IDEA - 5 : Smart Move, Sirji

Seated at the fifth place of VOICE&DATA's Top 10 tally of service providers
is Idea Cellular, which also emerged as one of the cleverest bidders at the
recent 3G spectrum auction. With a total revenue earnings of Rs 11,390 crore
during the last fiscal, the company recorded 12.5% increase in telecom services
revenues.

The national revenue growth for the calendar year 2009, shrunk to roughly
12.5%, compared to the 22% growth that the company enjoyed in the year before.
The reduction can be attributed to the steep drop in prices that the industry
saw last year and also the operator paid revenue of previous year transferred to
unpaid revenue of 2009-10, due to the free talk time offers with subscriptions,
by new entrants.

The company's subscriber base grew to over 63.8 mn in FY 2009-10 from 43 mn
in the previous year. The most important thing that happened for the telco was
that it became a pan-India integrated GSM operator, with presence in all
twenty-two service areas in the country. The fiscal saw the operator commencing
operations in seven telecom service areas-Orissa, Kolkata, West Bengal, Tamil
Nadu, Chennai, Jammu and Kashmir, Assam and the Northeast.

In FY 2009-10, the company invested about Rs 5,000 crore in rolling out
services in new circles. This perhaps was the peak investment phase for the
company; therefore other than 3G, in the next year there are likely to be lower
investments. The operator has acquired 2.1 GHz spectrum for eleven circles-Maharashtra,
Gujarat, Andhra Pradesh, Kerala, Punjab, Haryana and Uttar Pradesh. Its capex
guidance for FY 2010-11 is Rs 3,000 crore, excluding any 3G related investment.

A key development for the company in FY 2009-10 was completion of Spice
acquisition. Another big win for the operator was receiving the approval from
the Gujarat High Court for demerging its passive infrastructure-like towers and
power back-up plants-to its wholly-owned subsidiary Idea Cellular Towers
Infrastructure.

The company can boast of over 225 bn minutes of use in network, and witnesses
13.5% growth q-o-q in overall minutes (excluding Spice). Its MoU per sub has
increased.

The operator saw a number of highs and lows. Amidst the pay-per second
billing turbulence, Idea launched nationwide 40 paisa a minute plan and also the
national per paisa plan. The total tally of cell sites across the country came
to 65,000. The optical fiber cable network (OFC) rollout continued at a brisk
pace during FY 2009-10, and as a result, Idea closed the year with a total of
42,100 kms.

Idea has been the frontrunner in introducing innovative VAS MD, Idea Cellular, Sanjeev Aga

How would you rate your performance in FY 2009-10? The Indian telecom sector witnessed fierce price competition in the last financial year. Lower tariffs coupled with higher channel payout by new competition, and increased incidences of multiple SIM ownership led to an all-time high reported subscriber net additions. In such a scenario, improving capacity utilization and operational efficiencies; leveraging of spectrum and scale advantage in incumbent service areas; a calibrated approach for new areas; sophisticated processes; brand power; and a strong balance sheet, positioned Idea to emerge competitively stronger during and after the current difficult phase of market overcapacity and hyper competition. During the calendar year 2009, Idea, in fact, increased its revenue market share from 11.4% to 12.7%. Even in our eleven established service areas, the share increased from 17.5% to 18.8%. What is your 3G rollout strategy? Idea Cellular won 3G spectrum in eleven service areas at a total cost of Rs 5,768.59 crore. The 3G spectrum footprint of Idea covers a very high proportion, ie, 81% of Idea's total national revenues. Our bidding strategy and the auction results significantly enhance Idea's competitive position in the market. The network rollout plan for launching high-end data services on the 3G platform is already underway. We plan to be ready to launch services soon after the spectrum is allocated to us. With revenue margins shrinking, what are your expectations from 3G services? Idea has been the frontrunner in the introduction of innovative value added services in the Indian telephony market. As a result, Idea records the highest percentage of VAS revenue of the overall revenue, as compared to other industry players. This gives us an edge in further enhancing our data services portfolio. Does mobile number portability (MNP) make you anxious? No, we have always welcomed MNP. In fact, Idea was amongst the first operators to be ready with MNP supporting network. You have been spending considerable time, money and attention on popularizing VAS for going green. What is VAS's contribution to your business? Building a strong VAS portfolio has always been a key focus area for us. Be it mobile TV, which was launched for the first time in India on the Idea network; exhaustive music library in multiple languages; DTs/ RBTs; and other content downloads-Idea has consistently grown its VAS offerings resulting in revenue growth. We did a few pilots to demonstrate how innovative VAS offerings on the mobile platform can go a long way in saving paper. For example, mobile menu and mobile billing application was introduced in Barista and Café Coffee Day outlets. Paperless toll ticket at Bandra Worli Sealink and DND flyover was promoted through a special initiative designed around our 'Use Mobile, Save Paper' themed campaign. Currently, over 11% of our overall revenue is contributed by VAS.

Reinstating it focus on value added services, the operator launched a series
of environment campaigns and also introduced innovative services like pretones.

It also did a few pilots to demonstrate how innovative VAS offerings on the
mobile platform can go a long way in saving paper in the day-to-day activities.

Currently, VAS contribution to the total revenue is about 12%. To further
strengthen its stake in the services space, Idea plans to launch an application
store powered by the VAS company Spice Digital called Mobstore.

All set to plunge in the data pricing war, Idea Cellular has recently
introduced unlimited internet plan of Rs 98 with 30 days validity for its over
1.5 mn mobile subscriber base in Mumbai. The telco also introduced daily
internet surfing plan for Rs. 8 per day.In this plan, user can surf internet for
up to 70 MB download. After 70 MB of download users have to pay Rs. 5 per MB.
The smart bidder at 3G auctions now plans to sell 3G Services on $300 smart
phones in India.

Following the footsteps of Bharti Airtel and Reliance Communications, Idea
Cellular too is focusing on expanding its managed services portfolio on a
pan-India basis.