Idea and Telecom Industry

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  • Pages : 16 (5633 words )
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  • Published : January 20, 2013
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Executive Summary
In this report, the mobile services industry has been analyzed for 3 year period from Apr’09-Dec’11 and Idea Cellular Limited has been compared with both the industry standards and the market leader, Airtel. The current and likely future trends in the industry are identified with respect to market dynamics, subscriber growth, revenue growth, policy regulation and investments. It is believed that after a period of price war over the past 3 years, a consolidation phase will follow in the near future. Moreover, while data services will dominate urban growth, voice services growth will be stimulated by the rural region with a low tele-density of around 35%. Idea, with a revenue market share of 13.2% is the 3rd largest players in the segment. The company strengths include - an ARPU of Rs. 155 per quarter which is higher than the industry standard of Rs. 95, better MOU compared to the industry average, synergies with ABG and AXIATA and acquired 3G spectrum licenses in 11 service areas. Further, with the company's increasing focus on value added services (e.g. Idea MyCash), experience in M&A and sound internal control systems, the company is poised for higher growth. Airtel, with a market share of 20% has a higher ARPU than both Idea and the industry at Rs. 187 per quarter. It’s present in all 22 circles with 3G in 13 of these circles. Both the companies are looking to increase revenues from VAS and 3G in the coming future. However, Airtel with its large market presence has been able to use its economies of scale more effectively and has achieved better operational efficiency than Idea. In order to challenge Airtel in the future, the following challenges have been identified for Idea: slower growth in its subscriber base as compared to the industry, low operational margins and ineffective use of economies of scale as its biggest challenges. Idea must address its issue of slower growth in its subscriber base by providing better tariff plans and VAS to customers not only in its existing markets but also rural areas. Problems of low operational margins must be addressed by better utilization and sharing of 2G resources. It must also look to take the M&A route for better use of its economies of scale. In the process, the company must be careful about legal risks in M&A activities and decreasing profitability due to increasing competitive pressures.

Contents
Letter of Transmittal3
Executive Summary4
Introduction7
Numerical Profile of the Indian Telecommunication Industry8
Key Performance Indicators8
Process Profile of the Indian Telecommunication Industry10
Subscriber base10
Revenues11
Market Dynamics13
Investments14
Regulatory aspects14
Idea Cellular Ltd. – Company Profile16
Key Performance Indicators16
Financial Metrics18
Idea’s External Strategy18
Idea’s Internal Strategy20
SWOT Analysis20
Bharti Airtel Ltd. – Company Profile22
Key Performance Indicators22
External Strategies and related significant developments:24
SWOT analysis25
Bridging the Gap26
Exhibits28
Exhibit 1 – Idea Subscriber Base (June 2009 – September 2011)28
Exhibit 2 – Indian Wireless Telecommunications Industry Subscriber Base (June 2009 – September 2011)28
Exhibit 3 – Idea’s Market Share in Different Service Areas29
Exhibit 4 – ARPU for Idea and the Indian Telecom Industry30
Exhibit 5 – Revenue per Employee per Month for Idea30
Exhibit 6 – Subscriber per Employee31
Exhibit 7 – Quarter-wise financial and Operating results for Airtel31
Bibliography32

Introduction
The report studies the wireless telecommunication services industry in India covering the wireless telecommunication services, viz. GSM & CDMA based cellular services & corresponding value added services (VAS) like 3G. The standards & norms of the industry, (ARPU, MOU) that measure the performance of a telecommunication services company are identified. Then an...
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