Idea chalks out acquisition strategy

Idea Cellular, which had earlier announced that it was keen on expanding its foot-print by acquiring regional operators, has decided to focus only on those circles that are contiguous to its existing circles and that have good telecom revenue potential.

Announcing this here at a press conference, Vikram Mehmi, the chief executive officer of Idea Cellular, said that from the very beginning Idea's thrust was on acquiring the first and second operator licences in circles that are contiguous to its existing circles.

"This was how we first merged Tata Cellular with Birla AT&T, and the subsequent acquisition of RPG Cellcom's MP circle. With the acquisition of Escotel, we have again demonstrated our ability to consolidate and grow inorganically. We are primarily looking at the operators who have the 900 MHz licenses," Mehmi said.

"This kind of strategy gives us a three fold advantage "� the company will have the incumbency advantage in as many as seven circles which gives us capital expenditure efficiency.

This would also entitle us to the additional two per cent reduction in license fees for four years from April 2004 which has been granted only to the first incumbent and second operators in non-metro circles," Mehmi explained.

"The third advantage we expect is that the unified license regime will permit inter circle connectivity shortly. This will enable us to carry traffic covering more than 60 per cent of the Indian population and 65 per cent of the potential telecom market," he said.

After acquiring Escotel, Idea now has a presence in 11 circles across the country, including five circles in Andhra Pradesh, Maharashtra, Gujarat, Madhya Pradesh and Delhi. "We are now talking to a few potential companies for acquisition," Mehmi said without disclosing names.

"We would prefer to be the most profitable organisation than focus on being an operator with a national foot-print," he pointed out. We are present in four circles out of the five major circles in the country except the Mumbai circle.

The telecom penetration levels in AP, Gujarat and Maharashtra are still at lower levels and the size of these markets can be much higher than the present size, he said.

By the end of January, Idea Cellular had become cash positive and has posted a 43 per cent growth in EBIDTA (earnings before interest, depreciation, tax and amortisation) margins on a year-on-year basis. Its cumulative monthly revenues have crossed Rs 100 crore while EBIDTA margins have crossed the Rs 40 crore mark.

"We have not allowed our Average Revenue Per User (ARPU) to decline which has been stable at around Rs 460 a month," Mehmi said.

Taking advantage of the unified license regime, the company is now contemplating the introduction of fixed wireless terminals and fixed wireless phones using the GSM technology.

On the company's IPO plans, Mehmi said that the company is looking for an appropriate time to tap the market.