orissa and Tamil Nadu expected by December 2008. Idea currently has 900MHz spectrum in 7 of its 11 operational circles, so the addition of two more circles in the same spectrum band will increase operational synergies on account of lower operating and capital expenditure. Idea can target high ARPU through customers that are more inclined to be part of a network that has wider coverage and presence than the current two state coverage of

25

Spice in Punjab and Karnataka. It will also lead to reduction in network operating costs.

B. IDEA CELLULAR MUMBAI LAUNCH:

Idea will invest Rs 800 crore for its Mumbai operations of which approx Rs 600 crore have been compensated as Telecom licence free and the left over amount will be used to develop the circle's network and infrastructure. Ideas expanding footprint now crosses over 70% of India's mobile telephony market. As the biggest ever single city launch by any telecom company, IDEA aims at providing citizens of the city superior connectivity with an initial network of over 1000 cell sites. IDEA Mumbai will operate on 1800 MHz frequency riding on a pooled core switching network, with 2.75G capabilities and EDGE

26

services. This is also a strategic step taken by Idea recently when it launched its operations in Mumbai on 20 august 2008. 3.3: SEGMENTATION TARGETING AND POSITIONING

SEGMENTATION:
1. Geographic The Indian telecom market has been divided into telecom circles are classified as metropolitan circles and as category A, B or C Circles. The Circles are classified on the basis of the revenue generation capacity of each circle with category A being considered the most revenue generating. The various states have been categorised into these circles as follows: 4 metropolitan Circles (Mumbai, Delhi, Kolkata and Chennai) 19 regional Circles which are classified into three categories A, B and C. There are five category A Circles, eight category B Circles and six category C Circles.

2. Gender Idea launched its womens card specifically targeting the women, with features like information tips on beauty & fashion, health, fitness, cookery, career etc, private counselling on women maters, safety alerts in case of emergency, special Gup Shup tariff at 50p/min, calls on zero balance etc.

3. Age Idea launched a special pre-paid card for the youth called the I-Card. The card allows youngsters to send short messages at 25 paise compared to the average rate of Rs 1.50 per SMS prevailing at that time. It also gives discounted tariffs for STD calls and for two

27

local numbers. I-Card was a unique offering from IDEA that comes loaded with features that will be enthralling for the student community. It also launched new pre-paid card 'My Gang', targeting the youth. The new pre-paid card is a power-packed product having unique services like the closed users group (CUG) on pre-paid and the Youth Mobile radio. 'My Gang' offers local group calls within 'My Gang' subscriber groups at the rate of 10 paise per minute and group SMS at the rate of one paise.

4. User (New/Regular) Idea offers various tariff plans to customers depending on whether the customer is new or a regular customer. Plans with low tariffs are sometimes offered as a part of sales promotion to lure new customers, and existing customers are regularly offered new schemes and cheap recharge options. Lifetime Idea was also one of such plans which offered lifetime validity at a very low rate.

5. Service Usage It regularly offers various schemes and tariff plans to customers depending on their level of usage of the service. There are schemes which allow users to make cheap calls, sms, and other value added services by charging a monthly rental.

6. Lifestyle It offers plans and services to people depending upon their interests and lifestyle. For e.g. missed call information service, Idea TV, cricket alerts, Astrology services like Ganesha speaks, Idea radio, Easy mail etc.

TARGETING:
Idea targets all the above segments through its varied product offerings, services and marketing communication strategies. It targets these segments by various service plans and commercials, as explained above.

28

For e.g. For the women segment, it launched a different product called the womens card with different and unique services. It also launched different advertising campaigns to cater to this segment, with TVCs and print ads especially created for this segment.

POSITIONING:
Idea has worked towards creating a unique brand image in the minds of consumers. Mobile telephone service is something that is offered by all service providers. It varies in its quality, but what creates a unique and different brand image for a company is its marketing efforts and service providing. Through its marketing and communication strategies and promotional advertisements and campaigns, it has focused on brand building. Through its service offerings, it has positioned itself as a service provider that is reliable and trustworthy and the one that offers good, affordable and exciting promotional offers. Its campaigns have always focused on the use of a unique idea to bring about a change in life, in sync with its tagline An idea can change your life. People associate Idea with innovation. It has created a youthful and innovative image for its brand through its campaigns. Its recent education for all campaign is also based on the same theme of an innovative idea being used to bring about social change. Such campaigns help in positive brand building and differential positioning for the brand

29

CHAPTER 4

30

4.1: COMPETITOR ANALYSIS

A. BHARTI AIRTEL
Bharti Airtel, a part of Bharti Enterprise, is Indias first and largest private service provider with a nation-wide operational presence. While it was founded in 1995 as Bharti Televenture Ltd. (BTVL), in April 2006, the company changed its name to Bharti Airtel. Today, it is one of the fastest growing telecom companies in the world with more than 40 million subscribers. The company has structured its business in three segments mobile services, broadband and telephone services, and enterprise services.

BUSINESS STRATEGIES: BUSINESS ALLIANCES In order to improve cost and quality, the company outsources non-core activities through business alliances. These alliances provide access to new technologies and allow the company to adopt the best practices of enhancing customer experience. In fact, Airtel has established alliances with Sing Tel, Ericsson, Nokia, Siemens, Nortel, Corning, IBM, Hinduja TMT, TeleTech and MphasiS.

UNIFIED BRAND STRATEGY Bharti has decided to use Airtel as the single brand name across all its categories such as cellular, fixed and internet services. The company believes that an integrated approach such as One Airtel will help it in better addressing customer needs through bundled service offerings. This initiative is slated to increase Airtels ROI.

B. RELIANCE COMMUNICATIONS
Reliance Communications, previously known as Reliance Infocom, brought about a digital revolution in the Indian telecom industry by providing Indias vast population with affordable means of information and communication. Reliance Infocom, with the aim of making mobile

31

calls cheaper than postcards, built a 60,000-kilometre-long fibre optic backbone, crisscrossing the entire country. Reliance currently offers its services in 340 towns with its eight circle footprints; it also initiated mobile data services through its R-world mobile portal. This portal leverages the data capability of the CDMA 1X network.

BUSINESS STRATEGIES: INTEGRATED SERVICE From the beginning, Reliance believed in providing integrated communication services to its customers. The company claims that it sells a greater number of handsets compared to those sold by the market leader, Nokia. LARGE DISTRIBUTION NETWORK Reliance has created the largest chain of digital entertainment and communication stores Reliance Web World. The company is also expanding its reach aggressively through retail outlets, sales agents and electronic recharge outlets.

C. BHARAT SANCHAR NIGAM LTD.

BSNL, a state-owned service provider in India, is the seventh-largest telecommunication company in the world. It offers a wide range of services in India, such as wireline, CDMA mobile, GSM mobile, internet, broadband, carrier, MPLS-VPN, VSAT, VoIP, IN, etc. BSNL is the largest operator in basic services in India with its cellular services helping it to establish its presence as the largest operator in rural areas. BUSINESS STRATEGIES RURAL PENETRATION BSNL is playing a leadership role in developing the telecom infrastructure in rural areas. It has been successful in increasing its cellular subscriber base by pioneering its services in the rural terrain. Its services cover the whole of India, except Delhi and Mumbai, which are covered by MTNL, the other state-owned player.

32

LOW COST STRATEGY BSNL is a low-cost service provider of many services. This strategy has helped BSNL in penetrating the market.

33

CHAPTER 5

4.1: STRATEGIC SUGGESTIONS ON MARKETING MIX

34

PRODUCT:
In the case of a telecom service provider like Idea Cellular, the products are the SIM cards and recharge vouchers. The key is the service and not the product. All the company needs to do is to ensure the easy availability of the right product to the right customer at the right place and time.

PRICE:
Idea has since its inception focussed on being an affordable service brand. Its tariff plans, schemes and value added services are among the ones with lowest rentals. Customers perceive it as a trustworthy and affordable service provider. It should keep its price low compared to the competitors and focus on revenue growth through increase in volumes. It should continue to offer various value added services

PLACE:
Place involves the distribution network of Idea and its service outlets. It has a good distribution network with approximately 154,070 retail outlets. These retail outlets are serviced through approximately 1,355 exclusive distributors. In addition there are approximately 540 Idea n U and other showrooms which supplement the distribution channels and provide customer service. It should ensure the availability of the products i.e. pre-paid SIM cards and recharge coupons at the outlets. The customer service centres like Idea n U and My Idea should be located at all prominent market places. The look and ambience of the service centres should be good to give the customers a good image of the company.

PROMOTION:
Promotion is a very important part of the marketing mix for Idea. Since a mobile connection is something which is same for all service providers, except for the quality of the network. It is the promotion that distinguishes various service providers by creating a

35

separate brand image in the customers mind. It is very important for positioning the company uniquely. Reaching the customers through all available means like TV, newspaper, radio, billboards etc. Making use of internet for its promotion on social networking sites and other interest groups.

PEOPLE:
Idea being a mobile service provider, the company makes a direct contact with customers only through its customer care executives. This can be done over the phone, through mail, or by face to face interaction at the companys service showrooms called My Idea. Whether as part of a supporting service to a product or involved in a total service, people are particularly important because, in the customer's eyes, they are generally inseparable from the total service. Consumers make judgements and deliver perceptions of the service based on the employees they interact with. Hence, the behaviour and attitude of the customer care executives can make or break the image of the company. Recruiting the right staff and training them appropriately in the delivery of their service is essential. Staff should have the appropriate interpersonal skills, aptitude, and service knowledge to provide the service. Staff should empathise with the problems of the people and should be responsive. Providing employee training to deal patiently with customer complaints. Staff should be given ample knowledge of the services and products so that they can effectively handle customer queries.

PROCESS:
This is the processes involved in providing a service and the behaviour of people, which can be crucial to customer satisfaction. It refers to the systems used to assist the organisation in delivering the service. For a mobile service provider like Idea, the processes involved are the timely and good delivery of its services like the quick recharge, fast processing of customer complaints, timely and prompt response of the customer care executives etc. 36

Ensuring good delivery of service at the operational level by using efficient systems, equipment and people. Training the customer care executives to response promptly to customer calls and requests. Using good quality infrastructure and technology to provide optimum service. Reducing the response time while attending calls by customer care executives.

PHYSICAL EVIDENCE:
Physical Evidence is the element of the service mix which allows the consumer again to make judgements on the organisation. Physical evidence is an essential ingredient of the service mix. Consumers will make perceptions based on their sight of the service provision which will have an impact on the organisation. The look and ambience of the service outlets should be good to enhance the image of the company since this is where customers come in direct contact with the company. The staff should be well dressed and cordial in behaviour. The location of the outlets should be convenient enough for the customers to visit. The staff should have complete knowledge of the products and services. The outlet should have complete information in the form of brochures, pamphlets containing details of the services, new tariff plans etc.

REFERENCES:

1. www. Ideacellular.com 2. www.trai.gov.in/annual report/ 3. www.thehindubusinessline.com

37

4. www.wikipedia.org 5. www.coai.in 6. www.adityabirla.com

38