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Page 1: Telecom Dhruv Srivastava

Apr-May 2010

DHRUV SRIVASTAVA

PGDM 2009-11

Roll No. 038

Birla Institute of

Management Technology

Summer Internship Project

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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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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, India‘s 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 – Idea‘s 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 Events

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 world‘s 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 mark

Becomes pan-India operator in 2009

Acquired Escotel, incumbent cellular service provider in Haryana, UP(W) &

Kerala and new licensee in HP

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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)

Brand IDEA launched Delhi operations commence (Nov)

Acquired RPG Cellcom, service provider in Madhya Pradesh (Feb) Awarded

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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 process

MoU 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 Category Mobile Penetration

Delhi Metro 138%

Mumbai Metro 112%

Kolkata Metro 102%

Maharashtra A 37%

Gujarat A 45%

Andhra Pradesh A 41%

Karnataka A 46%

Tamil Nadu A 52%

Kerala B 55%

Punjab B 56%

Haryana B 44%

Uttar Pradesh (W) B 31%

Uttar Pradesh (E) B 24%

Rajasthan B 40%

Madhya Pradesh B 25%

West Bengal B 24%

Himachal Pradesh C 55%

Bihar C 20%

Orissa C 27%

Assam C 22%

North East C 29%

Jammu & Kashmir C 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 Idea’s 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. India‘s 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 consumer‘s 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 consumer‘s 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.