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2011

Idea Cellular Ltd.

Submitted By:
AMIT KUMAR

Submitted to:
Miss. Shivani Mam
11/30/2011

Idea Cellular:
Idea Cellular is nothing but a company (wireless telephony) that operates in around twenty two telecom circles i.e. in India. In 1995 it came into existence. It began as a joint business enterprise in between Aditya Birla Group, Tatas, and AT&T by appending Wings Cellular (that operated in UP, MP), Tata Cellular and Birla AT&T communications. At the starting it had just some degree of footprint in the field of GSM. In the year of 2004 Escotel acquisition provided Idea a properly pan India presence wrapping MP, AP, Goa, Gujarat, UP, Maharashtra, Chhattisgarh, Haryana, Delhi, West Bengal, Kerala, Rajasthan. It had won award of GSM Association for best billing as well as customer care solutions for two successive years.

Pestle Analysis:
The growth of telecom sector is very fast in India. Indian telecom industries have third highest position in the globe. At present there are 225 million mobile subscribers.

Political Attention

Government is giving special attention to these private sectors. TRAI is the government body for telecom industry which controls all service providers. In India out of 100 people 1.38 people have telephone, but set target is 6 people per 100. It means there is requirement of more 45 million connections which cost around 60 billion US$. In todays condition the there is political stability is in favor of the telecom industries.

Economical Attention

Wealth of any country depends upon its economic condition. India comes under growing economy. India was also less affected by the recession than other developed countries. So there are more chances of continuous growth for India. Telecom Industry contributes 1% to GDP. Therefore the economic condition of India is good for the telecom sector.

Social Attention

The telecom industry has brought revolution in the societies of India in the field of communication. It is decreasing the cost and the time-period for the transfer of messages. In 2005 there were 110 million connections which increased to 250 million in 2007 which proof people eagerness to adopt new medium of

communication. Technological Attention Technology has its own value in telecom companies. Adopting new technology like 3G has become the mode of survival for the companies. Sooner the company adopts the technology greater opportunity it enjoys. Legal Attention Telecom companies in India are controlled by government there are bodies like ministry of communication and Information Technology which make rules for these companies. Indian telecom policy in 1994 encourages foreign and private investment which became more liberalize in the form of Indian Telecom Policy in 1999. Environment Attention Environment play important role for the existence of the company. It includes culture, behavior, demographic condition which affects the company. It is important for the company to mould itself according to the environment.

Porter five factors:

Threat of rivalry: Today there is lots of competition between telecom companies to be ahead of each other. There are government companies like BSNL and MTNL. Some private Indian companies like Tata, Reliance and some are foreign companies like Vodafone, spice. Threat to new entrants: Indian telecom companies facilitates opportunities to foreign companies in different fields like; VPN, satellite phone calls, 3G, international calls and value added services. Market for idea Growth Avenue: Rural telephony. Enterprise telecom service. VAS (value added services)

3G WiMAX Infrastructure sharing Virtual private network. Managed services

In India big amount of players up-and-coming in the market national level from its state level existence like; Aircel Virgin Spice Idea Vodafone

Threat of substitute product and service:

The services like; GSM, internet, VOIP, CDMA mobile, Wire line, broadband, carriers,
VSAT, MPLS-VPN, etc. are provided by telecom industry. While talking about internet telephony, it is increasing as a good alternative. With cheaper rate it offers video conferencing just like Skype. ISP 1. BSNL 2. MTNL 3. SIFY 4. BHARTI AIRTEL 5. RELIANCE 6. TATA PHOTON MARKET SHARE (%) 45.2 19 8.9 6.8 6.1 4

Bargaining Power of Customer: As it is offering services at cheaper rate, bargaining power of its customers is very low. But due to the launching of mobile services at cheaper rate by Airtel and other telecom companies, customers acquired many options. So it could be bargaining power from the customers point of view. Bargaining Power of Suppliers: Idea cellular consumes iron, aluminum, electric wires for tower making. It purchases these raw materials in bulk quantities that every supplier wants to sell their product. Thus the bargaining power of suppliers is very less.

Opportunities:
Increasing number of cellular phones Starting of 3G services Nokia providing Idea the vender-atheist consultancy services Idea offers Internet connectivity in 20 circles Idea joined IBM to integrate some IT work

Increase in the number of mobile phone is an opportunity for Idea because it can be a reason of increase in consumers of services. 3G technology is a new technology in mobile world. It is costly to setup but once it is setup then it gives profit in the sense of speed, quality and coverage. People are also moving to the 3G. Today Nokia is also manufacturing mobile with 3G functioning. Nokia is helping idea in their business models, effectively of systems, and technologies.

Threats:
Brand name of other companies Force by courts to reduce tariff New Players Promotional prices Increased network costs Decline of ARPU

There are many other companies like Airtel, Vodafone which has very repudiated brand image and are potential threats for idea. Force by the courts to reduce tariff has resulted in lowering of service tax of service provider. New players like Aircel started one paisa per second, as a result it become very difficult to reduce call rates, but for survival in market it is necessary to do. Adopting new technologies in the network is costly and increases the cost price. According to ABI research ARPU of telecom including India is falling.

EFE Matrix:

KEY Factors Opportunities Increasing number of cellular phones Starting of 3G services

Weight

Rating

Weight Score

.3 .1

4 3 3

1.2 .3 .6

Nokia providing Idea the vender-atheist .2 consultancy services Idea offers Internet connectivity in 20 circles Idea joined IBM to integrate some IT work Threats Brand name of other companies Force by courts to reduce tariff New Players Promotional prices Increased network costs Decline of ARPU Total .11 .04 .08 .02 .05 1 .05 .05

3 3

.15 .15

2 1 2 1 1

.22 .04 .08 .02 .05 2.81

We can observe in EFE matrix that Strategies of handling the opportunities is average and need to improve.

A brief about Internal Analysis:

Internal analysis is very essential for strategic management of an organization. To identify organizations strength and weakness we need the help of internal analysis. By going through this analysis the organization will be able to know about the merits and demerits which will help to fulfill the needs of organizations target markets. From the organizational sustainability and customer point of view the strength as well as weakness is identified. (David, 2008) It is because sometimes the customers recognize what an organization could not recognize. It anticipates well about the capabilities of an organization.

Significance:

It estimates the size or quality of such things like; market condition of business, differentiation from the competitors, problems faced by the customers with companys products and the way to deal with their problems.

Profit analysis:

This analysis can be done through different resources as explained below:

Physical: It is a public listed company. It has license to operate on twenty two fields. Now in
around fifteen service fields its operations are present, incorporating a customer base of twenty four million wrapping greater than sixty percent of population in the total Indian telecom. (Capitaline, 2009) Now in Mumbai it has got its corporate office. And in Gujarat it has got a registered office. The whole spheres of offices are situated in around seventeen states. It has joint venture with some famous organizations like; NDTV for value added services, Cellebrum India Pvt. Ltd. and for roaming Bharti Telesoft. It has joined with Lowe India Pvt. Ltd. on behalf of marketing communication and on behalf of network; Nokia and Ericson are its major partners. (Bureau E. , economictimes.indiatimes.com)

Reputation: it has acquired a strong reputation in Indian telecom industry. It is listed in BSE
and NSE (Bombay Stock Exchange & National Stock Exchange). In 2009 by Economic times it has got award as Emerging Company of the year. (The Economic Times, 2009) And also it has got awarded for Care services in the best billing or customer care at GSM association award which was in Barcelona, Spain. It got prestigious Golden Peacock Award on behalf of its modern product My gang in 2008. Idea cellular limited is one of the official supports for IIFA awards. (Idea Cellular)

Organizational: Aditya Birla Group is the company which reflects its operations via Idea
Cellular. It has the link with its distributors as well as the suppliers. To prize to the employees, distributors and suppliers it conducts award functions every year. Each and every employee as well as shareholder gets dividends and bonuses in each year.

Financial: The Idea Cellular has acquired a current ratio of 1.38:1 and quick ratio of 1.3:1. It
illustrates that converting assets into cash is very convenient for them and also thet pay the current liabilities (Capitaline, 2009). $1.5 billion is the working capital. It proves that it has got a lot of cash for day to day operations and financial tasks. They have shareholder funds incorporating equity share as well as general reserve i.e. of $ 23 billion. The whole long-term debt is $6 billion (longterm debt < capital), therefore it is an advantage to obtain loan. (Idea Cellular Revenue, 2009). In 2009 in all thirteen operating service fields, revenues for Q1 @ Rs. 26 million increased by 13.9%. (The Financial Express, 2009). In large mutual fund companies it invests, like in ABN(Amro Mutual Fund), SBI Mutual Fund, ICICI Prudential Mutual Fund, Birla Sun Life Mutual Fund and in HDFC Mutual Fund. Therefore we can conclude that the company has got well-built financial resources management. (Capitaline, 2009).

Intellectual: R&D department is separated by Idea Cellular. It helps in enhancing market share.
Advertisement investment is very big for example brand ambassadors like Abhishek Bacchan as well as Mumbai Indians (Indian Premiere League). Idea has found to be very innovative (Idea Cellular Revanue). They have the punch line called An idea can change your life. It is their self image. In 2008 it provided radio services to the customers as Idea radio.

Technological: It invests a lot towards enhancing technology, CRM (Customer Relationship


Management), network, and wireless space. (Our Partners, 2009). They have link with IBM having a contract of $19.2. It uses IBMs application server for their information transaction like; financial transaction. For CRM (Customer Relationship Management) it uses Supply Chain Management and Oracle Siebel Customer Data Integration. They use Online Transaction Process (OLTP) and Customer Information Control System (CICS) packages to make the best of data network, mobility management, and security (Idea Portal, 2009). They also use Vehicle Tracking System i.e. by Global Processing System (GIS).

Foundation of Internal Analysis:

The analysis of VRHN is the internal analysis foundation. The process of any organization is considered to be the capability which has the integration with the resource. The resources can be technological, financial, equipments, plant, organizational expertise and brand equity. So to get a competitive advantage any organization has to know about the availability of its resources which should be rare, valuable, non substitutable and hard to imitate.

Rarity: Idea has link with companies like; Oracle, Nokia and Ericson. We know that the
infrastructure and technology are dissimilar. Technology is changing day by day. These companies facilitate software packages to Idea which Idea Cellular Company uses. As describe in the above it implements their servers, CRM software (Oracle Siebel Customer Data Integration), OLTP (Online Transaction Process), etc. (The Financial Express)

Valuable: The Telecom sector in India is providing better services and its growth is also very
fast. Some of the multinational companies like; AT&T (USA) and MTN (South Africa) want to take a control in India, but companies like; Idea Cellular and Airtel prevent them to become the market leader. Idea cellular in India has acquired better goodwill. It is a component of 12$ billion of Aditya Birla Group which is the first multinational group of India. The operations are spread in 18 countries (Idea Cellular, 2009). Idea was not there as the first in telecom industry but the GPRS was first launched by Idea Cellular, The Economic Times awarded for this in 2009 as an emerging company of the year (The Economic Times, 2009). Therefore the products have given good values to the customers.

Not Substitutable: All other players have the similar services with different name. Suppose a
customer is not satisfied by any service then he can easily switch to other brands. So other players are getting benefits of these reasons and coming with similar and lower services. Pricing strategy is still a negotiating factor for lots of companies.

Hard to imitate: TRAI is the body which controls the rules and regulation of the telecom
company. Service name, product and punch line are registered trademark which cannot be copied by other company but they can have them with different name and packages. Idea Cellular have a punch line An idea can change your life will be only used by the Idea cellular.

Internal Factor Analysis:


Strength:
Reputation of Brand : Aditya Birla Group operates in 25 countries and it is the owner of Idea cellular. It is the first Indian multinational company and also it is part of 100 fortune companies which gives a lot of strength to Idea. (Idea Cellular) Increase in Profit margin with high rate: As compared to its competitor like Bharti Airtel and Vodafone, Idea had a growth of 15% in 2007-2008. This growth can be the strength for the company because it gives competition to other competitor. (Idea cellular, 2008) Financial power: The balance sheet of Idea in 2009 shows that current ratio is 1.38:1 and quick ratio is 1.3:1, therefore Idea can easily convert its assets into cash so liability is not a big issue for the company. Also it show that Idea has $1.5 billion of working capital therefore it can easily used for daily, other operational, and financial works. Its shareholder funds are $23 billion and long term debt is $6 billion, so in future they can get loan very easily in future. (Capitaline, 2009). Market share of Idea: Idea cellular has a good rate of increase in market share. Currently it is operating with US based research agency from where there is expectation of increase in growth rate of $1.3 trillion (Insight research corporation New Jersey). Also Idea cellular has a huge market, target audience, and operations in many parts of India (The Money control, 2009).

Technology innovation used in Idea: Idea cellular is the company which started the services of GPRS India and come up with new product like My gang and Idea radio. Idea cellular always innovate the technology (http://news.oneindia.in). Advertising and promotion in Idea: Idea cellular does many promotional advertisements, and also uses Bollywood stars like Abhishek Bachan. The punch line WHAT AN IDEA SIR JI made idea very popular and was very effective (http://www.bollynewz.com). Strategic agreement with other brands: Idea cellular also has strategic agreement with companies like IBM and Oracle. These companies have its own brand image in the field of software and solutions like CRM, OLAP. It also has tie up with Nokia which shows that Idea is dedicating superior services (Idea Portal).

Weakness:
No Broadband service: Like other companies BSNL, Airtel, Tata, and Reliance Idea does not provide the broadband services. Today these companies are providing data card also which is adding the value to their services and on the other hand it weakening the Idea cellular market. Low coverage in India: Presence across nation of Idea is low as compared to other companies like Airtel and Reliance. So there is a huge market available which Idea cellular is missing. Market leader only in North India: In North India Idea Cellular has very good market but on the other hand in south market share is very small. So other companies are benefiting this market. Direct to Home Service is not available: Idea cellular does not provide DTH services to its customers whereas Reliance and Bharti Airtel provide DTH services. If we try to analyze the future then DTH will be common service. Customer looks for better and more facility so unavailability of DTH seems to be weakness for the company. Less market share in urban market: In the rural market Idea Cellular has very good position that is 70% but in case of urban market it has only 32% of market

IFE Analysis Matrix

Weighted Key Internal Factors: Strengths: Reputation of Brand Increase in Profit margin with high rate Financial power Market share of Idea Technology innovation used in Idea Advertising and promotion in Idea Strategic agreement with other brands 70% coverage in rural areas 0.06 0.07 0.09 0.08 0.09 0.08 0.07 0.08 4 3 4 3 4 3 4 3 0.24 0.21 0.36 0.24 0.36 0.24 0.28 0.24 Weight Rating Score

Weakness: No Broadband service Low coverage in India Market leader only in North India Direct to Home Service is not available Less market share in urban market 0.09 0.09 0.09 0.09 0.02 1 1 2 1 2 1 0.09 0.18 0.09 0.18 0.02 2.73

TOTAL

Understanding the competition:

When a product of a company enters the market then the company tries to get position in the market with its image. So understanding the strength weakness, opportunities and threats of other competitors become important. It gives a brief idea what a company is capable of with respect to other brands where it is lack behind. It also helps in forecasting and future planning. Product or service substitution is strong weapon in the hands of customers and if the companies pricing policy is matching with the customer expectation than there is no one who can take away the business of that company.

Identifying the competitors:

It is very important to know for the company that who are the competitors. Studying the profile of competitors gives their strength and weakness. It helps in creating the strategies for the product and market share.

Competitive Profile Matrix

Idea CSFs Wt Rating Wtd Score Market Share Brand Image Management experience Quality of services Promotions advertisement Sales Channel like 0.10 4 0.40 0.08 and 0.06 3 3 0.24 0.18 0.15 0.15 0.07 2 3 3 0.30 0.45 0.21

Airtel Rating Wtd Score 4 4 4 0.60 0.60 0.28

Vodafone Rating Wtd Score 3 3 3 0.45 0.45 0.14

Reliance telecom Rating WtD Score 1 2 3 0.15 0.30 0.21

4 3

0.32 0.18

4 3

0.32 0.18

1 3

0.08 0.18

0.30

0.40

0.20

Outlets, Distributor Financial Status Organization Culture Growth of sales Loyalty of customers Globalization Image of company Total 0.10 0.08 0.05 0.06 0.05 0.05 1 4 4 3 2 3 3 0.30 0.32 0.15 0.12 0.15 0.15 2.97 4 3 4 2 4 4 0.40 0.24 0.20 0.12 0.20 0.20 3.64 3 2 3 2 4 3 0.30 0.16 0.15 0.12 0.20 0.15 3.02 3 3 2 2 1 2 0.30 0.24 0.10 0.12 0.05 0.10 2.03

CPM and IFE Analysis:

After studying CPM and IFE Matrix we can conclude that company is in better condition. There is a requirement of some new strategy to increase its strength and position in market share. There is also requirement of providing the DTH and broadband services which is todays requirement. With the help of IFE and CPM matrix strategy for future can be decided.

On the basis of different tools and techniques for example SWOT analysis, Competitive profile matrix, Internal Factor evaluation, Resource based view, and we can suggest the suitable strategy for Idea Cellular. Now we will use GE matrix and BCG matrix to come to exact conclusion to select the right strategy for the firm for the coming years, and also considering the fact that in upcoming years telecom sector will grow at high speed. Idea cellular is one of the branches of Aditya Birla Group. Aditya Birla Group is a multinational company which operates in more than 25 countries. It is the repudiated company to be the first Indian multinational and part of 100 fortune companies. This is the biggest strength which Idea cellular get benefit of being the part of high-status group (Idea Cellular). The profit margin of Idea cellular in 2006-07 has relative growth of 4% and in 2007-08 it increased to 11%15% when it get compared with its competitors like Vodafone and Bharti Airtel. This gives strength to the organization to others a competitive edge (Idea cellular). Idea cellular has strategic alliance with IBM and Oracle. Both IBM and Oracle have unique brand image in the market for providing best class software solutions like OLAP and CRM. Idea Cellular also has tie ups with Nokia whose position is in top of mobile producers. From here we can get the picture that the organization is committed towards providing better services to its customers. (Idea Portal)

TOWS MATRIX:
This matrix is one of the important matching tools which help in developing four types of strategies on the basis of strength, opportunity, weakness and threat. 1. SO strategies Idea can take benefits of external opportunities by using internal strengths of the firms. 2. ST strategies in this type of strategy Idea can use firms strengths to decrease or keep away the impact of external threats. 3. WO strategies with the help of taking advantage of external opportunity Idea can improve the internal weakness.

4. WT strategies these strategies are defensive tactics which is used to reduce the internal weaknesses and avoid the external threats. On the basis of analysis of the SWOT analysis of Idea cellular of the previous report we will construct the tows matrix. SO strategies: Since the mobile users in rural India is increasing at very fast rate so according to Strength and opportunity strategy the company should penetrate the rural market. In other words we can say it is the strategy of becoming very close to urban consumers. Since Idea Cellular inherit the good brand reputation of Aditya Birla Group, the position of being first organization to launch the services like GPRS, the company can easily penetrate the rural market and grab the market by offering extra services at affordable range. In this type of situation Brand image play a important role. A good advertisement can be used to gain this large pool of customers WO Strategies: This is a tool to understand the weaknesses and weigh against them with the opportunities that is available in hand. Then this strategy is used to see how weaknesses can be utilized in maximizing the existing opportunities. In past the firm was concentrating only the consumers of Northern India. Bu now in its new development plan it has slowly covered the other parts of India also, but value added services like mobile broadband and Direct to home which other player like Reliance and Tata are doing, Idea has not provided any such services. If the company will provide these services then it will give a unique strength to company and also some diversification can be observed ST Strategies: Company biggest strength is its brand name and the growth of market share in both north and west part of India. The company also enjoyed the benefits of its promotional strategies. Many of the new advertisements have given success in executing the brand message to the consumers. But there is a requirement of carefully analyze the threats which cannot be the ignored and it should be converted into strength. The company should be always upgraded in latest infrastructure and technologies. Company reputation can also be effected by poor execution of promotional activities. Special care is required in selecting the technology, with whom the firm should tie up (like strategic alliance with Nokia and other major software providers like IBM). Untrained workforce can be another major threat.

So on the basis of above information strategy which company can use is provide appropriate training to workforce and at appropriate time. Second strategy which company can adopt is dealing with local distributors which will require effective convincing power. Idea cellular can reduce this threat by providing time to time suitable training to its workforce. Upgrading the technology and introducing more innovative promotional activities can bring many changes in companys business.

BCG matrix:
BCG Matrix of Idea Cellular Limited with respect to Airtel and industry growth rate:

Market Growth Rate (in %)

HIGH

35

Idea
17 0 LOW HIGH 32x

22x

16x

0.1X

Relative Market Share

The whole Telecom Industry is increasing at a rate of 35% as compared to the base year 200607. We can see moderate company growth and also it is likely to grow in the coming years. According to the latest report of TRAI, an apex body regulate telecom affairs, the number of mobile subscribers has touched 50 crore. The first position is captured by Bharti Airtel for long time with 32% share but now there market share is decreasing. In India in the total GSM market

Idea Cellular Limited has a share of 22% (as on July09) and has growth rate of 18% annually. At Present it is working in 11 service areas, having a customer support of 24 million covering more than 60 % of the total Indian telecom population (Capitaline, 2009). In present Idea cellular has its corporate office in Mumbai, and a registered office in Gujarat. It has its Its circle offices in 17 states. It also has partnership agreements with some famous organizations such as, NDTV and Cellebrum India Pvt. Ltd. for VAS (value added services), and for roaming Bharti Telesoft, for marketing communication it has tied up with Lowe India Pvt. Ltd. and for network, Nokia and Ericson are its biggest partners. (Bureau E. , 2009). So it comes under star.

Internal-External Matrix:
This IE matrix is the planned tool which is normally used to study the operational condition and the strategic position of the business. It includes both the external and internal factors which affect the business on the basis of scores of both external and internal factor evaluation (IFE and EFE) we decide the companys place in the Matrix. The matrix is divided in nine grids and the strategy will be explained by the relative position of the company in the grid. The company lies in the position of strong so it is in the strong grid of IE matrix so the company has to grow and build which suggests that the company should go for intense and aggressive tactical strategies like market penetration, product development or market development. The company can also go for the alternative of backward, forward or horizontal integration.

EFE Scores

Grow Idea

And

Build

Hold

And

Maintain

Harvest

Or

Divest

IFE Scores

Quantitative Strategy Planning Matrix:


This matrix is used to approach a strategic planning for evaluating the possible strategies; it uses an analytical tool for the comparison of the alternative strategies. Here we are considering following three alternative strategies for Idea this includes: 1. Strategic Alternative 1: Can go for backward integration such as Vodafone acquire Hutch to increase market share or forward like acquire distributers 2. Strategic Alternative 2: Can go for marketing penetration: Target the urban segment; launch a new service with same brand name like Tata Docomo has done Billing per pulse rate, provide more high end services like GPRS, mobile internet services and provide good customer service 3. Strategic Alternative 3: Can go for the horizontal integration activities i.e. Airtel has gone for Dish TV, Reliance has gone for Big TV Evaluating the above mentioned strategies with assigned weight to the strength, weakness, opportunities and threats present in front of the company, and we have figure out that the

strategic alternative 2 i.e. Target the urban segment; launch a new service with same brand name. Like Tata Docomo has done, Provide more high end services like GPRS, mobile internet services and provide good customer service. This strategy has the attractiveness score of 6.22.

Analysis of balance sheet:


After analyzing the balance sheet we can get idea on the financial position of idea cellular. Also we can recommend some points on the basis of their financial performance. If we see the company balance sheet there is a net current asset (Rs. 1,400.27 Crore in 2009, Rs. -1,117.67 Crore in 2008) which tells that the long term debt of the company is increasing. It may affect the interest on the total equity or preference for the short term loans. It is also increasing the total equity.

Current ratio:
Current ratio tells about the liquidity in the company. A company wants funds to run their business and it should keep maintaining the cash flow. The ideal current ratio is 1.33 but here in 2009, the ratio is 1.39 and similarly for 2008 it is 0.59. If we see the 2009 ratio it indicates that higher the margin of safety and higher the risk. According to 2008, Ratio Company had a lower margin of safety and also lower risk.

Quick ratio:
The ideal quick ratio should be 1:1. Therefore the company is running short of the Current assets which can be easily converted into cash. If the quick ratio of 2009 is 1.31 and of 2008 is 0.55, which shows the current assets of the company and also tells that the company has good liquidity.

Inventory turnover ratio:


Inventory turnover ratio tells the level of inventory that the company is holding. Inventory turnover ratio in 2008 is 243.35 and in 2009 it is 230.69. The previous year ratio shows that either the inventory is decreasing or sales are growing. The company has a turnover that is slower than for its industry.

Debt- Equity Ratio:


This ratio indicates the long term solvency of the firm. It describes the efficiency of the management in financial decision and forecasting. The debt equity ratio of the company is 0.67 in fiscal year 2009 and 1.84 in the fiscal year 2008. Ideal Ratio is 1:2. It means Long term Insider Liabilities are more than the Long term Outsider liabilities for both the year which is good for the company. The ratio is higher than the ideal ratio, it means that the company has a proper capital structure and equity is also at an equilibrium condition. The firm has profit scenario and it is in a good condition. It is also saving taxes.

Plan for next three years:


The company is having high operating cost i.e. the company is not utilizing its resources properly, since by the IE matrix the company come under in the grid of Grow and Build which also suggests that the company can go intense and aggressive strategy of market penetration or the alternative of going for the vertical integration. According to the QSPM analysis as well the alternative for going for the vertical integration was the most attractive one. The company should also come up with new service like Tata Docomo has come up Billing per pulse rate and increase its market share. In the BCG matrix Idea Cellular falls in the Stars category. Idea Cellular should also try to acquire or tie up with other companies such as Vodafone and Hutch and Airtel and MTN tried to tie-up in order to catch up with the competition and the growth of the industry. They acquired spice in past and they have tie-up with Ericson but they do not have any type of advantage in term of internet service or upcoming 3G service. Idea should come up with new service for new segment of customers, try to focus on urban market which is again found out to be best alternative from the QSPM analysis.

Conclusion:
As a conclusion of this report we figure out that the companys strategy to target the rural segment; launch a new service with same brand name like Tata Docomo has done, provide fast GPRS, mobile internet services and provide good customer service which is having the attractiveness score of 6.22.

Annexure 1:

SO Strategy 1. Can go for Marketing penetration: Target the urban segment; launch a new service with same brand name like Tata Docomo has come up

WO Strategy

Billing per pulse rate, provide more good and 1. Can go for Forward Integration- Operate fast services like GPRS, mobile internet services other showrooms which supplement the and provide good customer service distribution channels

ST Strategy

WT Strategy 1. Can go for the horizontal integration

1. Can go for Backward integration such as activities i.e. Airtel has gone for Dish TV, Vodafone acquire Hutch to increase market share Reliance has gone for Big TV

Annexure 2:
Strategic Alternative 1 Weigh Strength 1 Brand reputation like SBU of Indias first 0.15 4 0.6 2 0.3 2 0.3 t Scor e Weighte d score Strategic Alternative 2 Scor e Weighte d score Strategic Alternative 3 Scor e Weighte d score

multinational group 2. Strong advertising and promotion 3 Superior inventory

0.03

0.03

0.06

0.03

turnover ratio and current ratio 4. Wide distribution 0.1 and global 0.05 Technological like Indias service 0.06 3 0.18 3 0.18 2 0.12 1 0.05 2 0.1 3 0.15 4 0.4 4 0.4 4 0.4 0.04 3 0.12 1 0.04 2 0.08

network 5. Local

acquisitions 6. innovation first provider 7. Strategic Alliance such as with IBM, Oracle,

GPRS

Nokia 8. Better understanding of rural market Weakness 1. Target only North India

0.08

0.16

0.24

0.24

0.12

0.36

0.48 0

0.36 0

0.12

0.36

0.12

0.24

2 Net operating profit ratio is decreasing 3. No presence or in 0.09 3 0.27 2 0.18 2 0.18

Broadband service

internet 0.06 2 0.12 4 0.24 3 0.18

4. Increase in the operating cost 0.1 1 Opportunities 1. Growth in market size 2. Scope for new and innovative service 3. Opportunities for M&A 4. Growth in rural market 5. Higher disposable 0.1 0.06 0.09 0.04 2 1 1 1 0.2 0.06 0.09 0.04 0 sensitive 0.1 0.05 0.04 0.02 4 2 1 2 0.4 0.1 0.04 0.04 4 2 1 2 0.4 0.1 0.04 0.04 2 3 1 1 0.2 0.15 0.04 0.02 3 3 2 1 0.3 0.18 0.18 0.04 2 2 1 2 0.2 0.12 0.09 0.08 0 0.05 0.04 0.12 2 1 3 0.1 0.04 0.36 3 2 2 0.15 0.08 0.24 1 3 3 0.05 0.12 0.36 0.15 4 0.6 3 0.45 2 4 0.4 4 0.4 1 1 0.1 1 0 0.3

income of consumers 6. Levi on fringe tax 7. Increase in FDI 8. Export potential Threats 1.Price

Unorganized market 2. Production malpractices 3. Competition 4. Disputes with retailers 5. Volume dependency for sales 6. Transportation problem

0.07 0.07 1

1 2

0.07 0.14 5.33

2 2

0.14 0.14 6.22

3 2

0.21 0.14 5.46

COMPARATIVE BALANCE SHEET OF IDEA CELLULAR LTD.

Annexure_3
Mar ' 09 Mar ' 08 Absolute change
PERCENTAGE CHANGE

Sources of funds
Owner's fund Equity share capital Share application money Preference share capital Reserves & surplus 3,100.10 18.23 8,176.09 906.91 7,269.18 110.50 954.10 8,812.99 801.53 2.03 89.98 87.60 2,635.36 3.76 464.74 14.47 17.63 384.8404255

Loan funds
Secured loans Unsecured loans Total 5,564.93 5,454.43 2,014.43 1,060.33 18,873.78 10,060.79

Uses of funds
Fixed assets Gross block Less : revaluation reserve Less : accumulated depreciation Net block Capital work-in-progress Investments 15,562.75 12,791.22 4,739.86 3,123.83 10,822.89 1,721.82 4,928.81 4,994.96 3,594.69 1,400.27 9,667.39 941.13 569.93 1,674.14 2,791.81 -1,117.67 2,771.53 1,616.03 1,155.50 780.69 4,358.88 3,320.82 802.88 2,517.94 21.67 51.73 11.95 82.95240828 764.8097135 198.36 28.75840405 -225.2847442

Net current assets


Current assets, loans & advances Less : current liabilities & provisions Total net current assets Miscellaneous expenses not written Total

18,873.78 10,060.79 2,724.62 1,634.32 2,279.41 2,308.87 569.93

8,812.99 2,154.69 -29.46 -29.46

87.60 378.0622182

Notes:
Book value of unquoted investments Market value of quoted investments Contingent liabilities

-1.275948841

Number of equity sharesoutstanding (Lacs)

31000.95

26353.61

4647.34

17.63454798

Ratio analysis: idea Celluler. Annexure 4:

Ratios:
(Rs crore) Mar ' 09 Mar ' 08 3.55 6.87 3.96 7.29 10.06 31.8 25.71 9.45 8.13 8.13 25.5 2.66 6.3 24.70588235 23.05 866.5413534 0 -5.44 -5.3 -5.42 -6.15 -19.09 -20.61 0.61 6.455026455 0 absolute change -0.9 -0.21 -0.73 -0.05 % change

Per share ratios


Adjusted EPS (Rs) Adjusted cash EPS (Rs) Reported EPS (Rs) Reported cash EPS (Rs) Dividend per share Operating profit per share (Rs) Book value (excl rev res) per share (Rs) Book value (incl rev res) per share (Rs.) Net operating income per share (Rs) Free reserves per share (Rs) 2.65 6.66 3.23 7.24 -25.3521127 -3.05676856 -18.4343434 -0.68587106

Profitability ratios
Operating margin (%) Gross profit margin (%) Net profit margin (%) Adjusted cash margin (%) Adjusted return on net worth (%) Reported return on net worth (%) 31.63 20.51 9.91 20.45 7.29 8.87 37.07 25.81 15.33 26.6 26.38 29.48

-14.6749393 -20.5346765 -35.3555121 -23.1203008 -72.3654284 -69.9118046

Return on long term funds (%)

12.18

18.92

-6.74 0 -1.01

-35.6236786

Leverage ratios
Long term debt / Equity Total debt/equity Owners fund as % of total source Fixed assets turnover ratio 0.53 0.67 59.8 0.74 1.54 1.84 35.22 0.61

-65.5844156

-1.17 -63.5869565 24.58 69.78989211 0.13 21.31147541 0 0.8 135.5932203 0.55 127.9069767 0.76 138.1818182 -12.66 -5.2023834 0

Liquidity ratios
Current ratio Current ratio (inc. st loans) Quick ratio Inventory turnover ratio 1.39 0.98 1.31 230.69 0.59 0.43 0.55 243.35

Payout ratios
Dividend payout ratio (net profit) Dividend payout ratio (cash profit) Earning retention ratio Cash earnings retention ratio 100 100 100 100

0 0

0 0

Coverage ratios
Adjusted cash flow time total debt Financial charges coverage ratio Fin. charges cov.ratio (post tax) 3.67 2.78 2.86 3.6 3.71 3.76

0 0.07 1.944444444 -0.93 -0.9 0 -25.0673854 -23.9361702

Component ratios
Material cost component (% earnings) Selling cost Component 0.19 -

4.32

4.79

-0.47

-9.81210856

Exports as percent of total sales Import comp. in raw mat. consumed Long term assets / total Assets Bonus component in equity capital (%) -

0.69 0.75 -

1.17

-0.48

-41.025641

0.84

-0.09

-10.7142857

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