Professional Documents
Culture Documents
Submitted by:
Dharmender
Roll No-211
1
Summer Trainee
PGDM (International Business)
BIMTECH
ACKNOWLEDGEMENT
I would like to extend my sincere thanks to my corporate guide Mr. Kumud Singh
(Manager Corporate Sales, Idea Cellular Ltd.) and Mr. Ranjan Kaushal (Asstt. Manager,
Corporate Sales, Idea Cellular Ltd.) for giving me an opportunity to do my summer
training at their esteemed organization and assigning me a project topic. I am also
thankful to them for providing continuous cooperation, support and expert guidance
throughout the project. I would also like to pay my acknowledgements to the all
employees at Noida DST who helped me to get the field experience under their guidance.
I would also like to pay my acknowledgements to my project guide Prof. A.K. Biswas
for acting as mentor and as catalyst during the entire duration of my project. I am also
thankful to him for providing me with useful references and information, which were of
significant importance for the completion of the project.
I would also like to pay my acknowledgements to all the corporate executives, for taking
out time from their busy schedule and providing me with relevant information, which
contributed significantly to my project analysis.
Contents
Sr. No.
Topic
Page No.
Executive Summary
Introduction
11
Methodology
12
13
Current Trends
33
39
Conclusion
54
Recommendation
56
Limitations
57
Chapter 1
1.
Chapter 2
2.
Chapter 3
3.
Chapter 4
4.
Chapter 5
5.
Chapter 6
6.
Chapter 7
7.
Chapter 8
8.
Chapter 9
9.
Chapter 10
10.
11.
References
58
12.
Appendix-Questionnaire
59
Chapter 1
Executive Summary
Telecom Industry in India is touching new heights everyday and promises to be one of
the biggest markets across the globe but all Indian telecom companies are facing the
problem of decreasing ARPU (Average Revenue Per User). The project done with Idea
Cellular Limited was on to find the ways to increase the ARPU. The call rates in India
are lowest in the world and therefore there is a pressure on service providers to increase
the ARPU because their profit margin is decreasing continually.
The objective of the summer project was to understand the customer preferences while
choosing a telecom service provider. Other main objective of the project was to study the
trends in the International Telecom market.
The scope of the study was limited to Noida and Greater Noida region. This project was
conducted for Idea Cellular Limited to assess the preferences of mobile users in India. .
Data collected with help of questionnaire was put in excel sheets. A survey of 400
Mobile users was conducted in Noida and Greater Noida. The sample has covered the
mobile users of other service providers also as to understand the competition and their
strength and weaknesses.
The research design chosen was Descriptive Research Design because the survey was
conducted to get the customer insight and to know their preferences. Also it was to find
out perception about the service provided by telecom companies. So mainly it was to
describe the telecom market characteristics.
The sampling done was random sampling while conducting the survey. The survey was
conducted in Noida and Greater Noida region. A total of 400 telecom users were studied,
and most of them belonged to the youth category because my main objective was to find
out the spending habit of Indian youth. And the reason behind this was that its the youth
who is revenue generator today. The secondary data was collected to understand the
5
market trends and forecast in developed and developing countries. This data was mainly
collected from the research companies sites on the basis of their market research. These
trends then were analyzed whether these can be applied by Indian Telecom players.
The research showed that Idea Cellular Ltd. has a low image among its own customers.
They are not fully satisfied with the service they are getting. The main reason for
choosing a service provider is connectivity and Idea is not meeting the expectations of
the customers on this front. Idea is not able to retain its customers as compared to other
service providers. The churn rate for Idea Cellular is high and it has maximum of new
customers as compared to other service providers.
Satisfaction level with Price or Call rates of Idea users is high. Idea is positioned among
the user as a low price player. Idea attracts new customers on the basis of new attractive
scheme or promotional offers, means on the basis of prices which is a poor way doing of
business.
The trends in developed countries show that the customers are demanding new and new
Value Added Services. As 3G is about to reach India so these high quality value added
services will no longer be out of reach of Indian Telecom companies.
Mobile Blogging is a very good application that is catching up very fast. Mobile
marketing can be a good revenue generator for the telecom companies. Mobile Learning
can also become a good value added service because unlike e-learning, which is
dominated by corporate buyers, mobile learning is being driven by consumer,
government, and healthcare buyers. A variety of new and enhanced m-learning services
cab be language learning, test prep, training podcasts, location-based services and
handheld continuing education content.
Idea needs to focus on its existing customer base because the churn rate in telecom
industry is increasing at an alarming pace and the reason for it is the fierce competition.
As Airtel is doing now, calling its ex-customers and asking for the reasons for leaving
Airtel because it has realized the problem of churn.
Idea should work on its connectivity; its connectivity is not up to the desired mark. it
needs to keep coming with new attractive Value Added Services because the future of the
mobile telephony lies in Value Added Services.
Other thing Idea can do is to introduce attractive Value Added Service that are possible at
this point of time. 3G is almost reached and Airtel is starting IP TV. So Idea can take this
as an eye-opener. Idea can start applications like Mobile Magazine, Mobile Learning,
Mobile Marketing, Mobile Social Networking, Mobile Blogging and Music Downloads
etc. because these are very potential services which can generate huge revenues for the
company.
Chapter 2
Introduction
Statement of Problem
The countrys mobile service providers have been adding a combined 6.5 million
subscribers every month, making India the fastest growing telecom market in the world.
But ARPUs (Average Revenue Per User) of Indian mobile companies, which are already
the lowest in the world, is continuing to head further south, even as companies are
registering a significant increase in their overall revenues. IDEAs ARPU fell 1.6 per cent
to Rs 317 from Rs 322 a month a subscriber in the third quarter of 2006-07. However,
compared with the corresponding quarter of 2005-07, the figure fell a worrisome 15.1 per
cent. This decline has become a trend now; it has been declining continuously for past 34 years. So this is a cause of concern for the company.
The ARPU (Average Revenue Per User) for the Indian Telecom Industry is continually
falling. The call rates in India are lowest in the world and therefore there is a pressure on
service providers to increase the ARPU because their profit margin is decreasing
continually. So they need to introduce other services and find out other means to increase
the revenue.
Idea Cellular has seen a steady decline in its ARPUs on account of increased competitive
pressures. A part of the fall in the ARPUs can also be attributed to the reduction in
regulatory charges like the revision in interconnection usage charges, the reduction in
access deficit charge (ADC) and also due to a shift in customer profile. The company has
over the years witnessed a marked increase in its prepaid customers (as a percentage of
total subscriber base), which has caused a reduction in its blended ARPUs. However a
fast paced subscriber addition and an increase in the minutes of usage (MOU) per
subscriber per month has led to an increase in the overall revenues of the company. As it
is explained below:
Idea Cellular: ARPU and MOU
ARPU (Rs per subscriber per month)
Prepaid
Postpaid
Blended
MOU (per subscriber per month)
Prepaid
Postpaid
Blended
Service Revenue (Rs m)
Source:Company Prospectus
FY03
1330
426
727
FY04
1149
381
541
FY05
779
307
414
FY06
707
304
391
CAGR
-19.0%
-10.6%
-18.7%
414
103
207
9,403
583
199
279
12,965
463
185
248
22,464
523
224
289
29,489
8.1%
29.6%
11.8%
46.4%
What is ARPU
A cellular mobile service provider derives its revenues by way of tariff charges for
outgoing calls made by subscribers on its network. As such, revenue for a cellular mobile
9
service provider is simply a multiple of average revenue per subscriber per month
(ARPU) and number of subscribers. Let us now understand what determines the ARPUs
and subscriber base. Average revenue per subscriber per month, or ARPU, is the amount
of money that a cellular mobile service provider generates per subscriber per month. It
can be obtained by dividing the total wireless revenues by number of subscribers and
then dividing the output by number of months in a period. To even out the volatility in
ARPUs, if any, it is better to arrive at the figure by averaging the wireless revenues and
subscriber base for the latest two years. However, considering the rapid pace of
subscriber addition for Indian cellular mobile service providers, ARPU calculated as
dividing the trailing 12-months wireless revenues by latest subscriber base.
How are ARPUs calculated
ARPU is calculated as service revenue (excluding activation charges and infrastructure
sharing revenues) divided by the average number of subscribers for the relevant period.
ARPUs can also be calculated as minutes of usage (MOU) per user per month multiplied
by revenue per minute. In most cases, ARPUs are calculated for a month.
Do MoU and ARPU grow or fall together
Growth in MoU does not necessarily increase the ARPU. Most of such growth is due to
reduction in cost per unit thereby encouraging usage but as the revenue per minute is
lowered, the ARPU does not grow at the same pace. In fact it has been observed that
ARPUs have been consistently falling in spite of double-digit growth in MOU.
Importance of ARPUs
Tariffs and minutes of usage drive the ARPUs. The tariffs are representative of the
competitive pressure in the market, as increased competition will drive the tariffs down
to their more competitive levels. In certain cases, tariffs may also fall on account of a
reduction in the regulatory charges as levied by the regulatory body (TRAI in this case).
The minutes of usage are indicative of the usage of the service by subscribers and in turn
representative of the network utilization of telecom companies. Thus, the ARPUs are an
important tool for analyzing the subscriber and devising strategies to maximize revenues
10
through various tariff plans. The tariff plans are framed in such a way that they appear
attractive to new customers and also incentives the existing prepaid customers to switch
to postpaid tariff plans. This helps the company to maximize its reach with prepaid
customers as also to convert prepaid customers to relatively higher revenue yielding
postpaid customers.
Lower ARPUs and margins
Idea has a lower ARPU compared with Bharti Airtel and Hutchison Essar. Though it has
a slightly higher ARPU than Reliance Communications', it takes a hit in its operating
profit margin (OPM). Idea has a lower OPM at 33.6% compared with Reliance
Communications and Bharti Airtel both of which have OPM of close to 40%. The lower
ARPU can be attributed to the company's (a) lower market share; (b) absence in the
lucrative Mumbai circle and (c) high share of pre-paid customers (88%). The margin is
lower due to the lower ARPU and the launch of three new circles in the last year, which
dragged down the OPM. Going forward, as the operations in the new circles stabilise in
the medium term, the OPM would stabilise too.
11
Chapter 3
Objective & Scope
Objectives
The summer internship done with Idea Cellular Objective was to find the ways of
increasing the ARPU (Average Revenue Per User) for the company.
The objective of the summer project was to understand the customer preferences
while choosing a telecom service provider.
Other main objective of the project was to study the trends in the International
Telecom market.
Scope
The scope of the study was limited to Noida and Greater Noida region. This project was
conducted for Idea Cellular Limited to assess the preferences of mobile users in India.
The project is limited to direct observations from the data collected. Data collected with
help of questionnaire was put in excel sheets.
A survey of 400 Mobile users was conducted in Noida and Greater Noida. The
sample has covered the mobile users of other service providers also as to understand the
competition and their strength and weaknesses.
The survey was limited mainly to the youth because they are the most significant
part of the customer base and they are the trend setters. They are the customers where
revenues come from.
Scope of the project also includes the analysis of the strengths, weaknesses and
opportunities that the company possesses and the various threats posed by the
competitors like: Hutch and Airtel in the market.
Scope of the survey includes identifying customer needs and services that they
expect from a service provider so as to take measures to increase the average revenue per
user and increase the market share of Idea.
12
Chapter 4
Research Methodology
Collection of Primary Data
A systematic approach was followed to fulfill the objectives of this study. First of all, the
needs of the project were studied and on the basis of those needs a questionnaire was
formed. The data was collected from the Idea customers as well as the customers of
other service providers so that we could compare the services by Idea with its
competitors.
The objective of the questionnaire was to study the spending behavior of the telecom
users, to study for how long they stick to a service provider, also to find out the customer
priorities while buying the a new number.
The research design chosen was Descriptive Research Design because the survey was
conducted to get the customer insight and to know their preferences. Also it was to find
out perception about the service provided by telecom companies. So mainly it was to
describe the telecom market characteristics.
I did random sampling while conducting the survey. The survey was conducted in Noida
and Greater Noida region. A total of 400 telecom users were studied, and most of them
belonged to the youth category because my main objective was to find out the spending
habit of Indian youth. And the reason behind this was that its the youth who is revenue
generator today.
Collection of Secondary Data
The secondary data was collected to understand the market trends and forecast in
developed and developing countries. This data was mainly collected from the research
companies sites on the basis of their market research. These trends then were analyzed
whether these can be applied by Indian Telecom players.
13
Chapter 5
Description of Current Situation
Industry Growth Drivers
Overall economic growth and continued development of the Indian economy
The buoyancy of the Indian economy has increased the purchasing power of consumers.
Disposable incomes have risen by a CAGR of 10% over the last ten years, resulting in an
increase in consumption expenditure. According to the National Center for Applied
Economic Research (NCAER), the number of households in the middle income,
high income and rich categories is expected to increase to approximately 37 million,
21 million and 23 million, respectively, by financial year 2007 from approximately 24
million, 14 million and 12 million, respectively.
Increasing Affordability
This significant improvement in affluence coupled with the growing working population
is expected to be one of the key drivers for increased mobile telecommunication
penetration in the future.
14
Declining tariffs and reduced handset costs have enhanced subscriber growth
15
Tariffs have been declining over the past ten years. Handset costs have also decreased
significantly in recent years. This has reduced the entry barriers for new subscribers and
thus expanded the markets available to telecommunications service providers.
Fall in incremental capital expenditure per subscriber and economies of scale
Mobile operators in the Indian telecommunications industry have generally attained the
necessary number of subscribers to benefit from various economies of scale and to
negotiate better prices from network equipment vendors. As a consequence, as well as
because of significant subscriber growth, incremental capital expenditure per subscriber
is expected to fall in the future.
Increased regulatory clarity
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.
This situation should also make it easier for companies operating in the
telecommunications sector in India to raise finance and other funding on more attractive
terms given the greater predictability of the operational environment. Since the
regulatory framework is an evolving process within the industry, there remain certain
issues such as 3G Spectrum allocations and number portability which require further
clarity from the regulators.
16
17
Corporate Profile
Idea Cellular Limited is amongst the leading mobile operators and currently operates in
11 Circles which comprise one metropolitan Circle, three category A Circles, six
category B Circles and one category C Circle. In addition, it holds licenses for the
Metropolitan Circle of Mumbai and the category C Circle of Bihar. Its ranked amongst
the top three operators in six of the Established Circles. It is currently one of the fastest
growing mobile operators and has consistently grown in the Established Circles and New
Circles with a market share of Net Adds of approximately 16.7% in the period between
April and December 2006.
It is an experienced and well-positioned GSM service provider with original licenses in
seven of 13 Circles as a result of which it benefits from various incumbency advantages.
It has a history of expanding, integrating and rebranding Circles, as it did with, for
example, the Uttar Pradesh (West), Haryana and Kerala Circles. In November 2002 it
commercially launched in the highly competitive Delhi Circle and has gained a market
share of 11.5% as at December 31, 2006. It is well positioned to capitalize on the growth
opportunities in the Indian telecommunications market and will be able to leverage its
existing strengths in all 13 Circles and into additional Circles where it commence
operations.
It is now part of the Aditya Birla Group, which is sole promoter and is currently amongst
the largest business groups in India in terms of market capitalization. Since November
2005, companies belonging to the Aditya Birla Group have been major shareholders and
it has benefited from the Aditya Birla Groups strong and committed support. Since that
time it has invested over Rs. 25 billion in expanding and rolling-out network in the
Established Circles and the New Circles. Following this investment, in the last nine
months its subscriber numbers have grown significantly, increasing by approximately
68.9% to approximately 12.44 million subscribers as at December 31, 2006 from
approximately 7.37 million as at March 31, 2006, and cell-sites have increased to 8,600
as at December 31, 2006 from 4,763 as at March 31, 2006. As at December 31, 2006 its
18
network covered 1,627 Census Towns and 1,980 other population centers. For the
financial years 2005 and 2006, gross revenues were approximately Rs. 22.68 billion and
Rs. 29.73 billion, respectively, and EBITDA was approximately Rs. 8.29 billion and Rs.
10.86 billion, respectively. Its growth to date has been the product of a combination of
organic growth and acquisitions.
It is expanding its coverage in the Established Circles and the New Circles, and also is
pursuing new licenses to create a pan-India footprint. It has recently received License for
the Mumbai Circle and, through Aditya Birla Telecom Limited, License for the Bihar
Circle. The Mumbai Circle is attractive because Mumbai is the commercial capital of
India and also because of the community of telephony interests including the benefit of
traffic flows with other Circles, particularly Maharashtra, Delhi and Gujarat Circles. It
has also recently obtained an NLD license which will reduce operating costs.
In addition, it has nine License Applications pending for further Circles which, if
obtained, will give complete access to the Indian market. The table below explains the
market share of Idea in respective circles:
19
20
21
Growth Opportunities
1. Indian telecom market crossed 200 million telephone subscribers.
2. In the last two years 75 million new subscribers added.
3. About 5 million subscribers being added every month since Dec. 2005
4. Highest growth rate in the world, for the first time surpassing China
5. This growth has facilitated the expansion of BPO industry which employs 5 lakh
people - 400 employees added per day
6. 45 MHz of additional spectrum from defence to be made available for growth of
mobile services in the beginning of the year 2007
7. GSM spectrum between 15 MHz and 37 MHZ allotted in different service areas
8. CDMA spectrum between 2.5 MHz and 15 MHz allotted in different service areas
9. Nokia, LG, Ericsson have set up their manufacturing facilities in India
10. Motorola, Foxconn, Aspocomn etc., have also decided to set up their
manufacturing base with an investment of about US$ 650 million
11. FDI of US$ 2 billion in telecom manufacturing by 2007
12. A center of excellence in telecom technology in Public Private Partnership (PPP)
mode by 2007
13. Handset for Rs. 1,500 launched, expected to go further down to Rs. 1,000.
22
Growth Strategies
It believes that its well positioned to grow in the rapidly expanding Indian
telecommunications industry. It believes its growth strategies have and will continue to
enable it to:
Build on its strong position in the Established Circles
As at December 31, 2006, the footprint of its Established Circles alone covered
approximately 46.6% of Indias subscriber base. It enjoys 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
its network and its brand, has delivered growth in market share upon which it believe it
can build to strengthen its position in its Established Circles. For its New Circles and the
Bihar Circle, and for the licenses for which it have applied in category B and C Circles,
mobile penetration as at December 31, 2006 is 7.7%, which is lower than the 14.5% in
the Established Circles. This should mean that the entry barriers are less formidable and
the market opportunities greater. Additionally, its strong position in its established Circles
should provide it with advantages in contiguous Circles. For example, when it launched
in the Uttar Pradesh (East) Circle it benefited from its strong market position in the
neighboring Circles of Uttar Pradesh (west) and Madhya Pradesh. It therefore believes
that its leading position in the Maharashtra Circle will work to its advantage in the
intensely competitive Mumbai Circle.
The DoT intends to release further Spectrum in the 900 MHz and 1800 MHz ranges to
commercial mobile operators once the Indian defense services and other agencies vacate
these ranges and it anticipate that this could happen in the next three to six months. The
additional Spectrum should ensure that its not bandwidth constrained in any of its 13
Circles and thereby facilitate organic expansion. Although the opening up of additional
Spectrum will also allow further competitors to enter its 13 Circles, it believe that its well
positioned to face the increase in competitive pressures. It will evaluate 3G opportunities
as and when they become available.
23
It, and also the Aditya Birla Group, is seen as employers of choice. The Aditya Birla
Group offers career opportunities to high performing talent across its locations worldwide, which contributes to its attractiveness as an employer.
Focus on customer service to enhance brand appeal
It places significant emphasis upon delivering an efficient and friendly experience at all
contact points in the subscriber life cycle. Its tariffs are designed to be transparent and
easy to understand. It has developed call centers to focus on its subscribers needs for
service and to cross-sell its various products. It has consistently focused on innovative
products that address existing and latent needs of its subscribers. For example, it has
recently promoted a free one-year life insurance cover of Rs. 10,000 to a section of
customers who subscribe to its 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 44% of its employees serve in customerfacing roles.
25
Competitive Strengths
Competitive strengths are set out below:
Operations in 11 Circles covering a large part of the Indian market
As at December 31, 2006, the Established Circles and the New Circles covered 57.7% of
Indias total population and about 57.9% of Indias current subscriber base. It have
approximately 14.7% share of these subscribers as at December 31, 2006 although
services in the three New Circles were only recently commercially launched. Andhra
Pradesh, Gujarat and Maharashtra and the metropolitan Circle of Delhi, which are
economically well-developed, each with average per capita state domestic products
higher than the national average. These four Circles alone account for 30.4% of all
mobile subscribers in India as at December 31, 2006.
Market leader in three of, and established positions in the remainder of, the
Established Circles.
It is the market leader in the Haryana, Maharashtra and Uttar Pradesh (west) Circles by
number of subscribers. As at December 31, 2006 it had over 0.75 million subscribers and
a market share of 20.3% in the Haryana Circle, over 2.5 million subscribers and a market
share of over 23.0% in the Maharashtra Circle and it had nearly 1.5 million subscribers
and a market share of approximately 21.2% in the Uttar Pradesh (west) Circle. It believes
its leading market position has helped it to develop strong brand recognition and a high
profile among existing and potential subscribers. It believes this position also has
allowed it to establish a strategy of developing a larger, more active pre-paid card
distribution network than its competitors in these Circles.
26
27
distributed network architecture for its base station controllers (BSC) and switches in
the Established Circles and the New Circles which has helped it build a reliable network
whilst minimizing the transmission costs. It has deployed the highly developed
Intelligent Network system from Ericsson and Nokia for its prepaid system and has
integrated these with its Online Service Control system for online charging of roaming
SMS, WAP, MMS and GPRS for prepaid subscribers.
It has implemented GPRS across all the Established Circles and the New Circles with
Enhanced Data Rates for Global Evolution (EDGE), which provides its subscribers
with data transfer speeds superior to GPRS, activated in major towns across the
Established Circles and the New Circles.
29
Risk Factors
It faces intense competition from other operators
The competition in the Indian telecommunications industry is intense. It faces significant
competition from companies that have a pan-India footprint such as Bharti Airtel
Limited, Tata Teleservices Limited and Reliance Communications Ventures Limited.
Competition may affect its subscriber growth and profitability by causing its subscriber
base to decline and cause both a decrease in tariff rates and average revenue per user
(ARPU) and an increase in Churn and selling and promotional expenses.
It may be unable to manage its rapid growth
Idea has experienced significant growth in recent periods. Its total number of subscribers
has increased from 7.36 million as at March 31, 2006 to approximately 12.44 million as
at December 31,2006. Based on statistics compiled by the Cellular Operators Association
of India (COAI) it acquired a approximately 5.08 million subscribers in the last nine
months, of which its records indicate approximately 97.0% were prepaid subscribers.
To meet anticipated growth in demand for mobile services it intends to increase the
capacity of the Established Circles and to continue to roll-out network in the New
Circles. It also plans to roll-out services in the Mumbai and Bihar Circles and to operate
its NLD license. It is actively seeking further licenses and has filed the License
Applications. There can be no assurance that it will be able to execute owes strategy on
time and within budget or that it will retain its subscribers on its network, achieve the
network quality, capacity or revenues or enroll the number of new subscribers that it have
planned.
30
The Churn rate in its networks is high increasing its subscriber acquisition costs
and resulting in the loss of future subscriber revenues
Churn, or subscriber attrition, is an industry term used to refer to subscribers leaving a
network. It calculate churn by dividing the total deactivations in a period by the average
number of subscribers for that period and dividing the result by the number of months in
the relevant period. Churn in mobile networks in India is high especially among pre-paid
customers. Its average monthly Churn was 6.2%, 7.3% and 6.2% for financial years
2004, 2005 and 2006, respectively, comprising 6.7%, 8.2% and 6.4% of pre-paid
subscribers, respectively, and 4.6%, 4.4% and 5.3% of post-paid subscribers,
respectively. Its pre-paid subscribers accounted for approximately 75.7% and 81.8% of
its total end of period (EOP) subscribers as at March 31, 2005 and 2006, respectively.
Its revenues are derived solely from providing mobile services and its dependent on
four of the Established Circles for a significant proportion of revenues
Its focused exclusively on providing mobile services, which constituted approximately
99.1% and 99.2% of its revenues during the financial years 2005 and 2006, respectively.
Its future success depends, to a large extent, on the continued growth of the mobile
market and there being no adverse regulatory, technological or other changes impacting
the mobile industry, its ability to add new revenue streams profitably or its ability to offer
complete telecommunications solutions to its subscribers.
Further, it is substantially dependent on four of the Established Circles, namely the
Andhra Pradesh, Delhi, Gujarat and Maharashtra Circles, for its revenues and continued
growth. According to COAI, it had in aggregate approximately 2.42 million, 3.19 million
and 4.61 million subscribers in these Circles as at March 31, 2004, 2005 and 2006,
respectively, which represented approximately 88.8%, 62.9% and 62.6%, respectively, of
Its total subscribers at those dates. 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.
31
It had negative cash flows in the financial years 2002, 2003 and 2006. Any negative
cash flows in the future could have an adverse effect on its results of operations
It operates in a capital-intensive industry and has historically financed its capital
expenditure requirements through a combination of cash generated from operations, the
sale of equity interests and secured and unsecured borrowings. It made substantial
investments to meet its capital expenditure requirements in financial years ended 2002,
2003 and 2006 and, in consequence, had negative cash flows of Rs. 126.23 million, Rs.
4.21 million and Rs. 227.97 million, respectively.
It faces competition from Government-owned companies such as BSNL and MTNL
It competes with players like MTNL in the Delhi Circle and BSNL in its other Circles.
MTNL and BSNL also are incumbent operators in certain of the Circles for which it has
submitted License Applications. These telecommunications operators are state-owned
enterprises and are controlled by the Government and thus enjoy certain advantages. For
example, BSNL is not required to pay Entry Fees, giving it a significant competitive edge
over other mobile operators.
These companies also have interconnect benefits allowing, for example, MTNL to
provide, as it has recently done, local call rates to its subscribers for calls between the
metros of Mumbai and Delhi. Additionally, BSNL holds an NLD license. There can be
no assurance that it will be able to compete successfully with the Government operators
and, if the Government does not ensure a level playing field its business, results of
operations, financial condition and prospects could be negatively impacted.
32
Its revenues from Roaming are dependent on its ability to enter into appropriate
arrangements with other operators
Currently all mobile operators offer Roaming services to both their pre-paid and postpaid subscribers. Until recently, Roaming was a sizeable source of revenue for mobile
operators. The strategy deployed by integrated operators and those having a pan-India
footprint is to encourage preferred domestic Roaming whereby the subscriber roams with
the same operator even when outside his or her home network. Until it achieves a panIndia footprint it will not be able to provide such seamless Roaming services to its
subscribers (especially when compared to its major competitors) unless it continue to
have appropriate arrangements with other operators.
33
Chapter 6
Latest Market Trends in Developed Countries
34
replace them more often and churn less than other wireless subscribers. They also are
more open to mobile ads.
35
more than half of projected mobile data revenues by 2011, generating $93 billion
globally--while multimedia services including music, games, TV and adult content will
grow to about $38 billion, user-generated content will blossom into a $13 billion market.
"We may not be buying as many games, full-track downloads or multimedia messages as
operators would like, but we are spending a huge amount of time sending and reading
text messages and organizing our lives using the phone's address book, clock, alarm and
calendar functions," Informa senior analyst Daniel Winterbottom said in a prepared
statement. "Over time, users will warm to other data services as well. The mobile web is
a prime example: WAP failed to take off when it was first launched, but five years on,
more and more users have become comfortable with accessing news or other information
on their mobile phones."
37
An additional new Ambient Insight report anticipates growing demand for m-learning
tools within the healthcare sector. Ambient says healthcare buyers are already spending
over $96 million annually on mobile products including clinical applications, medcasts,
CME exams, licensing exam preparation and medical reference, and anticipates spending
will roughly triple to $276 million by 2011.
38
Chapter 7
Findings & Analysis
1. Reason for Choosing
The survey reveals that the main reason for choosing Idea is New Good Scheme; more
than 50% Idea user who responded the survey were attracted to buy Idea Cellular
because of its New Good Scheme. Other main reason for choosing Idea was Call Rates
of Idea Cellular. But if we see the General trend, people choose any mobile service
mainly because of its better connectivity.
Reason for Choosing Idea
3% 3%
9% 0%
51%
Attractive Number
Call Rates
34%
Better Connectivity
New Good Scheme
Brand Name
Value Added Services
25%
27%
5%
10%
25%
Attractive Number
Better Connectivity
Brand Name
Call Rates
Good Customer ServiceNew Good Scheme
Value Added Services
40
2. Duration of Usage
The duration of usage shows the loyalty towards a brand. Here according to the survey,
only around 50% of the Idea customers are using Idea for more than 6 months but if we
see the general trend, the people using a telecom service providers service for more than
6 months is 60%. So there is less customer retention in case of Idea Cellular as compared
to other users.
33%
40%
15%
12%
Less than 3 Months 3-6 Months 6-12 Months More than 1 Year
32%
47%
13%
8%
Less than 3 Months 3-6 Months 6-12 Months More than 1 Year
41
3. Monthly Bill
Monthly bill for Idea cellular is almost similar to the other service providers but if we see
it closely the portion of user spending more than Rs.800 is lesser than the Industry
average.
20%
23%
51%
Below Rs.300 Rs. 300-500 Rs. 500-800 Above Rs.800
24%
19%
48%
Below Rs. 300 Rs. 300-500 Rs. 500-800 Above Rs.800
42
21%
79%
Yes
No
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5. VAS Used
According to the survey 55% of the mobile users do not use VAS but this figure is
alarming high for Idea Cellular i.e. 70%. Main VAS used by Idea customers is dialer
tones and ring tones. And same is the case for the whole telecom industry. So it needs to
introduce new attractive VAS and make people know about them.
6%
3%
9%
70%
12%
10%
1%
4%
15%
55%
Dialer Tones
Picture Messages
44
3%
15%
73%
3%
22%
67%
45
3%
21%
27%
37%
5%
40%
12%
33%
46
3%
15%
21%
46%
12%
33%
55%
47
9%
27%
58%
2%
11%
34%
48%
48
3%
12%
27%
52%
5%
7%
24%
52%
49
Brand Idea
6%
6%
23%
23%
42%
Very Poor Poor Neutral Good Very Good
Brand Airtel
0%
2%
21%
24%
53%
Very Poor Poor Neutral Good Very Good
50
0%3%
15%
36%
46%
5%
5%
10%
36%
44%
51
3% 3%
15%
29%
50%
2%
5%
39%
47%
52
If we compare these services providers on different parameters then Airtel is far at height
in terms of connectivity followed by Hutch, Idea and Reliance. Idea is at the lower end in
terms of connectivity followed by just only Reliance.
53
In case of customer care services Airtel is on top followed by Hutch, Idea and Reliance.
Reliance customer care service is considered to be the poorest among the four players.
Idea has almost equal quality of customer care service.
Airtel and Hutch are on the Heights of the Branding as compared to Idea and Reliance.
Idea is quite low as compared to Hutch and Airtel on the branding. And Reliance is at the
lowest end of customer care service.
In terms of VAS, there isnt much difference among the service providers. All of them are
almost on the same line but Idea is a little ahead.
If we take Giving Attractive New Schemes parameters then Idea is on the top of all.
Hutch is on the 2nd spot followed by Airtel and Reliance is at the lowest level.
Also in case of Promotional offers, Idea is leading the league followed by Reliance and
then Airtel and Hutch at the lowest place.
If we compare these on the basis of price, Reliance is having the lowest prices followed
by Idea Cellular. Idea is having lower rates than its GSM competitors i.e. Airtel and
Hutch.
54
Chapter 8
Conclusions
The reasearch shows that the Idea Cellular Ltd. has a low image among its own
customers. They are not fully satisfied with the service they are getting and customer
satisfaction is the base for any company to survive. The main reason for choosing a
service provider is connectivity and Idea is not meeting the expectations of the customers
on this front.
Idea is not able to retain its customers as compared to other service providers. The churn
rate for Idea Cellular is high and it has maximum of new customers as compared to other
service providers. And its a satisfied old customer who spends more money than a new
one. Monthly spending by Idea users is less than the other players.
The future of the mobile companies lies in Value Added Services, these services will be
the revenue generator in the future. Idea customers pay more attention to Value Added
Service related messages than other customers. Unless a customer know about something
how can he use it.
Survey shows that the customer portion that doesnt use any VAS for Idea is very large.
The main VAS used by Idea as well as generally are Dialer tones and Ringtones. The
money spent on VAS by Idea customers is lower than the general customers.
Satisfaction level with Price or Call rates of Idea users is high. Idea is positioned among
the user as a low price player and hence Idea is trying to penetrate the customer base with
lower prices. But even when its prices are lower than others customers are not happy
with it as compared to Airtel whose prices are higher and customer are happy for the
prices. The reason is that Airtel provides the value for money, it provides connectivity
whereas Idea has poor connectivity.
Idea attracts new customers on the basis of new attractive scheme or promotional offers,
means on the basis of prices which is a poor way doing of business.
55
In terms of customer care service also Airtel and Hutch are above Idea. Idea is also not a
big Brand name as compared to others like Airtel and Hutch. So these things like
connectivity, customer care service and brand name stand for quality. And the company
which lacks these fields is considered poor.
The trends in developed countries show that the customers are demanding new and new
Value Added Services. As 3G is about to reach India so these high quality value added
services will no longer be out of reach of Indian Telecom companies. Mobile sports is
going to be a big start in Asia with Beijing Olympics.
Mobile Blogging is a very good application that is catching up very fast. Another trend
that is catching up is Mobile Magazine. In developed countries some magazine
publishers have begun offering mini-versions of their content via mobile phones.
Mobile marketing can be a good revenue generator for the telecom companies. It can be
one of the major revenue generator among value added services. And good news is that
people are more open to mobile ads. Successful will leverage mobile phone technology
to create deeper and longer-lasting customer relationship.
Mobile Learning can become a good value added service because unlike e-learning,
which is dominated by corporate buyers, mobile learning is being driven by consumer,
government, and healthcare buyers. A variety of new and enhanced m-learning services
cab be language learning, test prep, training podcasts, location-based services and
handheld continuing education content. Healthcare buyers are already taking the benefits
of m-learning in Europe.
But all these services can be delivered when a company retain its customers and biggest
loophole in retaining customer for Idea is its network. And network is the foremost thing
that customer wants.
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Chapter 9
Recommendations
First of all what Idea need to do is to improve its image among its own customers. Its
churn rate is high so it needs to retain its existing customers along with acquiring new
customers because its old customer who brings revenue for the company. So Idea needs
to focus on its existing customer base because the churn rate in telecom industry is
increasing at an alarming pace and the reason for it is the fierce competition. As Airtel is
doing now, calling its ex-customers and asking for the reasons for leaving Airtel because
it has realized the problem of churn. So Idea also need to focus on this thing.
Idea should work on its connectivity; its connectivity is not up to the desired mark. Its
the connectivity of the service provider that decides the quality. Idea also needs to
improve the customer care service. Idea is able to start new VAS in the past but presently
few customers use these VAS. So it needs to keep coming with new attractive Value
Added Services. And the reason for that is the future of the mobile telephony that lies in
Value Added Services. They will bring the revenues for the telecom companies
Other thing Idea can do is to introduce attractive Value Added Service that are possible at
this point of time. 3G is almost reached and Airtel is starting IP TV. So Idea can take this
as an eye-opener. Idea can start applications like Mobile Magazine, Mobile Learning,
Mobile Marketing, Mobile Social Networking, Mobile Blogging and Music Downloads
etc. because these are very potential services which can generate huge revenues for the
company.
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Chapter 10
Limitations
My study had certain limitations which are explained below:
1. As I was doing my summer training at DST ( Distribution & Sales Terminal ) so I had
no details of customers that company have at the Corporate office.
2. The sample for the survey covered subscribers from NCR only.
3. The time for the research was limited.
4. The result is limited to the reliability of method of investigations, measurement and
analysis of data.
5. People were not interested in filling questionnaire properly.
6. It is very small research, which may be insufficient to give the real picture.
58
References
www.fiercemobilecontent.com/channels/trends_metrics
www.equitymaster.com/ideacellular
www.moneycontrol.com/india/newsarticle
www.ideacellular.com
www.ibef.org/industry/telecommunications
www.indiatelecom.org
59
Appendix-1
Questionnaire
PART A
NAME
_______________________________________
AGE
(a) 10-25
(b) 26-40
(c) 41 and above
SEX
(a) Male
(b) Female
INCOME
(a) Up to 2 lakhs (b) 2-5 lakhs
(c) 5 lakhs and above
(d) N.A.
PROFESSION (a) Service
(b) Business
(c) Student
(d) Any other
PART B
1) Which companys telecom service you are using?
a) Airtel
b) Hutch
c) Idea
d) Reliance
e) Tata Indicom
2) How long you have been using it?
a) Less than 3 months
b) 3-6 months
c) 6-12 months
d)
f) Any Other___
More than 1 year
5) Do you pay attention to messages for Value Added Services like ringtones,
background tones, dialer tones, contests, picture messages etc.?
a) Yes
b) No
6) Which Value Added Services you generally use?
a) Ringtones
b) Dialer tones
c) Background tones
d) Contests
e) Picture messages
f) Mobile mail
g) GPRS
h) None
7) How much you spend on Value Added Services per month
a) Less than Rs. 15
b) Rs. 15-40
c) Rs. 40-80
d) More than Rs. 80
8) An overall service offered by service provider justifies the price charged by it.
a) Strongly Agree b) Agree
c) Neutral
d) Disagree e) Strongly Disagree
9) The connectivity is very good
a) Strongly Agree b) Agree
c) Neutral
d) Disagree
e) Strongly Disagree
c) Neutral
d) Disagree
e) Strongly Disagree
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d) Disagree
e) Strongly Disagree
c) Neutral
d) Disagree
e) Strongly Disagree
c) Neutral
d) Disagree
e) Strongly Disagree
d) Disagree
e) Strongly Disagree
15) How would you rank the promotional offering by the company?
a) Very Good
b) Good
c) Average
d) Poor
e) Very Poor
PART C
Mark the following on scale of 1-7: Very Good=7, Very Poor=1
I.
Tangibles:
The physical facilities at servicing outlets are visually appealing and organized
(well maintained reception area, computerized billing)
____
The payment counters are enough at outlets.
____
II.
Reliability :
Provide their services at time they promise to do so.
If a customer has a problem, shows a sincere interest in solving it.
____
III.
Responsiveness:
Personnel give prompt services to customers.
Any queries at any point of day convenient to customer.
____
____
____
IV.
Assurance
Personnel at servicing outlets are courteous with customers
____
Have knowledge to answer customers questions.
____
V.
Empathy:
Give individual attention and understand specific needs
____
It keeps customers informed about services and schemes offered
____
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