|
|
India's Idea Cellular - Pressure in Many Markets As Churn Balloons
Net additions at India's fifth largest mobile player, IDEA Cellular, declined in Q2 09 compared to the first three months of the year by more than 17%, despite the launch of two new circles. Services got under way in Orissa in April and then in Tamil Nadu in May, bringing the total coverage to 15 of India's 23 telecoms circles after launches in Mumbai and Bihar in the second half of last year. The two new operations contributed 0.22m new customers in the quarter, but a crash in net adds in Mumbai from 427k in Q1 09 to 189k in Q2 limited the overall increase in the four new circles to 1.00m, down from 1.02m three months ago. Yet IDEA's 11 established circles performed worse, with net additions off in all but two circles, and by 21% in aggregate.
Total connection numbers reached 42.8m at the end of the quarter, or 47.1m including the soon-to-be-merged associate Spice Communications.
The expansion of IDEA and Aircel to become national players and the licensing of four new greenfield operators has made the Indian market even more competitive in every region, and whilst there is more than enough raw growth to go round in theory, this does not mean that every operator will win out in every quarter. Some of the deals on offer, particularly from new-entrants, have in IDEA's words been "extraordinary", and this inevitably stirs up the market and causes volatility in customer loyalty. It seems that this was the issue for IDEA, as the churn rate leapt to 6.7% from 4.0% in 2008.
So used have we become to the irrepressible progress of the Indian market that these bumps and blips would seem to signal danger for the companies concerned, yet increasingly we believe that they will become part of life (as they are in virtually all other markets in the world) and longer-term strategy and progress will become the focus. And this is something IDEA seems confident of: after all its annual growth rate, at 57%, is still the best of any of the major players.
Its Q1 revenue growth was also healthy, with a recorded annual increase of 32.6% - which would have been 38.8% had it not been for a change in the interconnect regime. What is more, since the end of the quarter IDEA has already launched another two circles, in the shape of Tamil Nadu and Chennai, and the company remains confident that it "will be a pan-India operator within the calendar year".
Posted to the site on 6th August 2009
This article was extracted from The Mobile World Briefing, the weekly newsletter from The Mobile World.
To download a sample issue of the Briefing in PDF format, please click here.
For more information including full subscription pricing, please visit The Mobile World