Apr-May 2010

Summer Internship Project

DHRUV SRIVASTAVA PGDM 2009-11 Roll No. 038 Birla Institute of Management Technology

Summer Internship Project

Summer Project Certificate

This is to certify that Mr. Dhruv Srivastava, Roll No. 038, a student of PGDM has worked on his summer project titled Planning& Implementation of Advertising & Promotion Budgets basis Urban & Rural markets at Idea Cellular Pvt. Ltd. after trimester-III in partial fulfilment of the requirement for the programme. This is his original work to the best of my knowledge.

Date: __________

Signature ___________

Seal:

Name of Faculty________

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Summer Internship Project

Acknowledgement

I take this opportunity to express my deep sense of gratitude to all those who have contributed significantly by sharing their knowledge and experience in the completion of this project work. I am extremely grateful to Mr. Ashit Singh, Head- Marketing Communications, my industry guide for being supportive and for taking out time to help me during my project. His mentorship has set an example for me. I am highly indebted to Professor R.J. Masilamani, my Faculty Guide, under whose able guidance this project was carried out. I thank him for his continuous support, guidance, help and mentoring before, during the tenure & after completion of the project.

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Table of Contents

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Company Background Idea Cellular is an Aditya Birla Group Company, Indias first truly multinational corporation. The group operates in 25 countries, and is anchored by over 1, 30,000 employees belonging to 30 nationalities. The Group has been adjudged the 6th Top Company for Leaders in Asia Pacific Region in a survey conducted by Hewitt Associates, in partnership with The RBL Group, and Fortune. The Group has also been rated The Best Employer in India and among the Top 20 in Asia by the Hewitt-Economic Times and Wall Street Journal Study 2007. Idea Cellular is a publicly listed company, having listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) in March 2007. Idea Cellular is a leading GSM mobile services operator in India with over 62 million subscribers, under brand Idea. It is a pan India integrated GSM operator covering the entire telephony landscape of the country, and has NLD and ILD operations. A front runner in introducing revolutionary tariff plans, Idea Cellular has the distinction of offering the most customer friendly and competitive Pre Paid offerings, for the first time in India, in an increasingly segmented market. From basic voice & Short messaging Service (SMS) services to high-end value added & GPRS services such as Blackberry, Data card, Mobile TV, Games etc- Idea is seen as an innovative, customer focus brand. Idea offers affordable and world-class mobile services to varied segments of mobile users. Be it high end, or low-end, price sensitive consumers Ideas tariff plans are designed to suit every pocket. With a vision of delighting its customers while meeting their individual communication needs anytime, anywhere, Idea offers seamless coverage to roaming customers travelling to any part of the country, as well as to international travelling customers across 200 countries. Idea Cellular has partnership with over 400 operators to ensure that customers are always connected while on the move, within the country or other parts of the world. Idea is the winner of The Emerging Company of the Year Award at the Economic Times Corporate Excellence Awards 2008-09. The company has received several other national and international recognitions for its path-breaking innovations in mobile telephony products & services. It won the GSM Association Award for Best Billing and Customer Care Solution for 2 consecutive years. It was awarded Mobile Operator of the Award India for 2007 and 2008 at the Annual Asian Mobile News Awards.

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The chronology of key events of the Company from incorporation is set out below: Calendar year EventsBecomes pan-India operator in 2009

2009 Subscriber base as on December 31, 2009: 57,611,872 Idea becomes a pan-India operator Emerging Company of the Year - fastest growing mobile operator in the worlds fastest growing telecom market 2008 Subscriber base as on December 31, 2008: 40,016,153 Idea acquired 9 licences for Punjab, Karnataka, Tamil Nadu & Chennai, West Bengal, Orissa, Kolkata, Assam, North East and Jammu & Kashmir Acquired Spice Communications with the operating circles of Punjab and Karnataka Launched services in Mumbai metro in the largest single metro city launch, ever Launched services in Bihar 2007 Subscriber base as on December 31, 2007: 21,054,027 Won an award for the "CARE" service in the "Best Billing or Customer Care Solution" at the GSM Association Awards in Barcelona, Spain Initial Public Offering aggregating to Rs. 28,187 million and Listing of Equity Shares on the Bombay Stock Exchange and the National Stock Exchange Merger of seven subsidiaries with Idea Cellular Limited Reached the twenty million subscriber markAcquired Escotel, incumbent cellular service provider in Haryana, UP(W) & Kerala and new licensee in HP

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Summer Internship Project

2006 Subscriber base as on December 31, 2006: 12,442,450 Became part of the Aditya Birla Group subsequent to the TATA Group transferring its entire shareholding in the Company to the Aditya Birla Group Acquired Escorts Telecommunications Limited (subsequently renamed as Idea Telecommunications Limited) Restructuring of debt Launch of the New Circles Reached the 10 million subscriber mark Received Letter of Intent from the DoT for a new UAS License for the Mumbai Circle. Received Letter of Intent from the DoT for a new UAS License for the Bihar Circle through Aditya Birla Telecom Limited. ABNL, the parent of Aditya Birla Telecom Limited, pursuant to a letter dated November 22, 2006, agreed to transfer its entire shareholding in Aditya Birla Telecom Limited to the Company for the consideration of Rs. 100 million. 2005 Subscriber base as on December 31, 2005: 6,473,962 Reached the five million subscriber mark Turned Profit Positive Won an Award for the "Bill Flash" service at GSM Association Awards in Barcelona, Spain Sponsored the International Indian Film Academy Awards 2004 Completed debt restructuring for the then existing debt facilities and additional funding for the Delhi Circle. Acquired Escotel Mobile Communications Limited (subsequently renamed as Idea Mobile Communications Limited)Acquired RPG Cellcom, service provider in Madhya Pradesh (Feb) Awarded

Brand IDEA launched Delhi operations commence (Nov)

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Reached the four million subscriber mark First operator in India to commercially launch EDGE services 2005 2003 Reached the two million subscriber mark 2002 Changed name to Idea Cellular Limited and launched "Idea" brand name Commenced commercial operations in Delhi Circle Reached the one million subscriber mark 2001 Acquired RPG Cellular Limited and consequently the license for the Madhya Pradesh (including Chattisgarh) Circle Changed name to Birla Tata AT&T Limited Obtained license for providing GSM-based services in the Delhi Circle following the fourth operator GSM license bidding process 2000 Merged with Tata Cellular Limited, thereby acquiring original license for the Andhra Pradesh Circle 1999 Migrated to revenues share license fee regime under New Telecommunications Policy ("NTP") 1997 Commenced operations in the Gujarat and Maharashtra Circles 1996 Changed name to Birla AT&T Communications Limited following joint venture between Grasim Industries and AT&T Corporation 1995 Incorporated as Birla Communications Limited Obtained licenses for providing GSM-based services in the Gujarat and Maharashtra Circles following the original GSM license bidding processMoU for merger between Birla AT&T and Tata Cellular Limited Andhra Pradesh signed (Jan)

Birla AT&T commence Cellular operations Maharashtra & Gujarat

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Telecommunications Industry in India India is among the fastest growing mobile markets in the world: India, the second largest mobile market in the world, is also among the fastest growing mobile markets globally. The total number of mobile subscribers in India (i.e., the subscriber base) has increased from 6.4 million in March 2002 to around 350 million in December 2008, at a compounded annual growth rate (CAGR) of 81%, aided by a significant increase in network coverage and a continual decline in tariffs and handset prices.

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India, a relatively late entrant into mobile services, has benefited from a significant decline in mobile network costs during the last three to four years. As compared with a capital cost of US$50-90/subscriber to provide mobile service, it costs as much as US$200-350/subscriber to provide fixed-line services. This and the added benefit of mobility have led to stagnation in the total fixed line subscriber base, which along with the significant growth in the mobile base has translated into India having one of the highest ratios globally of mobile subscribers to total telecom subscribers. Despite the growth, mobile penetration remains moderate: As on end September 2008, India had a mobile penetration of around 27%, which is relatively lower as compared to other countries as depicted in Chart 2. Given the moderate penetration levels at present, mobile growth in India is expected to continue in the short to medium term albeit at a lower level because of the larger base effect.

Growth expected to be led by B and C Class circles: The growth in the domestic telecom industry has largely been concentrated in the Metros and Class A circles in the past decade, with coverage reaching around 90% and 35%, respectively. However, coverage in the Class B and Class C cities is still low at 15-25%. Moreover, within these circles growth has largely been concentrated in the urban areas while penetration in the rural areas remains lower. Thus future growth is likely to come largely from Class B and C circles and rural areas. Keeping this in view, larger players like Bharti Airtel Limited, Reliance Communications Limited, and Bharat Sanchar Nigam Limited (BSNL) are largely focusing on increasing their geographical coverage in Class B and C circles.

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Addition of low usage subscribers and competitive pressures lead to fall in ARPUs: With growth coming from the lower economic strata and on account of strong competition in the mobile industry, average revenues per user (ARPUs) have moved south over the years. The movements in the ARPUs and minutes of usage (MoUs) for global system for mobile communications (GSM) and code division multiple access (CDMA) operators are presented in Charts 5 and 6.

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Conservation of capital In the past, with costs being amortised over a larger base and steps being taken to rationalize costs, most telecom operators were able to improve their earnings before interest, taxes, depreciation and amortisation (EBITDA) margins. However, in the current market conditions, the margins and return indicators may come under pressure as ARPUs continue to fall. The chart broadly illustrates the impact of declining ARPUs on the internal rate of return (IRR) at different EBDITA margins. Thus, for new operators especially whose margins are low because of the high set-up costs, operations can be unviable at the current level of incremental ARPUs.

Competition set to intensify further with market liberalization: The Indian mobile sector is an intensely competitive industry, featuring 10 mobile operators of which four, namely Bharti Airtel Limited, Reliance Communications Limited, Vodafone Essar Limited and BSNL together account for almost three-fourths of the entire mobile market share. This is also the partly on account of the fact that these operators have their presence in a larger number of circles as compared with other players. With licences being granted to some of the existing operators for new circles and also to new entrants, competition is expected to intensify further. This is also leading to increasing load on the existing infrastructure of towers and stations. With most tower companies like Indus towers being joint ventures between the competing cellular service providers, the sharing of the cost is also going to determine the future profitability of the companies.

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Service Provider wise market Share as on 28-02-2010

Mobile penetration as on Jun 2009 for each circle Circle Delhi Mumbai Kolkata Maharashtra Gujarat Andhra Pradesh Karnataka Tamil Nadu Kerala Punjab Haryana Uttar Pradesh (W) Uttar Pradesh (E) Rajasthan Madhya Pradesh West Bengal Himachal Pradesh Bihar Orissa Assam North East Jammu & Kashmir Category Metro Metro Metro A A A A A B B B B B B B B C C C C C C Mobile Penetration 138% 112% 102% 37% 45% 41% 46% 52% 55% 56% 44% 31% 24% 40% 25% 24% 55% 20% 27% 22% 29% 37%

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Telecom Subscription Data as on 28th February 2009 Total Telephone subscriber base reaches 413.85 Million Wireless subscription reaches 376.12 Million 13.44 Million new additions in wireless Overall Tele-density reaches 35.65

Telecom Subscription Data as on 28th February 2010 Total Telephone subscriber base reaches 600.69 Million Wireless subscription reaches 563.73 Million 18.76 Million new additions in wireless Overall Tele-density reaches 51.05

Total Subscriber base (Maharashtra-Goa Circle) 42,233,290 (Excluding Mumbai)

Idea Cellular customer base- 9,146,389

Ideas Market Share (%) - 21.66 %

Tata Customer base- 7,570,932

Vodafone customer base- 6,908,481

Reliance- 6,871,987

Airtel customer base- 6,601,480

Aircel customer base- 279,055

MTNL customer base- 2,639,506

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Review of Literature When it comes to promo tools, there is a strong misconception they are tailor-made only for tactical objectives while promos may be primarily used for immediate activation of the brand, there is more than enough opportunity to simultaneously build equity for the brand. Promotions globally as well as in India have the potential of being a strategic and brand building tool. Any work that needs to be evaluated will have to take into account whether the promotion activity has managed to activate the brand promise and will keep up the brand equity in the long term. This is best done by ensuring that promo and activation is well-integrated with the advertising strategy for the brand. In India the integration of promotion with other communication is mostly done on the recommendation of the brand owner / the client. Forrester and the Association of National Advertisers (ANA) surveyed 104 US advertisers representing nearly $14 billion in measured media budgets. More than half of them 62% told them that TV advertising is less effective than it used to be. That's in line with what they told in 2008. Advertisers want more accurate measurement and the option for more targeted and clutter-free ad inventory. Meanwhile, US marketers are willing to explore alternatives to the 30-second TV commercial as they shift budget from TV to social media, banners, and search. More forward-looking marketers are ready to experiment with online video ads, branded entertainment, and interactive TV. They recommend that advertisers get ready for the future of television, by preparing to deliver targeted commercials, delivering true branded entertainment experiences, and embracing the connected TV. As the Indian telecom sector which registered a robust growth rate of 38.51 per cent in 2008-09 as against the previous year by adding nearly 10 million subscriber month on month. Indias largest telecom sector company Bharti Airtel added 32.38 million subscribers in 2008-09. Reliance Telecom added 26.88 million subscribers while Tata Telecommunications added 14.56 million subscribers in the last fiscal. The telecom sector firms, which used to be fervent advertisers in the past, have marginally lowered down their advertisement, sales promotion and marketing budget by 3 per cent. However, their net sales increased by 26.9 percent despite the decline in their advertisement expenditure.

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Marketing communication programmes and campaigns can be built around a host of different communications options. Keller (2001) for example, highlights the major communications options in the following way:

In orchestrating these options and tools in marketing communications campaigns and programmes, each needs to be considered to achieving brand objectives in both short and long term. In particular, the relationship between contributions to overall long term brand equity (perceptions of brand quality, levels of brand recognition and recall, competitive positioning of the brand, etc.) needs to evaluated and considered. For practitioners, integrated marketing communication (IMC) has 1. Become widely accepted 2. Has pervaded various levels within the firm 3. Has become an integral part of brand strategy that requires extensive brand development activities within the firm before beginning any external brand communication efforts.

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Regarding academics, Vargo and Lusch (2004) argued in a recent paper that marketing is evolving towards a dynamic and evolutionary process-one that is based on a service-centred view. In keeping with this evolution, Vargo and Lusch (2004) suggest that 1. IMC should replace diverse, limited-focus promotional tools. 2. Brand management should be used for initiating and maintaining a continuing dialogue with the customer and for enhancing relationships. Kitchen et al. emphasize that strategically oriented integrated brand communications can help business move forward in the highly competitive world of the 21st century (2004, p.28, italics added). For Schultz (1998), brands are central to this integrated marketing communication. Keller (1993) points out that customer-based brand equity emanates from the consumers familiarity and strong, favourable associations with the brand. For Keller, marketing communications represent the voice of a brand and the means by which companies can establish a dialogue with consumers concerning their product offerings (2001, p. 823).

The focus on IMC is also being driven by ongoing global changes in marketing communications environment, and the need for improved effectiveness of marketing communications. These global changes include the development of sophisticated customer databases, fragmentation of mass media, cost of new customer acquisition and customer defection, the relationship between below and above the line activities, and changes in consumers response to traditional communications tools and approaches, amongst others. Shimp (2000) further qualifies the changes affecting marketing communications as: 1. Reduced faith in mass marketing as communications channels proliferate and customer and consumer loyalties diminish or dilute. 2. Increasing reliance on more highly targeted communications methods to reflect an emerging relationship marketing orientation in business.

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3. Greater Demands placed on marketing communications suppliers, such as agencies, to become more of a brand custodian or guardian than just a transaction based supplier of communication services. 4. Increased efforts to access communication return on investment reflecting greater demands by managers (marketers) for accountability and measurement of alternative customer acquisition and relationship activities. When people think of advertising, they usually think of traditional media, such as newspapers, magazines, television, radio, billboards, yellow pages, and perhaps direct mail. As consumers grow numb (and eventually immune) to the ads that inundate them through traditional media channels, advertisers seek new formats to distribute their messages. Increasingly, marketers are looking for new, unexplored ways to reach their target audience. Sometimes it also makes sense to capitalize on existing non traditional approaches that they may not have previously considered. Below is a list of media options that have found some acceptance as an advertiser continue their never-ending search to reach elusive consumers. Transit- Car cards, ads on outside of public transportation, clocks, framed displays, air terminal posters In-Store media- POP banners, cash register units, counter units, floor stands, aisle displays, racks, testers/sampling, interactive units, electronic displays, in-store television and radio. Sports & Theatrical Events- programs, poster type ads, revolving banners, stadium score boards, signs Non traditional Out of Home- Audience segment hangouts, truck stops, painted walls, kiosks, rest room advertising, bus shelter displays, inside taxi cabs, in-flight advertising, free standing inflatable, shopping mall displays, banner pulling, moving bill boards. Speciality advertising- Calendars, writing instruments, business gifts, desk accessories, wearable items, airline ticket envelopes, trade shows.

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