What Happened To Idea Cellular Limited And What Led To Its Downfall?
Indian telecom industry has made enormous strides in the last few years with the roll-out of countrywide 4G and rising subscriber base. With such a large subscriber base, India should be a hotdog for telcos. Alas, that hasn't been the case. This is mainly because of the lack of competitors and failed players like Idea Cellular limited. Why did it fail?
Table of Contents
- What Happened To Idea Cellular Limited And What Led To Its Downfall?
- Introduction to Idea Cellular Limited
- What happened to Idea Cellular Limited?
- Why did Idea Cellular Limited fail?
- Idea Cellular Limited Downfall & Solutions
- Lack to react to market changes and competitors
- The story of VI
Introduction to Idea Cellular Limited
Idea Cellular Limited was one of the leading players in India's telecom industry until a few years ago. In 2002, when the telecom service was introduced in India, the only option was state-owned BSNL. The number of internet users in India at the time was only 1.4 million, the number of handsets was nearly 100,000, and mobile internet devices were non-existent. Check out: How Spotify makes money?
With a mobile penetration of just 15%, this seemed like an opportunity to start a telecom service for Indians. Idea Cellular Limited was the first such operator to launch telecom services in India. Later, Airtel acquired a controlling stake in the company in 2005. Since then, the company had maintained a dominant position in India's telecom industry.
What happened to Idea Cellular Limited?
Idea was the second largest telecom company in India after Bharti Airtel. This should be interesting for you to know because Airtel is a leading mobile telecom service provider and has helped Indian subscribers with top-notch 3G/4G mobile services. In fact, Airtel was the first operator to launch commercial 3G services in India.
In June 2010, Idea Cellular Limited (parent company of Idea Cellular Ltd) had announced the acquisition of Warid Telecom, a Pakistani mobile operator for US$2.25 billion. The initial reaction to the deal was affirmative. However, this positive aspect started to fade away quickly with the revelation of the whole Warid fraud controversy.
Why did Idea Cellular Limited fail?
Idea Cellular Limited was founded in 1997 as a joint venture between Indian subsidiaries of German telecom company Vodafone and Idea Cellular Limited. It has been around for 20 years but has witnessed tumultuous times during this period of time. Not only did the company go through a bidding war with larger and better-capitalized players like Bharti Airtel and Reliance Jio but also has witnessed a three-year-long license dispute with the country's telecom regulator TRAI (Telecom Regulatory Authority of India).
One of the most crucial factors for Idea Cellular is its spectrum position. Having owned a chunk of high-end 800 Mhz frequencies, Idea Cellular was keen to build out networks in Delhi, Mumbai, and parts of the east coast.
Idea Cellular Limited Downfall & Solutions
Idea Cellular lost out to Reliance Jio. The telecom company couldn't react to the disruption in the market and ultimately failed to compete. Here are thing things Idea Cellular could have done to still stay relevant:
Decline in Operational funds & capital:
- They could have solved it by convincing the investors about well thought out and analyzed strategies.
- Appointing a proper third party for optimum management of funds.
- Raising public awareness and taking the customers on the company's side through trust, quality services and competitive pricing.
Losing to its competitors:
- Idea Cellular should have provided good to true offers to its customers.
- The quality of services should have been maintained.
- Brand loyalty by providing consistent services.
Heavy Expensive Marketing:
- Idea Cellular could have cut the costs of marketing and use them to channelize funds.
- The marketing expenditures could have been used to provide better recharge deals or superior services than its competitors.
- Resort to world of the mouth publicity till the company gets profitable.
TRAI AGR Dues:
- The company could have borrowed extra time.
- Convince investors for raising more funds or borrowing from institutions to clear dues.
Lack to react to market changes and competitors
- Create a loyal user base of customers through consistent quality.
- Attract new users with the help of digital media and also provide inexpensive offers to get new users on board.
- Make losses at the start at the cost of acquiring users and retention of the same thereby turning into profits later.
The story of VI
As Idea Cellular Limited failed to provide competitive pricing & offers, the status of the company declined. The company also fell in market position and was on the verge of bankruptcy. Later, Vodafone joined hands with Idea and together they formed VI.
Presently, VI provides good offers like weekend data rollout and even double data offers for some plans. However, the customer base is not as large in comparison to Jio and Airtel. They both are the leading players. VI aka Idea & Vodafone won’t be turning around into huge players any time soon. It is only about time we shall know. Which telecom operator are you using and why? Drop your opinions about the future of VI in the comments below.