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An Idea Whose Time Has Come

Idea Cellular continues to make bold strides in India’s 3G market. Earlier this week, the mobile operator launched a 3G service in Delhi over 900MHz spectrum it picked up in the auction of February 2014. In doing so, it became the first Indian operator to run the high-speed technology over 900MHz airwaves, which rivals are still using to support their 2G services.

Idea Cellular Ltd. ‘s technological smarts have helped to bring it market success. In the last four years, the operator has advanced from the number five spot in India’s mobile market to become the third-biggest mobile operator by customer numbers. With 152 million subscribers at the end of January, Idea now claims a 16% share of India’s mobile market.

Even more significantly, Idea has the highest share of active subscribers, according to data released by the Telecom Regulatory Authority of India (TRAI). It also grew its revenue share of the market by 1.4 percentage points between the second (July-to-September) quarter of the 2013/14 financial year and the same period of 2014/15 — registering the biggest increase of any player — to give it a revenue market share of 17.2%.

“Idea has exhibited higher than industry subscriber and revenue growth over the past few years,” noted a January 2015 report on Idea from ICICI Securities, a brokerage firm. As that report pointed out, Idea’s customer base increased at a compound annual growth rate (CAGR) of 33.5% between 2008 and 2014, while its revenues grew at a CAGR of 25.7% over the same period. According to ICICI, Idea’s market share of recent net additions has been as high as 28.7%.

Various factors have contributed to this growth. For a start, Idea has been one of the biggest beneficiaries of India’s introduction of mobile number portability (MNP), allowing customers to change service providers while keeping the same phone number. As of December 31, it had gained nearly 12 million customers through MNP.

Network expansion has supported the operator’s growth. Idea added 8,331 additional 2G sites in 2014, taking its total tally of basestations to 109,931 by December 2014. The company also increased its 3G footprint to 27,744 cell sites (in 11 circles, or service areas). By comparison, its closest rival, Vodafone India , has about 30,000 3G sites, while Bharti Airtel Ltd. (Mumbai: BHARTIARTL), India’s biggest mobile operator, maintains about 41,850.

Idea has also been investing in an optical fiber cable (OFC) transmission network, which measured 90,200 kilometers in 2014 (up from 71,600 kilometers in 2013). Although this remains considerably shorter than Bharti Airtel’s 193,625km OFC network and even the 120,000km network operated by number four player Reliance Communications Ltd. , Idea is slowly and steadily reducing the infrastructure gap. The operator also claims to have deployed 100G DWDM (dense wave division multiplexing) network technology to cater to rising data demand.

Thanks to these efforts, Idea has been recording a steady increase in data revenues. In the recent third quarter, those made up nearly 15.7% of Idea’s service revenues, up from just 5.7% in December 2012. On this metric, Idea is fast closing on Bharti Airtel, which attributed 16.2% of its revenues to data services in the third quarter.

Another development that has worked to Idea’s advantage was the cancellation of 122 spectrum licenses in 2012. The move by Indian authorities forced service providers like S Tel Pvt. Ltd. and Etisalat out of the market. Aircel Ltd. and Tata Teleservices Ltd. were also forced to trim their operations in many circles and reduce costs.

But India’s just-concluded spectrum auction will have been critically important for Idea. Although the sale of airwaves raised $17.5 billion for India’s government, the details have yet to be made available. Idea’s existing licenses are due to expire in the circles of Andhra Pradesh, Gujarat, Haryana, Kerala, Madhya Pradesh, Maharashtra, Uttar Pradesh (West), Karnataka and Punjab, which generated about 70% of its revenues in the 2013/2014 financial year.

What’s more, despite picking up 1800MHz (as well as 900MHz) spectrum in key circles during the auction of February 2014, Idea is not planning to launch 4G services in 2015. That could leave it exposed once Reliance Jio launches a 4G network later this year.

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