Aircel: A competitor to watch for!

6 05 2009

After recent launch of its services in financial capital of India, Aircel, a JV between Maxis Communications Berhad, Malaysia (holding 74% stake) and Apollo Hospitals Enterprise, has come a long way since launch of its services in 1999. Before Mumbai, Aircel has launched its services in Delhi (March09) which completed its foray into all four major metros of India. We will take a look at this most ambitious telecom operator who is looking forward to garner 30 million subscriber bases by the end of year 2009.

After launch of its services in 1999 in Tamilnadu Circle, Aircel became leading operator in just 18 months. In Dec 2003, it has commercially launched its services in Chennai circle and rapidly established itself as a market leader (27% share against 23% of Airtel). Since 2005, company is looking forward to expand its services into different circles and after getting all operational licenses it succeeded in garnering a fair number of subscribers in Assam, the Northeast, Orissa, Bihar, J&K, HP, and WB & Kolkata. In fact, in Assam & Northeast it has subscriber base of 2.6 million, which is more than sub base of any other operator operating in the region.

In 2008, it was allocated spectrum for 13 new circles, giving boost for its rollout plans in circles like Delhi-NCR, Mumbai, MP, Karnataka, Maharashtra & Goa etc. Mumbai was Aircel’s 17th circle of operation & most recently added, after launch of Delhi, UP (E), AP and very soon company will be rolling out services into rest of Maharashtra. This will take Aircel’s footprint to 18 circles of operations out of 23. Recent launches into different circles saw company’s market share growing drastically from 2.88 % in Mar-06 to 4.65% in Feb-09.

The Advantage:

In the commonplace market such a telecom, it is highly rewarding if you have some clear cut advantages over your competitors. Though Aircel has no such advantages as compared to other operators, its main strong point is its strong financial backing from Maxis. A total of $10 billion has been kept aside for investment till 2011 along with commitment of over $5 billion for countrywide capex rollouts through 2009. Though there are no major disadvantages with Aircel, it will be a real daunting task to garner decent subscribers in metros. The other advantage comes from the NGN expertise of Maxis telecom in more mature markets like Malaysia especially with 3G & WiMAX. This will certainly help Aircel, in 3G rollouts in India, provided it gets license for operation.

The Strategy:

It will be real challenge for Aircel to garner decent sub base in recently launched circles like Delhi, Mumbai, and AP etc. Though Delhi & Mumbai has more than 90% mobile penetration, the actual unique number tally is somewhere around 70%. Aircel is betting on this number along with targeting churn out subscribers (3 % churn rate) to garner subscribers. For Aircel, acquiring more number of subscribers is going to be main target and it has already started offering highly competitive tariff plans in these mature markets. When creamy layer has already been taken, company can only bet on competitive tariffs & attractive VASs to garner subscribers. While it has roped in Indian Cricket icon M.S. Dhoni for advertisements & branding, company is betting on its VAS offerings like Location based services & phone banking to attract subscribers in metros. Surely, it is going to replicate the success of Maxis in Malaysia, where 1/3rd of revenue comes from Data services. Probably, while talking about differentiation in the market Aircel is concentrating more on VAS & Data services than any other new operator. This strategy is paying off a bit, as it has succeeded in garnering 28K sub base in March within 15 days of launch of its services, in Delhi-NCR. Moreover it is betting on its QoS, where it has least congested network in all operators, to attract new subscribers, who are facing number of congestion related issues with existing telecom monopolies.

The Plan:

Just like Airtel, Voda & Idea, Aircel has also opted out for outsourcing route to tie with specialists. It has three year managed service hosting agreement with Ericsson, which has end-to-end responsibility to provide Aircel with a consumer push email service, including system integration, management, operations & maintenance. The company has also tied up with Wipro for its nine years NGN contract. Recently company has tied up with Oracle for implementation of Oracle Communications Services Fulfillment suite.

Company is also looking forward to increase its tower numbers in coming months. It is also open to renting or sharing of towers (like Indus Towers) to save on capex.

Coming back to adaptation of new technologies like 3G & WiMAX, Aircel has launched WiMAX services in Chennai in Oct 2006, expanding the network to 44 cities, where it provides high end data services to number of corporate clients. On 3G front, company has already tasted complete range of 3G services in Chennai & awaiting for 3G license auction. Moreover, Aircel has kept aside Rs 20 billion for 3G spectrum despite economic slowdown.

Company is also looking forward to acquire Loop Telecom (Former BPL Mobile) who has decent subscriber base in Mumbai Circle. This move, if successfully acquired, will help Aircel in establishing itself as a major telecom operator in Mumbai Circle, which is the highest revenue generating circle in India.

The future:

Surely, Aircel has come a long way from being a Chennai based Telecom Operator known by very few to almost becoming a Pan-Indian Mobile Operator. If you look at subscribers additions, company has sub base of 17 million in Feb 09 as compared to 2.6 million in Mar 06. With Urban market coming close to saturation, Aircel needs to concentrate simultaneously on to rural foray & Metro rollouts. Though, no clear policy about rural market, company is betting on its VAS portfolio to attract subscribers in both types of markets. Surely, in coming months completing major rollouts & acquiring decent sub-base will be the major target for Aircel. Still, the real question remains unanswered, will Aircel be able to acquire decent subscriber base & if it is, how will it maintain it, with churn rate reaching it to top at 3.3 %?. May be it will adopt merger & acquisition route or it will bet on highly competitive tariff pricing along with VASs, which-ever route it takes, there lies a very tough competition ahead. But still, Aircel is surely going to make a mark with its highly aggressive marking strategy, strong financial backing & differentiation market segment strategy. Just watch out for Aircel in coming months!