Idea Cellular Strategy Report

Idea Cellular An Industry and Strategy Analysis

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Table of Contents
1. Industry Overview 2
1.1 Declining Trend in Profitability 2
1.2 Scarcity of 2G 2
1.3 Auction of 3G slots auctions 2
1.4 Implementation of Mobile Number Portability (MNP) 3
1.5 Regulation 3
2. Porter’s Five Force Analysis 3
2.1 Barriers to entry 3
2.2 Threat from substitutes 4
2.3 Bargaining power of consumers 4
2.4 Bargaining power of supliers 4
2.5 Rivalry among competitors 4
3. Competitor Analysis 4
4. Company Overview - IDEA 5
5. SWOT Analysis of IDEA 6
5.1 Strengths 6
5.2 Weaknesses 6
5.3 Opportunities 6
5.4 ...view middle of the document...

To illustrate, as of September 2009, overall subscriber base expanded by 50 per cent (y-o-y), while revenues grew by a much slower pace of 12 per cent during April-September 2009. Going forward, the extent of overcapacity is expected to increase as new players enter the market and existing ones undertake expansion plans. [1]According to CRISIL, profitability of an existing player is expected to decline sharply by 600-650 bps over the next 3 years and touch 22-23 per cent in 2011-12. New entrants are expected to be worse off due to their probability of earning lower ARPU and high operating cost structure with a relatively lower loaded network.

2 Scarcity of 2G

With the government having frozen further 2G spectrum allocation, there is uncertainty among operators over future spectrum availability. We believe that if this situation is prolonged, it would hinder the expansion plans of players. Consequently, operators with high traffic on their network would actively look to acquire smaller players to get access to additional 2G spectrum

3 Auction of 3G slots auctions

The government is expected to auction only limited slots to the 3G license auctions and the operators unsuccessful at the auction might either pursue acquisitions or alternatively sell out

The following factors to be the key drivers determining 3G penetration in India: 

- Extensive proliferation of 3G-enabled handsets: It will be the single biggest driver of 3G services, at least in the preliminary phase. On account of the rising competition and economies of scale, 3G handset prices are likely to come down drastically, thereby increasing affordability and the addressable market size. This would lead to proliferation of 3G handsets, thus widening the target base for 3G service providers. 

- Spectrum Management: 3G would offer operators an opportunity to manage their 2G spectrum more efficiently in the top 40 cities or so, which are currently facing a spectrum crunch. The operators are expected to market 3G services aggressively in these cities and consequently alleviate some pressure on the 2G spectrum. This would offer a two-fold advantage to operators, namely, increased penetration of 3G services and higher number of 2G subscribers being accommodated on the bandwidth released without significant investments. 

4 Implementation of Mobile Number Portability (MNP)

The major threat facing all telecom players is the Mobile Number Portability (MNP) which is expected to be introduced in 2010. The rollout of MNP would also alter the dynamics of the telecom sector and force weaker players to succumb to competition. MNP provides subscriber the right to retain the same phone number when switching between two operators in the same circle. This policy poses a threat to the basic assumptions on which the company strategies are based. The policy considerably reduces the switching cost of the subscriber which increases their bargaining power to a certain extent. To handle...