Idea Business Model

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  • Topic: Aditya Birla Group, Idea Cellular, Kumar Mangalam Birla
  • Pages : 5 (1316 words )
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  • Published : December 8, 2010
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Idea Cellular INCLUSIVE BUSINESS CASE STUDY

IDEA CELLULAR’S INCLUSIVE BUSINESS MODEL
When Aditya Birla Group took over, Idea’s new management reoriented the company’s strategy to focus network expansion mostly in India’s remote areas where demand is both high and underserved. The company also built a distribution network of 1,520 branded service centers and more than 700,000 multi-brand retail outlets around the country as of March, 2009. These investments have enabled Idea to serve customers at the base of the economic pyramid by bringing coverage to rural areas and achieving economies of scale that help keep prices low. Idea’s approach has also included a suite of products and services customized to meet the needs of rural and low-income consumers. For example, Idea has launched small recharge sachets in denominations as low as $0.20. The company provides value-added services such as “music on demand,” which has been particularly successful in rural areas where FM radio does not reach. Idea’s media and advertisement campaigns are also conducted primarily in local languages, to reach out to rural users. Most recently, Idea has been working to extend its reach specifically to consumers who cannot afford their own phones through a Pocket Public Calling Offices (PPCO) project. PPCO is at once a product of Idea’s expansion efforts and a part of its strategy for further growth. The company considers PPCO a commercial project, and as such it was developed via Idea’s standard business development process: concept documentation, management approval, product configuration, testing, and full commercial launch. PPCO is a shared access model in which a mobile phone is used as a public phone operated by a micro-entrepreneur. To develop the model, Idea partnered with IFC to leverage its experience with shared phone projects around the world. Central to the model is a grassroots-level partnership, originally brokered by IFC, with India’s Self-Employed Women’s Association (SEWA). With limited financial support from IFC, SEWA fulfills critical project functions, namely: • Providing access to the information and relationships required to partner with rural micro-entrepreneurs • Financing micro-entrepreneurs to purchase and operate PPCO equipment • Training and building the capacity of PPCO operators While Idea provides overall management for the project and ensures regulatory compliance, SEWA is responsible for identifying and screening PPCO operators and providing them with training in their local languages. SEWA gives PPCO operators the financing to purchase PPCO equipment – including a handset, shared phone software, SIM card, and airtime for about $35, or just a SIM card for about $11 for operators who already own their own phones. This, in turn, provides the organization with interest income. SEWA also provides PPCO operators with technical support and collects data for monitoring and evaluation purposes. PPCO operators are responsible for maintaining PPCO equipment, promoting their businesses, and maintaining accurate call records. PPCO operators generate income by selling airtime to their communities, for which Idea pays a 20-47% commission depending on the volume of airtime an operator sells each month. Operators may also have additional revenue streams such as phone recharging and sales of prepaid cards to customers who own their own phones.

COMPANY BACKGROUND
Idea Cellular Limited (Idea) is the fastest growing telecom service provider in India. The company’s origins extend back to 1995, and it started its commercial operations in 1997 in Maharashtra and Gujarat states. Idea expanded into other service areas through a combination of organic growth and acquisitions. In late 2006, the Aditya Birla Group consolidated majority ownership over Idea and assumed management control. In February 2007, Idea engaged in an initial public offering to raise the capital necessary to support a network expansion. The Aditya Birla Group...
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