The journey of Idea cellular from idea to VI

Idea cellular has been in the telecom industry for decades as a major mobile phone service operator in India but lately has been struggling to keep its services going. On the whole, it appears Idea has come on a verge of crisis from being a pioneer to turning in a defaulter.

So, what exactly went wrong with the telecom major? What is the reason for its losses? In today’s blog, we’ll discuss this and more.

The story

How an Idea gave birth to the “Idea cellular”?

Well, it all started in 1995. Idea Cellular is an Aditya Birla Group Company; India's first truly multinational corporation. The company was incorporated as Birla Communications Limited and had a 2G license for operating in Gujarat and Maharashtra circle. In the subsequent year, Idea expanded its business in a joint venture with the AT&T group of the US.

Moreover, the company merged with Tata Cellular Ltd in 2000 to expand in India.“IDEA” became the official name of the company in 2002. As a matter of fact, the company had managed to surpassed the two million subscriber level by 2005.

Post the exit of two shareholders, the Aditya Birla Group became the sole owner in 2006 and expanded into other service areas through a combination of organic growth and acquisitions.

Overall, it looks like the concept behind the company's name, "IDEA," was an idea in itself? Anyway, instead of delving into this thinking, let's look at how IDEA achieved reachability in the telecom market.

The answer to which is - through its genius advertising campaigns.

Yes!!!

Now, to understand it, let’s go back to 2008!

You remember the tagline ‘An idea can change your life’? Those gripping catchphrases of ‘What an Idea, Sirji!’ or that viral track “You are my Pumpkin Pumpkin, Hello Honey Bunny” and more.

Well, from the times of 2008, Idea cellular launched a slew of marketing campaigns; all while keeping cause-oriented communication alive.

Later, Idea's advertising emphasis shifted from emphasising its pricing plans and network coverage to utilising mobile technology to address social issues. Idea also created a number of websites to complement its social-issue commercials.

The company reached its heights and it seemed as Idea cellular’s time has come.

But then, things got worse.

Reliance Industries, led by Mukesh Ambani, launched its wireless telecommunication services, Reliance Jio, in all service areas of India on September 5th, 2016.

Before Jio entered the market, the subscribers used the mobile data judiciously as the mobile data of 1.5GB for a month was so dear costing around Rs. 350. Jio had brought data revolution making the data affordable.

Here, Reliance Jio subscribers were entitled to unlimited 4G internet, national voice, video, and messaging services, including national roaming, as part of the Welcome Deal and Happy New Year offer until December 31, 2016, which was later extended until March 31, 2017.

This offer lured a big number of users, and Jio had surpassed 50 million members within 90 days of its launch. Reliance Jio has continued to gain users by offering low-cost services and putting together tempting bundles.

But, Jio's arrival has a variety of effects on Idea Cellular.

With the price war set in motion Idea Cellular drastically reduced its price, without increasing investment. Hence, suffered in ensuring data quality. At the same time, Idea’s data revenue declined by more than 19 percent in the fourth quarter, a drop of over 6.4 million customers. According to the Telecom Regulatory Authority of India's (TRAI) telecom subscriber figures for October 2019, suggested Reliance Jio was the top gainer in terms of new customers, indicating the venture's sustained success.

Now, with the launch of Jio, why Idea came on the verge of crisis and Airtel stood strong, you’ll ask?

So, as previously said, while Jio's services were cheaper, the quality of service was inferior to Airtel's. When Jio was compelled to raise its tariffs, Airtel followed suit.

When Airtel's rates were somewhat more than Jio's, the price difference didn't matter because they provided superior quality.  Jio is also concerned about the number of active users as older consumers migrate to rival networks or use Jio as a backup sim on dual-sim phones.

This bet by Airtel on quality has also bought it more quality users who are willing to spend.

But, Idea cellular continued to lose...

However, Jio coming to existence was not the only bad thing that happened to telcos.

Hence, in a bid to take on the juggernaut called Jio, Vodafone and idea formed a merger.

However, the merger failed to solve both the company's existing issues. The Total debt now stands at more than Rs 1 lakh crore and their ARPU (Average Revenue Per User) is lowest in the world at Rs 108.

Now, here comes the debt story of Idea cellular

When India got independent an urge of developing the country started for which the focus was on developing the telecom sectors. The situation was this sector didn’t had to pay any tax for their commencement. Here, government didn’t take a single penny on the spectrum. The telecom sector saw this as an opportunity. But, in 2002, tables turned when the government charged a license free for availing spectrum to the operators.

Government did an agreement with the telecom companies of getting a lump-sum amount on spectrum and license. Along with 8% on the total income with spectrum and 4% with the license fee. In all, 8 to 12% of the yearly revenue had to be given to the government. i.e.  the adjusted gross revenue. Thus, the telecom operators felt cheated.

The telecom operators went to high court and Supreme Court. Finally, in 2019 Supreme Court gave a verdict of following the government rule to the telcos. Here Airtel had to pay 35000 cr and Vodafone Idea got indebted with 58,000 cr AGR dues.

So, how Vodafone Idea clears its debt is yet to be seen. Till then we can say...

Integration of Vodafone India and Idea's network hasn't been a smooth journey. There have been multiple outages and customer complains about frequent call drops, slow data transfers and poor coverage. A decade back, Vodafone India was known for its solid reach and superior offering, but the same can't be said now.

Until then, just hope for the best...