Interview with Rajat Mukarji

“Idea will remain nimble, agile and adaptive”

The past one year has been a challenging one for the incumbents in the Indian telecom sector as profitability took a serious hit following the entry of a new player and its offer of free services. Consequently, Idea Cellular, like its peers, spent the last two quarters of 2016-17 focusing on enhancing its 4G reach and defending its market share. The operator has also been exploring other opportunities in the telecom domain such as digital entertainment and fibre-to-the-home (FTTH) to drive future growth. In March 2017, Idea announced a merger with Vodafone India to help both the companies consolidate their market position. Rajat Mukarji, chief corporate affairs officer, Idea Cellular, shares his views on the evolving telecom landscape in India and Idea’s strategies to withstand this change…

How has the Indian telecom sector evolved during the past year? What has been the impact on Idea Cellular?

The Indian wireless industry witnessed an unprecedented disruption in the second half of 2016 on account of free voice and mobile data promotions by the new entrant. The period October 2016 to March 2017 can be best described as a “period of telecom discontinuity”, which has permanently changed the mobility business parameters. Consequently, the revenue key performance indicators and financial parameters for all mobile operators have declined sharply. For the first time, the flourishing Indian mobility industry has shown a declining trend in annual revenues. However, with the new entrant now starting to charge for its services, the sector is likely to witness some growth in 2017-18.

Idea Cellular has managed to withstand the unprecedented and prolonged free service offers of the new entrant and continued to maintain its position amongst the top three operators in the country. It has continued to add subscribers to its network. As on February 28, 2017, the company accounted for 19.4 per cent market share while the subscriber base stood at 193.3 million, reporting a 10.7 per cent growth over the past 12 months.

What were the key highlights of Idea’s operations during 2016-17?

In spite of the short-term challenges, Idea continued to strengthen its infrastructure and assets. The company added more than 50,000 sites across 2G, 3G and 4G networks, the highest ever site addition by the company in a year. It also expanded its fibre backbone network by 29,100 km, from 115,500 km as of end-March 2016 to 144,600 km as of end-March 2017. The overall capex for 2016-17 was Rs 78.5 billion, mainly funded through a cash profit of Rs 69.4 billion.

In the October 2016 spectrum auction, Idea acquired 2×64.6 MHz of frequency division duplex spectrum in the 1800 MHz and 2100 MHz bands, thereby expanding its 4G spectrum ownership from 11 to 20 service areas. Further, with the acquisition of 200 MHz time division duplex spectrum in the 2300 MHz and 2500 MHz bands, Idea has the requisite spectrum to meet future capacity requirements.

In March 2017, Idea announced a merger with Vodafone India. The two companies will combine their operations in India (excluding Vodafone’s 42 per cent stake in Indus Towers) to create India’s largest telecom operator. The merger transaction is subject to approval from the relevant regulatory authorities.

What are the key growth drivers for 4G adoption in India? What is the status of Idea’s 4G roll-out?

The decline in the prices of 4G handsets is driving the uptake of 4G services in the country. Although a growing portion of the population is coming under the 4G coverage, the consumer base is increasing at a moderate pace only.

Idea recently completed its pan-Indian 4G roll-out. Its services are now available in 20 circles (excluding Kolkata and Delhi) where the company has acquired 4G spectrum. As of end-May 2017, the company’s 4G services covered 350 million people across 50,000 towns and villages. Idea added 26,209 4G sites across 19 service areas during 2016-17, taking the total number of 4G sites to 40,852. As a result of its continued focus on investing in mobile broadband infrastructure across the country, Idea reported the highest average 4G upload speeds during May 2017 among all 4G operators.

What are the emerging opportunities that Idea is focusing on?

In the beginning of 2017, Idea forayed into the digital entertainment space with the launch of three new applications – Idea Music Lounge, Idea Movie Club and Idea Game Spark. These apps offer a high quality user experience in domains such as  music, movies, live TV and gaming. Within the first 60 days of the launch, around 1.5 million customers started using these digital content services.

Idea has also forayed into the wireline broadband space to provide ultra high speed broadband services to customers’ homes through FTTH technology. In March 2017, the FTTH service was launched in select premium housing societies in Pune with speeds ranging from 20 Mbps to 200 Mbps. This FTTH service is capable of delivering multi-platform products and services with speeds of up to 1 Gbps.

What has been the progress in the uptake of mobile money amongst your users? How are you planning to bring more users on board?

Idea commenced prepaid payment instrument services in July 2014 and currently operates through retailer service points in 17 circles. The Idea Money wallet caters to domestic

money remittances through its retailer assisted model (RAM). These services are available to non-data users through Idea’s retailer-assisted touch points. During the quarter ended March 31, 2017, Idea added 4 million new wallet customers, taking the total wallet subscription to more than 11 million. The company recently collaborated with OYO Rooms under the Idea Money RAM. This partnership aims at simplifying the hotel booking process for Idea’s customers. Earlier, Idea Money had entered into a similar partnership with ShopClues.

In April 2017, the Reserve Bank of India awarded a payments bank licence to Aditya Birla Idea Payments Bank Limited. The services are expected to be launched during the second quarter of 2017-18 after the necessary regulatory approvals are in place. We have an existing wireless base of around 200 million subscribers; hence there is a huge potential for our payments business. Moreover, we will convert our 2 million retailer base across the country into banking touch points to take financial services to rural areas.

What is the company’s sustainability strategy? What were the key achievements during 2016?

At Idea, sustainability goes well beyond environment preservation or the judicious use of natural resources; it is at the centre of innovation and core business processes. Idea has always been a frontrunner in adopting energy saving technologies. It spearheaded passive infrastructure sharing in 2001, much ahead of other industry players. Further, it deployed outdoor base transceiver stations as soon as the technology was commercially available, leading to lower energy consumption per site. The company has also adopted green energy alternatives and has been focusing on harnessing solar power.

Moreover, ensuring compliance with the norms governing electromagnetic field radiations (EMF) is a business priority for the company. We have made significant financial investments in EMF testing and monitoring equipment to ensure compliance with the existing regulations of the Department of Telecommunications. In fact, we have a dedicated team of senior officials who engage with the external and internal stakeholders for creating awareness on EMF radiations. Going forward, the company plans to continue strengthening its internal systems and processes to be EMF compliant.

The entire telecom hardware procured in 2016 comprised low-power devices. Further, about 10,500 sites have been converted from indoor to outdoor, reducing carbon emissions by 62,000 tonnes. Over 19 per cent of Idea’s telecom towers are now operated on hybrid power and 90 per cent of our servers have been virtualised across data centres.

What is your outlook for Idea Cellular and the telecom industry in general for the next year?

Idea will remain nimble, agile, adaptive and focused on its execution capabilities. It is confident about capitalising on the emerging opportunities in voice, digital content, mobile banking and wireless data as the telecom market moves towards consolidation with five major providers.

In addition, we are expecting some revenue growth for the industry in 2017-18. On a full-year basis, we expect the industry to recover from the performance of the fourth quarter of 2016-17 by the corresponding quarter of next year by almost 15 per cent. As for Idea, we will be able to recover our losses incurred in 2016-17 by the end of the next fiscal.


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