IDEA CELLULAR TAKING THE RIGHT CALL

EMERGING COMPANY OF THE YEAR 
An Idea that's now worth many billions

IF VICTOR Hugo were alive today, Idea Cellular may have made him proud. "Nothing is as powerful as an idea whose time has come," is probably the best way to sum up the cellular company's progress. What was once an also-ran mobile phone company, Kumar Mangalam Birla's Idea now rubs shoulders with giants such as Bharti Airtel and Vodafone-Essar. Thanks to the patient, but painful, assembling of many tiny units on its way to realise the idea of a multi-billion dollar mobile phone company. 

    Starting from a time when two relatively small companies combined, to a failed merger, to some key buyouts, and the exit of a key foreign partner, to a pan-India presence, this company has seen it all. 
    Idea Cellular is part of the AV Birla Group whose business interests range from aluminium to cement to retail. Idea — ET's Emerging Company Of The Year — now has more than 56 million subscribers, making it the fourth largest in the sector. 
    The business of mobile phones was probably one of the last ideas of the legendary businessman, Aditya Vikram Birla, before he passed away in 1995. Aditya Birla gave a thumbs up for the joint venture between his nascent telecom company and the iconic AT&T, which traces its roots to the inventor of telephone, Alexander Graham Bell. 
    The wireless story in India was unknown then and, for most businessmen, it was a sector that gulped hundreds of crores of investments with no returns in sight. The Birlas were among the few who took the plunge with the likes of Tatas, Modis, Nandas and the Goenkas. While many quit the race, Birlas stayed in the marathon. 
    It was Birla-AT&T then when tariffs were beyond the budget of most Indians. At Rs 16.80 per minute, the mobile handset was ostentatious and there were enough naysayers who scoffed at the story that was refusing to take off. The company's operations were launched in 1997, and this was restricted to Maharashtra (including Goa and excluding Mumbai) and Gujarat. 
    It was a test of perseverance for four years before the National Telecom Policy, 1999 — referred to as NTP 99 — came along. "This was a watershed event," says Idea Cellular's MD Sanjeev Aga. "When I read NTP today, it is still contemporary and comprehensive." 
    The policy moved from a fixed-licence regime to one that was revenue sharing. "The business model was going nowhere," said Mr Aga, who is having his second term at the firm after quitting once in 2001. The problem with the fixedlicence fee regime was that the bids for licences were hopelessly optimistic, he said. 
    Idea had its share of romance too, when two of the biggest industrial houses — Tatas, Birlas — came together, probably for the first time ever, to try their luck in telecom. A strong balance sheet to help Idea's future plans 
IN 2000, Tata Cellular was a company providing mobile services in Andhra Pradesh. When Birla-AT&T brought Maharashtra and Gujarat to the table, the merger of these two entities was a reality. Thus, Birla-Tata-AT&T, popularly known as Batata, was born. "We had the advantage of good promoters. So, we always set high standards," says Mr Aga. 
    But these relationships did not last long, and Idea was to set on a solo sail. There were many hurdles in its journey. In 2001, the Batata triumvirate agreed to merge its operations with the Rajeev Chandrasekhar-promoted BPL Communications. The merger could have brought in regions like Mumbai, Maharashtra, Kerala and Tamil Nadu, which seemed to be a perfect accompaniment to what it already had. This was critical, with the bid for the fourth operator licence round the corner. However, the engagement with BPL was broken. Then, it set sights on RPG's operations in Madhya Pradesh which was successfully acquired, helping Batata have a million subscribers, and the licence to be the fourth operator in Delhi was clinched. This was the time when Idea looked ten years ahead, when smaller rivals gave up hope. 
    In 2004, Idea (the company had by then been rechristened) bought over the Escorts group's Escotel gaining Haryana, Uttar Pradesh (West) and Kerala — and licences for three more — UP (East), Rajasthan and Himachal Pradesh. By the end of that year, four million Indians were on the company's network. 
    This period was critical in more ways than one. "We managed our debt that had accumulated over time. However, we did not have the wherewithal to aggressively expand to other circles," says Mr Aga. 
    In 2005, AT&T sold its investment in Idea, and the year after Tatas also bid good bye to pursue an independent telecom business. "In many ways, June 2006 was the real turning point for us," says Mr Aga. "Now, there was just one promoter and the 
sector was doing well," he added. 
    When the company's stock listed on the bourses in March 2007, its subscriber base was 13 million with presence in 11 circles. Today, in less than three years, the subscriber numbers have more than quadrupled. The public issue was oversubscribed 50 times and raised Rs 2,450 crore. The company, which sold its shares at Rs 75 each, reached an all-time high of Rs 161 in October 2007. In recent times, the scrip has not exactly outperformed, first because of the general downturn in the market in 2008, and later because of the frenzied tariff-cutting by telecom companies. 
    Mr Aga and company, on their way, also encountered the psephologists' nightmare called India — the varied tastes and behaviour of different states and regions. "We realised that behind the façade of being a national market, each circle was more like an independent market," says Mr Aga. "The network in each circle was really one large factory. What worked for us was the high quality spectrum in our older circles," he says. 
    In June last year, Idea Cellular bought out BK Modi's stake in Spice Communications for Rs 2,700 crore, adding Punjab and Karnataka circles. Modi's joint venture partner, Telekom Malaysia, invested Rs 7,000 crore for a 14.99% stake in Idea. Just around then, Idea's subsidiary, Aditya Birla Telecom, sold a 20% stake to US-based Providence Equity Partners for over Rs 2,000 crore. With these two transactions, Idea was debt-free then, a rare feat in telecom. 
    "Today, we have a tremendously strong balance sheet. Our net debt is only Rs 4,000 crore and we have approvals to raise another over Rs 11,000 crore. In fact, we can raise much more than what we will ever need," adds Mr Aga. In the past three-and-a-half years, infrastructure growth for the company has been impressive. From 5,000 cell sites in March 2006, Idea boasts of 62,000 today and is mentioned in the same breath as other large players like Bharti Airtel and Vodafone-Essar. "Just a few years ago, there was an apprehension that we would struggle as an independent operation. We can now say that Idea can take on the best in the world's most competitive market," Mr Aga said proudly. A mighty idea. 
    rashmi.pratap@timesgroup.com 

SANJEEV AGA MD, IDEA CELLULAR LTD.