The $600-800 mn business transformation pact between the Aditya Birla group promoted Idea Cellular and IBM is expected to meet the demands of the mobile operator's 14 million present subscribers-and future growth in Mumbai, Bihar and Jharkhand, and other circles, where it has applied for license.

Though the deal amount is pegged between $600 mn and $800 mn, the final deal size will depend on the future growth, in terms of both revenue and circle expansion of Idea Cellular. Circle expansion in phases is on the cards but revenue earning potential will depend on its market share in both existing and new circles, where it will face tough competition from existing players. With the planned expansion into Mumbai, Bihar and Jharkhand, Idea Cellular's footprint will cover nearly 70% of India's telephony potential.

Lost Opportunities
Idea Cellular had earlier missed out several opportunities to enhance its presence in the telecom market. Aggressive expansion plans under the aegis of Sanjeev Aga, managing director of Idea Cellular, are now in the pipeline. Till the break-up between the Tatas and Birlas, the former joint-promoters, expansion in line with competition had taken a beating at Idea Cellular. Both organic and inorganic growth in India and abroad were a neglected area at some point of time when its competitors like Bharti Airtel, Hutchison, Reliance Communications and Tata Teleservices increased their presence in the local market and added market share. When Hutchison International's stake in Hutchison Essar was up for sale, Idea Cellular did not even join the race to grab the coveted deal.

Currently, Idea Cellular does not figure in the big league of ARPU earners like Hutchison and Bharti Airtel. And on top of this, the private GSM industry has witnessed a 11% fall in ARPU from Rs 375 per subscriber per month for September 2005 quarter to Rs 335 per month for the September 2006 quarter. The decrease in ARPU comes at a time when private GSM mobile operators have recorded a rise of 12.6% in the revenues during the second quarter of fiscal 2006-07. The roll out in 'B' and 'C' circles, where the next level of telecom revolution would happen, will assist Idea Cellular to improve its financials in a big way.

Accelerating Growth
Since revenue generation and roll outs in new circles is a key element for the success of the outsourcing deal, it has the following features:

• Accelerate time-to-market of new services to delight customers and enhance loyalty

• Leverage opportunities from the convergence of voice, data, video and wireless technologies

• Add new revenue streams to provide a competitive edge

• Empower business with analytics tools for focused market segmentation and cross selling

• Improve end-to-end customer management to drive efficiency

• Provide advanced revenue assurance capabilities for top and bottom line growth

Idea Cellular's association with IBM is expected to bring value to its customers, employees and shareholders. It will harness IBM's power to support Idea Cellular's explosive growth with robust, best-in-class solutions that address scalability, complexity, innovation and cost control, to provide Idea with the most advanced business processes globally. This will be through supporting end-to-end transformation of business critical processes including billing, revenue assurance, and credit collection, subscriber management, business intelligence, fraud management, customer relationship management, e-billing and payment, and customer self care. IBM will also undertake the management and support of Idea Cellular's IT Infrastructure. All IT department employees of Idea Cellular would play a key role in the transformation, either as Idea Cellular employees or as IBM employees.

Baburajan K
baburajank@cybermedia.co.in